Competition Law and Regulatory Review Conference - 22 February 2010

Ben Hamlin, Senior Legal Counsel, Commerce Commission[1]

A                 Introduction

As a matter of policy, the question of whether to criminalise cartels is very interesting. But it is not the subject of this presentation; the Commission is not commenting on the policy settings that might be appropriate. Rather, the Commission's comments - and mine today - are confined to how Government policy, once settled upon, might be translated by the Commission into good implementation of the law.

It is clear from the Ministry of Economic Development's Cartel Criminalisation Discussion Document (the MED Paper) that matters of detail will determine whether criminalisation can effectively deter hard-core cartels, without chilling legitimate conduct.[2]

This paper seeks to identify some of the key practical implications of criminalisation on Commission investigations and prosecutions.

The Commission has not publicly commented on how it would adapt to criminalisation, but has been considering the issue internally and will be making submissions on the MED Paper. While it has reached no final views one possible approach would be that of the Australian Competition and Consumer Commission (ACCC), who took the view that:

The criminalisation of cartel conduct does not provide a green light for the ACCC to drastically change the way we have been dealing with cartel conduct. Rather, the changes to the Act give the ACCC the necessary tools to detect, deter and punish hardcore cartel conduct.[3]

On that approach, the Commission's criminal prosecutions would follow a substantially similar course to its civil ones. There would however be some changes. This paper canvasses:

• the effect of criminalisation on enforcement decisions, in particular the application of the leniency and cooperation policies, who would bring a criminal prosecution, and how the Commission might decide between criminal and civil enforcement;

• the effect on the processes through which breaches of the Commerce Act are investigated and prosecuted .

To consider these issues, some assumptions have been made. I have followed MED's general approach that "unless a specific legislative exception is made, standard criminal law will apply to the cartel offence."[4]

B                 Leniency and cooperation

The Commission's leniency and cooperation policies would remain key to its cartel detection activities. However both may need some form of revision in light of criminalisation. Given the need for certainty and predictability in the operation of leniency and cooperation, it may be that some form of statutory recognition is appropriate, as has been done in some other jurisdictions.

B1             Leniency

Criminalisation would likely increase the demand for immunity from prosecution, and raises some design issues that may need to be addressed. These are explored below.

Alignment with other jurisdictions' policies

In September 2009 the Commission began consulting on a draft revised leniency policy.[5] The draft policy includes the introduction of "Amnesty Plus" and a marker system, and restrictions on the ability of a coercing party to obtain leniency. A new "Cartel Leniency Policy" (Leniency Guidelines) are expected to be issued at the beginning of March.

The Leniency Guidelines will go further than the draft, and more closely align with those adopted in the US, Canada, Australia and the UK. This alignment can be expected to continue over time as international cooperation in respect of cartel conduct increases, and as international practice in respect of leniency converges around an agreed 'best practice' model.[6] Over time, and through international bodies such as the International Competition Network (ICN), it is conceivable that markers or immunity may one day be granted on a multi-jurisdictional basis.

Overseas experience indicates that the marker system would become extremely important in a criminalisation setting. There have been some indications from the ACCC that criminalisation has led to a substantial increase in the number of markers being sought, as firms take protective action while investigating internally to ascertain whether a breach of the Act has occurred.

Absent from the Commission's guidelines is an innovation of the US Department of Justice (DOJ) - the 'Amnesty Minus'. In short, it is the flipside of Amnesty Plus. Where a leniency recipient does not disclose other cartel arrangements it is involved in, the DOJ's approach to sentencing on the subsequent cartel is to seek an uplift for aggravated conduct or absence of a mitigating factor.

Leniency and conflicts

Following the release of the Commission's leniency policy in 2004, concerns were raised about the potential for conflict between the interests of companies and individuals (including directors or even General Counsel), given those individuals may personally seek and receive leniency to the exclusion of their employer.[7] In a recent paper the Commission's General Counsel raised broader issues regarding the joint representation of individuals and companies in Commerce Act investigations.[8]

To date there has been only one occasion where the Commission has granted leniency to an individual to the exclusion of their employer. The issue of conflicts continues to trouble the Commission. Clearly criminalisation would make leniency (and cooperation) more valuable to individuals, and therefore create a greater incentive on individuals to come forward. The asymmetry between corporate and individual positions - and the conflict issues that follow - may become more acute.

Prosecutorial Discretion

The MED Paper suggests that the Commission would retain its prosecutorial discretion under the proposed framework, and that the Commission's ability to grant leniency would not be affected by criminalisation.[9] This would avoid the potential uncertainty inherent in the bifurcated prosecution arrangements between the ACCC and the Commonwealth Director of Public Prosecutions (DPP) in Australia.[10]

Prosecution decisions - whether to prosecute and what charges to lay - are highly discretionary public powers. With only a few exceptions, the Courts are reluctant to interfere with the exercise of prosecutorial discretion, both civil and criminal.[11] This reluctance extends to interference in decisions to refrain from prosecuting.[12] A challenge to the grant of leniency, an exercise of prosecutorial discretion, is unlikely to succeed in New Zealand.  

Should the Commission revoke leniency, a judicial review challenge may be brought, either before or simultaneously with an application to stay any proceedings arising from the investigation. The proceedings issued by Stolt Neilsen in respect of the DOJ's revocation of its immunity are instructive. The DOJ's decision to revoke immunity was overturned by the District Court, but restored by the Court of Appeal.[13] However, the victory on this front was short lived, as the District Court stayed the proceedings at trial.[14] Ultimately the Court retained the ability to control conduct it saw as abusive.

Protecting information supplied by the leniency applicant

The Commission has indicated its view that leniency information will generally be privileged, and that it will seek to protect such information to the fullest extent possible.[15] As yet, the Commission's position has not been tested in the New Zealand Courts. However, it is notable that in the Cadbury - Amcor litigation in Australia, Cadbury succeeded in obtaining documents relating to Amcor's leniency, notwithstanding the objections of the ACCC.[16] The Trade Practices Act 1974 (Cth) (TPA) has since been amended, in part because of that litigation, to protect information provided to the ACCC as part of a cartel investigation.[17]

Opportunity for statutory protection

The value of a leniency programme is undisputed in international discussion on the enforcement of competition law, and is accepted by officials in New Zealand.[18] It would be no exaggeration to refer to it as a "cornerstone" of the international approach to cartels. Yet the Commission's Leniency Guidelines have no particular legislative status and have no prescribed requirements.

Any move to criminalisation provides a logical legislative vehicle for some form of legislative imprimatur to the Commission's Leniency Guidelines. This would provide an opportunity to correct any potential problems with leniency. Procedural protections for applicants could be mandated if necessary, particularly around the revocation of leniency. Third-party challenges to the leniency decision could be limited or excluded. Disclosure of leniency-related documents could be controlled. Such changes may give greater certainty to leniency applicants, and thereby encourage further applications.

B2             Cooperation

The Commission's approach to  Cooperation in the civil jurisdiction should by now be well understood, at least where proceedings are already on foot.[19] A move to the criminal jurisdiction would have significant consequences.

First - and foremost in most defendant's minds - would be the discount received for a guilty plea. Barring legislative intervention, this would follow the Court of Appeal's recent guideline judgment in respect of R v Hessell.[20] The essential position set out by the Court, at para [15], is that a defendant will receive for a guilty plea:

• A discount of up to 33%, depending on the timing of the guilty plea:
  • at the first reasonable opportunity, a 33 per cent reduction (the first reasonable opportunity being after initial disclosure under the Criminal Disclosure Act 2008);
  • at a status hearing or first callover, a 20 per cent reduction; and
  • three weeks before hearing or trial, a 10 per cent reduction.

• A discount of up to 60% where substantial cooperation against co-offenders is coupled with a plea at the first reasonable opportunity.

Second, the Commission's approach to cooperation would, at least once a decision to prosecute criminally had been made, be guided by the Solicitor General's prosecution guidelines on "plea discussion and arrangement"[21] The key points to take from that are that:

• The process of plea discussion and arrangement must not be initiated by the prosecutor;
• it is appropriate for a prosecutor to indicate to defence counsel a willingness to consult concerning disposition of charges by plea;
• no plea discussion or arrangement should take place on the premise that the prosecutor will support a specific sentence.

The final bullet point in particular would represent a departure from established practice in the civil jurisdiction, where a penalty range is frequently agreed and recommended to the Court. This may cause greater uncertainty until an established body of sentencing decisions is available. Should this be seen to be undesirable, some form of statutory intervention may be required.

Updated Cooperation Agreement

When the Commission's Leniency Guidelines are released, a template cooperation agreement will be released. This template reflects the experience of the Commission over the past five years, and should provide a greater degree of certainty to parties contemplating cooperation.

B3             Avoiding Criminal Proceedings

The ACCC has made it clear that it will not allow the prospect of criminal prosecution to be avoided by an offer to pay a large civil penalty. To this end it has indicated it will not commence negotiations to resolve a matter through a civil penalty proceeding until after the possibility of a criminal prosecution has been ruled out.[22]

There is obvious ugliness in the prospect of serious criminal charges being avoided through the opening of the company cheque book. To avoid criminal proceedings, potential defendants must obtain immunity under the Leniency Guidelines - or better yet, avoid cartel conduct altogether.

C                 Enforcement decisions

Given the public interest considerations in commencing proceedings, and the costs (financial or otherwise) involved in prosecution, the making of prosecution decisions is a serious responsibility. For those liable to face prosecution, there will be a number of key questions:

• How will prosecution decisions be made?
• When will a criminal prosecution be brought?
• When will civil proceedings be brought?
• Are dual track proceedings appropriate?

All decisions will be fact-specific, and so general guidance is difficult. However, it is possible to offer some thoughts on the possible process implications of criminalisation.

C1             Who would make prosecution decisions?

Prosecutorial independence, including a degree of separation between investigation and prosecution of offences, is of particular importance in the criminal context.  Because of this the ACCC cannot, under the Trade Practices Act, bring a criminal prosecution, but must refer the matter to the DPP.

New Zealand lacks an equivalent to the DPP. The MED Paper proposes the adoption of a 'prosecution panel' similar to that established under section 48 of the Serious Fraud Office Act 1990.

The conduct of Serious Fraud prosecutions by the Panel was reviewed by the Law Commission in the course of its more general work on Criminal Prosecution.[23] Assuming a similar model were to be applied to the Commission this would mean:

• Appointments to the prosecution panel would be made by the Solicitor-General after consultation with the Commission. The panel would include Senior Counsel and Crown Solicitors with relevant experience;

• Commission staff, including investigators, economists and in-house lawyers would provide an investigation report to the Commission recommending prosecution (or otherwise);

• The Commission determines whether to refer the matter to a member of the prosecution panel. That member may be consulted on the prosecution decision;

• The member of the prosecution panel determines whether to file an indictment on behalf, and in the name, of the Solicitor-General. The Commission is unable to commence a prosecution on its own behalf;

• The panel member operates under general instructions prepared by the Solicitor-General and their fees for conducting the prosecution are approved and paid by the Crown Law Office;

• The Commission would continue to be consulted by the panel member responsible for the prosecution. Its in-house lawyers would continue to act in many cases as junior counsel, including on minor matters of an interlocutory nature such as name suppression and bail applications.

Of course the devil lies in the detail, or in this case the instructions prepared by the Solicitor-General. The degree of consultation between the Commission and the prosecution panel member would be important. For example, the views of the Commission would likely be required in any decision on the appropriate discount for cooperation, particularly in cases involving the 'amnesty plus' approach to leniency.

C2             Civil vs Criminal Prosecutions

The MED Paper proposes to retain a dual civil-criminal system subject to certain restrictions in relation to situations akin to double jeopardy.[24] This reflects the Australian position. As a result, the approach of the ACCC may again be instructive of how the Commission could approach this duality.

Australian position

The ACCC determines whether to proceed civilly, or to refer the matter to the Commonwealth Director of Public Prosecutions (DPP) for prosecution. The ACCC's position is that serious cartel conduct should be prosecuted criminally whenever possible. For this reason, the ACCC will distinguish serious cartel conduct from that which is less serious in nature, including relatively minor conduct.[25]

What is considered to be "serious", and hence worthy of referral is to be decided having regard to a (non-exhaustive) list of matters set out in a Memorandum of Understanding between the DPP and ACCC.[26] These include:

• the conduct was longstanding or whether it had, or could have, a significant impact on the market in which the cartel operates
• the conduct caused, or could have caused, significant detriment to the public, or a class of the public, or caused, or could have caused, significant loss or damage to one or more customers of the alleged participants
• one or more of the alleged participants has previously been found by a court to have participated in, or has admitted to participating in, cartel conduct either criminal or civil
• the value of the affected commerce exceeded or would have exceeded $1 million within a 12-month period (that is, where the combined value for all cartel participants of the specific line of commerce affected by the cartel would exceed $1 million within a 12-month period)
• in the case of bid rigging, the value of the bid or series of bids exceeded $1 million within a 12-month period.

The requirement that the affected commerce "exceeded or would have exceeded" $1 million must be read in light of the ACCC's indication that attempts to enter a cartel, or cartels that are shut down at an early stage, may still warrant criminal prosecution.

That is not the end of the matter - the DPP must then determine whether to commence a prosecution, having regard to the evidential sufficiency and public interest in the matter. The approach the of DPP is substantially similar to the Solicitor General's Prosecution Guidelines.

What would the Commerce Commission do?

At the outset it should be noted that the ability to take civil and criminal proceedings in respect of the same conduct is not unusual. The Commission routinely faces this choice in respect of the Fair Trading Act 1986 and Credit Contract and Consumer Finance Act 2003 (CCCFA) and in obstruction cases under s103 of the Commerce Act. Nor is it alone in this respect - bodies such as the Securities Commission and Inland Revenue Department also make such decisions.

The exact detail of the Commission's approach would in part be determined by the arrangements for prosecution. However, assuming that the prosecution panel outlined above is adopted, and the ACCC approach was otherwise followed:

• the Commission may update its 'enforcement criteria' to address these criminal sanctions, and to provide guidance on when it is likely to refer matters to the prosecution panel;

• the prospect of trans-tasman cartel investigation and prosecution would suggest that a degree of alignment with the ACCC might be likely. Given the legislative intention to harmonise with Australia, radically different approaches would be inappropriate.

• Any guidelines would seek to provide both transparency and consistency of application, and would be influenced by the Solicitor General's prosecution guidelines. The relationship between prosecution, settlement and cooperation would need to be detailed.

There remain questions about when it might be appropriate to bring civil proceedings but not criminal. The dual-track context of the Fair Trading Act 1986 may be useful to consider.  There, the Commission initially opted to bring a number of High Court civil proceedings and gained clarity around the key terms of the Act. Since then, the Commission has almost exclusively proceeded criminally.

Conversely, Commission staff are unaware of any case where the Commission has opted to follow the civil track because a case was not serious, or because it could not meet the criminal standard of proof. There seems little reason for the Commission to adopt a radically different approach to cartel provisions under the Commerce Act. Given it does not prosecute 'minor' cartel cases under the current provisions, it seems unlikely to do so in the future.[27]

There are four circumstances where the Commission may wish to consider civil proceedings. First, when the new regime is enacted there may be a period of transition where the Commission continues with civil cases. The Commission may need time to adapt to the new regime, and the desirability of starting with a good first case has been advocated in other jurisdictions.[28]

Second, where there are no individuals within New Zealand against whom the Commission could reasonably bring a criminal prosecution, it is likely that the proceedings against any company would be brought civilly. Even under the existing provisions, the Commission does not bring proceedings against individuals in all cases.[29]

Third, it has been suggested that the bringing of 'test cases' to clarify the law is a proper exercise for a regulator in the civil jurisdiction.[30] Such cases could be brought notwithstanding that a criminal prosecution may not similarly have been brought. It is conceivable that in cases of genuine uncertainty as to the meaning of the law, the Commission might elect to prosecute such a case in the civil jurisdiction. This would also enable the Commission to exercise a right of appeal if unsuccessful, where that was appropriate.

Finally, where the remedies available under the civil law and criminal law differ (for example, for compensation for affected parties) it is conceivable that civil proceedings could be issued in lieu of criminal proceedings. This would of course depend on the form of the Act as amended.

Corporate liability

The MED Paper seeks submissions on whether corporate criminal liability is appropriate. On the assumption that it is, the Commission may choose to pursue companies under the criminal law where it is simultaneously pursuing individuals. Alternatively, where no individuals are being prosecuted criminally, it seems more likely that civil proceedings would follow.

The prospect of separate civil and criminal prosecutions against the company and individuals respectively seems unlikely, even if permitted.  This would, at face value, be wasteful of Court, Commission and defendant resources, and would need strong justification.

D                 Investigation

The Commission's power to investigate and inquire into complaints, and to undertake investigations or inquiries on its own motion, is implicit but not controversial.[31] Broadly speaking, the Commission's toolkit consists of:

• monitoring of publicly-available information
• policies which encourage disclosure to the Commission (such as the leniency policy)
• voluntary interviews and information requests
• compulsory interviews and document provision orders
• search warrant and surveillance powers

The selection of appropriate statutory powers would be one of the key aspects of any criminalisation legislation.

D1             How might the Commission approach civil vs criminal investigation?

As to how the Commission would investigate proceedings, the approach of the ACCC is perhaps instructive:

"In the absence of a clear indication that a matter will be prosecuted criminally or subject to civil proceedings, the ACCC will require its investigators to conduct investigations in a manner that will preserve its capacity to seek criminal prosecution."[32]

There are obvious practical difficulties with, say, ruling out a criminal prosecution at an early investigative stage given the potential that information may be acquired that would have made criminal prosecution the more appropriate course. This means that all, or nearly all, investigations would be conducted to a criminal standard. Meeting the procedural requirements for criminal prosecution would also protect the ability to bring civil proceedings.

As acknowledged by the MED Paper, the Commission could in theory obtain information which could be used only in criminal cases. For example, information obtained through the use of telecommunications intercepts could not, without legislative change, be used for the purpose of civil proceedings.[33] In practice such powers would likely be used only in serious cases which, as is discussed above, are unlikely to be prosecuted civilly.

D2             Voluntary interviews

Voluntary interviews are the backbone of Commission investigations, and are likely to remain so. However, to ensure their contents can be used against possible defendants in a criminal prosecution, voluntary interviews would need to be conducted consistently with the Chief Justice's Practice Note issued under s30 of the Evidence Act 2006.[34] As a result:

• Investigators would make use of 'cautions', giving individuals notice of their right to consult a lawyer and that their responses may later be given in evidence.

• It is likely that video recording of interviews would become standard practice.

• Questioning would avoid 'cross examination' of witnesses.

• Where questioning relates to evidence held by the Commission, including statements made by others, the nature of the evidence and substance of the statements would be fairly explained.

For cautions to be effective, the Commission would need to broadly indicate as to the purpose of the interview, the factual subject-matter, and the type of allegations which the suspect might face.[35] However in both the civil and criminal contexts it remains the case that full disclosure obligations would not apply at this point.[36]

With the exception of video recording, these matters are not new to the Commission.

D3             Compulsory Interviews

The MED Paper proceeds on the basis that the Commission's powers under ss 98(a)-(c) would remain available.[37] This seems appropriate having regard to the powers of the Serious Fraud Office and Securities Commission, and the compulsion orders available under the Search and Surveillance Bill. Similarly, the ACCC has retained its powers under the equivalent section of the Trade Practices Act 1974.

Self Incrimination

It would be inappropriate for this paper to enter the debate on whether the privilege against self incrimination should be replaced with a more limited statutory privilege in line with the existing s106 of the Commerce Act 1986.

However, any legislative reform must be clear to avoid ambiguity. Having regard to the existing section 106, and the disputes arising from its interpretation:

• It must be clear whether the statutory privilege:  
  • is intended to apply to oral evidence only, or both oral evidence and written statements;

• • covers only compelled statements, or extend to cover voluntary statements;

• • can be waived, and in what circumstances;

• • admits intrusions into the privilege against self incrimination, such as when a defendant puts forward contradictory testimony.

• Where practical and appropriate, the privilege under the Act ought to align with the Evidence Act, or provisions in other similar legislation. This would greatly assist in the development of consistent case law.

Both the defence and the prosecution ought to be able to clearly establish in advance what evidence is or is not able to be adduced. If they are not, then the Courts would be required to fill the legislative gaps, leading to uncertainty and delay, at best.

D4             Search and Surveillance Bill

There has been much comment in the media regarding the Search and Surveillance Bill and the use of interception warrants and covert surveillance.[38] Again, it would be inappropriate for this paper to enter that debate. A few observations remain appropriate.

Such techniques will generally only be useful in obtaining information in two circumstances. First, they can be used in respect of ongoing activity. The evidence obtained by the US DOJ in the lysine cartel was sufficiently compelling to result in both convictions and Hollywood immortalisation.[39] However, in the last decade, the Commission has not prosecuted a covert cartel which was ongoing at the time it was brought to the Commission's attention. While enforcement has increased over that time, it seems likely surveillance powers would be used infrequently in respect of active cartel conduct.

Second, surveillance powers can however be extremely valuable in cases where parties attempt to obstruct the investigation or otherwise pervert the course of justice. Such evidence can be crucial in respect of offences which are difficult to establish. Compare, for example, the resolution of the "Kahui" case with convictions in R v Mahomed. In Mahomed, the evidence obtained by surveillance devices, as the defendants sought to align their stories after the event, no doubt featured heavily in the jury's deliberations over the murder charges they faced.[40]

D5             Information Exchange

Globalisation of commerce has led to a globalisation of cartels and cartel enforcement, even affecting New Zealand.[41] The OECD and ICN have recommended cooperation amongst competition enforcement agencies.[42] The Commission has cooperation arrangements with Australia, the UK, Canada and Taiwan.[43] The ACCC has additional agreements with the US, Korea, Fiji and Papua New Guinea.[44]

In light of this trend, the Commerce Commission (International Cooperation, and Fees) Bill was introduced to Parliament by the last government in September of 2008, but has not yet had its first reading. The Bill amends the Commerce Act 1986, CCFA, and Fair Trading Act 1986 to authorise the Commission to assist - and be assisted by - equivalent overseas regulators through the use of reciprocal cooperation arrangements.[45]

The introduction of criminalisation would enable the Commission to access additional international arrangements which are well established in criminal proceedings. Specifically, the Commission would be able use:

• The Mutual Assistance in Criminal Matters Act, which would enable the Commission to locate witnesses and obtain oral and documentary evidence, including the execution of search warrants, in other jurisdictions (including the US, Canada, Australia and the UK).

• The Extradition Act 1999, which permits applications to extradite defendants to and from New Zealand.

Recourse to these powers would no doubt be reserved for serious cases. However in practice, the possibility of the Commission gaining access to defendants and their corporate records through these means may in many cases result in voluntary compliance.

D6             Obstruction

A notable feature of the MED Paper is its discussion of reform of section 103 of the Commerce Act, to increase the penalties for obstruction.[46] It has been recognised that obstruction of cartel investigations is an international problem, and an obstacle to successful prosecution of cartels.[47] The Commission itself has experienced refusal to supply documents[48], document destruction[49], document concealment and false testimony[50] in the course of its investigations.

There is good reason to believe that the Commission would continue to vigorously pursue attempts at obstruction following criminalisation of cartel conduct. First, the Commission would be conscious of the need to ensure compliance with its information requests despite the prospect of criminal prosecution based on that compliance. This can only occur if obstruction is strongly enforced.

Second, evidence of obstruction is often evidence of consciousness of wrongdoing. Evidence of concealment can be persuasive in establishing the underlying offence under investigation, as illustrated above. Third, obstruction offences may be easier to establish than the underlying offence, as Martha Stewart found to her detriment.[51] This may ultimately lead to cooperation on the cartel offence, to secure a more favourable outcome in respect of the obstruction.

E                 Trial and everything after

The MED Paper proposes that standard criminal procedure rules would generally apply, with a few potential exceptions. Time does not permit an in-depth review of criminal procedure.  In any case, by the time any criminalisation legislation is brought into force, it may have significantly changed under the "Criminal Procedure (Simplification) Project".[52]

The selection below outlines a number of key differences and issues that may arise as a result.

E1             Judge Alone High Court Trials?

The MED Paper suggests that all cartel proceedings would be heard in the High Court, in effect a Category 5 proceeding under the Criminal Procedure (Simplification) Bill Plan. The MED Paper seeks comment on whether the nature of cartel proceedings means that they should be heard before a judge alone in all cases.[53]

Complex white collar trials are not, perhaps, readily understood by the average juror. This may give rise to doubt as to whether a jury trial is the most effective means of determining guilt. In any case, it is useful to note s 361D into the Crimes Act 1961, which provides that a judge may, on an application made by the prosecution, order that an accused person be tried before a judge without a jury.[54] In essence, the provision allows for substantial, complex criminal trials to be conducted before a judge alone. It seems likely that a prosecution application under s361D will be likely in many serious fraud, securities and cartel cases.

E2             Disclosure

Disclosure in criminal proceedings is governed by the Criminal Disclosure Act 2008. This would supersede the current mixture of civil discovery and requests under the Official Information Act 1982. It would be fair to say that the junior solicitors of major law firms would shed few tears at the lifting of the burden of discovery in such cases!

The Criminal Disclosure regime has several key aspects:

• The prosecution is required to disclose to the defence all relevant information, unless there was good reason to withhold it under s16 of the Act.

• Defendants are not required to make disclosure of relevant documents. Their disclosure obligations are limited to alibi evidence and expert witnesses under s22 and 23 of the Act.

• At the commencement of criminal proceedings, or not later than 21 days thereafter, the prosecution must provide, inter alia, a summary that is sufficient to fairly inform the defendant of the facts on which it is alleged that an offence has been committed.

• The Court will likely, at the second or third call of the proceedings, make timetabling orders under section 32 with respect to the prosecution obligation to make 'full disclosure' under section 13.

Practically, matters would be brought to trial faster under a criminal regime.[55] Delays of 18 months to 2 years in the Court system have been sufficient to warrant a stay of proceedings for even relatively serious offending.[56]

The Australian cartel provisions under the Trade Practices Act 1974 require the defendant to give notice if he or she intends to raise certain of the defences under the Act (such as the joint venture defence). It may be that similar provisions ought to be provided here, of a similar nature to s22 and 23.

E3             The Commission and the Media

The use of the media by the ACCC in Australia has been the subject of discussion in the past.[57] The Commission has itself been accused of "grandstanding" in respect of the Air Cargo Cartel proceedings.[58] On the one hand, the media is seen as an important tool to influence and inform the business community and general public. On the other, enforcement agencies can be accused of orchestrating "trial by media" where serious damage can be done to corporate reputations without the accountability provided by Court proceedings.

The Commission's approach to the media where criminal proceedings are concerned would be informed by the Solicitor General's Media Protocol for Prosecutors. This outlines five key principles that guide dealings with the media:[59]

• Avoiding prejudice to fair trial interests;
• Supporting the administration of justice and the integrity of the criminal justice system;
• Respecting the principle of open justice;
• Recognising the public interest in receiving accurate information about the criminal justice system and criminal prosecutions; and
• Treating victims of crime with courtesy and compassion, and respecting their dignity and privacy.

E4           Costs in Criminal Cases

One notable difference between the civil and criminal jurisdictions is the payment of the costs of prosecution and defence. There is no presumption that costs will be paid to a successful defendant in criminal cases.[60] Where a prosecution is reasonably and properly pursued, costs will generally not be ordered. Conversely, there is no presumption that an unsuccessful defendant will be required to contribute to the costs of prosecution.

Even where costs are paid, they are usually paid at the "crown rate", which will generally be well below the rates of the counsel involved in white collar criminal proceedings.[61] This can lead to a considerable shortfall where commercial counsel are engaged in criminal proceedings.

E5           Asymmetrical Appeal rights

Prosecution appeals in indictable criminal proceedings are restricted to questions of law reserved by the trial judge.[62] Such appeals can be seen as an incursion into the rule against double jeopardy, and are restricted to questions of public importance beyond the case at hand.[63]

F                   Conclusion

The Commission continues to consider what would be required of it under criminalisation. Ultimately, the Commission will take its cue on any adjustments from the legislative framework that is adopted. Till then, its views cannot be finalised.        

Criminalisation has been on the horizon for some time, and as it draws nearer the Commission continues to prepare for what lies ahead. The Commission will be ready for criminalisation if it comes. We say that of course, with one eye watching for the devil hidden in the details.

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[1] I am grateful for the assistance of Commission staff who reviewed the paper in draft and provided comment, in particular Mary-Anne Borrowdale and Peter R Taylor.

[2] In this respect, I encourage readers to consider Chapter 6 of the Ministry of Economic Development's Cartel Criminalisation Discussion Document (2010) ("the MED Paper").

[3] Graeme Samuel "The ACCC Enforcement Perspective on Serious Cartel Conduct" (2009) 17 TPLJ 244 at 244

[4] MED Paper, para 307.

[5] Commerce Commission "Commerce Commission publishes draft revised leniency policy", (Media release, 3 September 2009).

[6] See for example International Competition Network "Anti-Cartel Enforcement Manual: Drafting and Implementing an Effective Leniency Program" (2009).

[7] Matt Sumpter "Detecting Cartel Behaviour" [2005] NZLJ 380.

[8] Peter R Taylor "Conflicts of Interest and Joint Representation - Irreconcilable Differences" (Competition Law and Policy Institute New Zealand Conference, August 2009).

[9] MED Paper, para 327.

[10] See the discussion in Caron Beaton-Wells and Brent Fisse "The Australian Criminal Cartel Regime: A Model for New Zealand" (Uni of Melbourne Legal Studies Research Paper No 413, June 2009) at 41 - 54.

[11] Fox v Attorney-General [2002] 3 NZLR 62 (CA) at [28]-[31].

[12] Hallett v Attorney-General (No 2) [1989] 2 NZLR 96 (HC) at 101-102, applied in respect of Commission prosecutions in Clear Communications Ltd v Sky Network Television Ltd (Unreported, HC Wellington, CP19/96, Gallen J, M Brunt, 1 August 1997) at pp41-42.

[13] Stolt-Nielsen, S.A. v. U.S. 352 F.Supp.2d 553 (2005), overturned on appeal in Stolt-Nielsen, S.A. v. U.S. 442 F.3d 177 (2006).

[14] U.S. v. Stolt-Nielsen S.A.524 F.Supp.2d 609 (2007).

[15] Peter R Taylor "Issues Arising From The Application Of The Leniency Policy" (Competition Law and Policy Institute New Zealand Conference, August 2007).

[16] Cadbury Schweppes Pty Ltd v Amcor Ltd (2008) 246 ALR 137 (FC), upheld on appeal in Australian Competition and Consumer Commission v Cadbury Schweppes Pty Ltd and Others (2009) 174 FCR 547 (FFC). See also the discussion on class actions in Ross McInness and Mihkel Wilding "Bring it on! New challenges and opportunities in the pursuit of cartels in Australia" (2009) 17 TPLJ 167 at 178 - 182.

[17] See ss 157, 157B, 157C and 157D of the Trade Practices Act 1974.

[18] MED Paper, para 30.

[19] Mary-Anne Borrowdale "Altered States: Co-operation Between Carteliers and Commerce Commission" (7th Annual Competition Law & Regulation Review, 26 February 2007).

[20] R v Hessell [2009] NZCA 450, and see also Mark Harborow "The value of a guilty plea" [2009] NZLJ 409. Note that the Courts have sought to apply the criminal approach to cooperation when imposing penalty under the Commerce Act see for example Commerce Commission v Koppers Arch Wood Protection (NZ) Ltd (2006) 11 TCLR 581 (HC) at [44] - [46].

[21] Solicitor General's Prosecutions Guidelines (2010), sections 16 and 19.

[22] Graeme Samuel "The ACCC Enforcement Perspective on Serious Cartel Conduct" (2009) 17 TPLJ 244 at 249.

[23] Law Commission Criminal Prosecution (NZLC R66, 2000) at p29 -31.

[24] MED Paper, para 357.

[25] ACCC Guidelines - ACCC approach to cartel investigations (2009).

[26] Memorandum of Understanding between the ACCC and DPP (2008) at para 4.4.

[27] For example the Commission did not prosecute attempts to fix prices in respect of LED Bike lights (Commerce Commission "Trade Me seller warned against anti-competitive behaviour" (Media Release, 3 February 2010)]) or lift repairs (see Commerce Commission "Elevator company admits attempted price fixing" (Media release, 14 November 2008), resolving these through settlements and warnings.

[28] Terry Calvani "Custodial Sanctions for Cartel Offences: An Appropriate Sanction in Australia?" (University of South Australia Trade Practices Workshop, 17 October 2009).

[29] For example, the Commission has not pursued individuals in current proceedings relating to Waikato Pathology Services and Gas Insulated Switchgear. By contrast, the Commission has pursued individuals in its current proceedings in relation to Air Cargo and Wood Chemicals.

[30] Terrance Arnold "Comment On 'Role Of The Regulator' By Professor Fels, (The Modern Reality of Dealing with the Commercial Regulators, 29 September 2006).

[31] Commerce Commission v Telecom Corporation of New Zealand Ltd [1994] 2 NZLR 421 (CA) at p428.

[32] ACCC "Guidelines - ACCC approach to cartel investigations (2009), at para 24.

[33]s312N, Crimes Act 1961.

[34] Practice Note - Police Questioning (s 30(6) of the Evidence Act 2006) [2007] 3 NZLR 297.

[35] Simpson v Ministry of Agriculture & Fisheries (1996) 3 HRNZ 342 (HC).

[36] Young v Police [2007] 2 NZLR 382; Polynesian Spa Ltd v Osborne [2005] NZAR 408.

[37] MED Paper, para 314 - 318.

[38] Patrick Gower "State agency spy powers 'chilling" New Zealand Herald (New Zealand, 23 October 2009); Warren Young "Needless alarm over search and spy bill" New Zealand Herald (New Zealand, 10 November 2009).

[39] Scott Hammond "Caught in the Act: Inside an International Cartel" (OECD Competition Committee

Working Party No. 3 Public Prosecutors Program, October 18, 2005). See also "The Informant!" (Warner Bros, 2009).

[40] Andrew Koubaridis "Bugs crucial to Tahani case conviction" New Zealand Herald (New Zealand, 6 November 2009); See also the discussion in R v Mahomed (15 December 2009, CRI-2008-092-748, Asher J) at [19].

[41] Denese Bates QC "International Cartel Enforcement: New Zealand's Role" (New Zealand Bar Association Annual Conference, 16 August 2008).

[42] OECD "Recommendation C(95)130, Concerning Co-Operation Between Member Countries On Anticompetitive Practices Affecting International Trade (adopted 27/28 July 1995); International Competition Network "Co-operation Between Competition Agencies in Cartel Investigations" (ICN Cartel Working Group Report to the ICN Annual Conference, May 2006).

[43] http://www.comcom.govt.nz/TheCommission/InternationalAgreements/Overview.aspx

[44] http://www.accc.gov.au/content/index.phtml/itemId/255435

[45] Hon Mark Vaile MP and Hon Jim Sutton "Joint statement on Closer Economic Relations by the CER 20th Anniversary Ministerial Forum" (28 August 2003).

[46] MED Paper, paras 322 - 324.

[47] International Competition Network "Report on Obstruction of Justice in Cartel Investigations" (2006).

[48] Commerce Commission "Aerolineas Argentinas fined for non-compliance with Commerce Act" (Media release, 22 January 2009).

[49] Commerce Commission "Commission warns businesses not to destroy company information and documents" (Media release, 15 July 2004).

[50] Commerce Commission "Koppers Arch and GM fined for Commerce Act breaches" (Media release, 3 June 2005).

[51] Following an investigation into alleged insider trading in relation to biotech company ImClone Systems, Martha Stewart was found guilty in March 2004 of conspiracy, making false statements and obstruction of justice and was sentenced to five months imprisonment. No charges were brought in respect of the insider trading.

[52] Ministry of Justice / Law Commission "Criminal Procedure (Simplification) Project: Reforming Criminal Procedure" (2009).

[53] MED Paper, paras 330 - 339.

[54] Inserted by the Crimes Amendment Act (No 2) 2008 and discussed in the recent decision R v Wenzel [2009] 3 NZLR 47 (CA), and Anita Killeen and Peter Williams "Judge-alone trials" [2009] NZLJ 291.

[55] Section  25(b) of the New Zealand Bill of Rights Act 1990 guarantees to everyone who is charged with an offence "the right to be tried without undue delay". See R v Williams [2009] 2 NZLR 750 (SC).

[56] See for example the list contained in R v Williams (CRI-2007-404-0006, Asher J, 10 August 2007) at Appendix 1.

[57] See for example Prof Fels, "The Review of the Trade Practices Act and issues concerning the ACCC and the media", (2002), and compare with Terrance Arnold "Comment On 'Role Of The Regulator' By Professor Fels, (The Modern Reality of Dealing with the Commercial Regulators, 29 September 2006).

[58] Air New Zealand "Air cargo proceedings" (Media Release, 15 December 2008).

[59] Solicitor General "Media Protocol for Prosecutors" (2010), para 5.

[60] Costs in Criminal Cases Act 1967, s 5(3).

[61] See for example, in relation to the "Digitech" proceedings brought by the Serious Fraud Office, R v Connelly (2006) 22 NZTC 19,844 (HC), upheld on appeal in Reid v R [2008] 1 NZLR 575 (SC).

[62] Crimes Act 1961, ss 380, 381A and 383.

[63] See for example the approach of William Young P in R v Gwaze [2009] NZCA 430 at [36] - [40]. Leave to appeal to the Supreme Court was granted at R v Gwaze [2009] NZSC 115.