Court of Appeal rules on use of confidentiality orders
11 March 2011
The Commerce Commission welcomes yesterday's judgment by the Court of Appeal in relation to the Commission's use of confidentiality orders in a major cartel investigation.
The Court of Appeal has ruled that the Commission correctly applied its powers under section 100 of the Commerce Act, in preventing Air New Zealand staff from disclosing the Commission's lines of enquiry during witness interviews in the air cargo price-fixing case.
According to the Court of Appeal, it is "self-evident that protecting the integrity of an investigation, particularly in the context of cartels, is an important goal that can justify a time limited (ie for the duration of an investigation) curb to freedom of expression". In the Court's view, "[p]reventing witnesses from discussing their evidence with others will aid in protecting against the contamination of evidence".
In December 2008 the Commission commenced proceedings against 13 international airlines, and various individuals, alleging that the airlines had colluded to fix the price of fuel surcharges on air cargo movements into and out of New Zealand. The conduct is alleged to have occurred over a period of more than seven years. In May 2011 that case is due to begin its first phase of hearing in the High Court at Auckland.
Air New Zealand asked the High Court in March 2009 to review the Commission's decision to impose section 100 confidentiality orders on witnesses in the cartel case. The orders prevented the witnesses from speaking about their interviews with the Commission. The High Court ruled in Air New Zealand's favour, and the Commission appealed to the Court of Appeal.
In its decision, the Court of Appeal provided guidance on the proper scope of confidentiality orders under section 100. The Court clarified that confidentiality orders can in appropriate cases survive, or be issued, after the commencement of litigation where the investigation is continuing. The Court also ruled that questions posed by the Commission in a witness interview can be covered by confidentiality orders.
"With this appeal, the Commission was not seeking to continue the section 100 orders, which we accepted were no longer required by the time of the High Court's judgment. Instead, we were looking for clarity from the Court of Appeal about the principles that must be applied when the Commission uses its power to make confidentiality orders", said Mary-Anne Borrowdale, General Counsel for Enforcement, Commerce Commission.
On 15 December 2008 the Commerce Commission initiated proceedings against 13 airlines and seven airline staff, including senior executives, for long-term cartel activity in the air cargo market. The alleged cartel has given rise to similar proceedings brought by competition agencies and private plaintiffs in other jurisdictions, including Australia, the United States, Europe, Canada and Korea.
Cartels are groups of businesses or executives who, instead of competing against each other to offer the best deal, secretly agree to work together and keep prices high. Cartels harm competitors by sharing customers with other cartel members, rigging bids, agreeing to charge higher prices than they would be able to charge in a competitive market, restricting volumes and by squeezing non-cartel members out of the market.
Section 100 of the Commerce Act allows the Commission, in the course of carrying out investigations or enquiries, to make an order prohibiting:
(a) the publication or communication of any information or document or evidence which is furnished or given or tendered to or obtained by the Commission in connection with the operations of the Commission;
(b) the giving of any evidence involving any such information, document or evidence.