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Proactive Disclosure
(4) International Comparative Analysis of Private Rights of Access
(2) Divestiture Orders:
Unlike Australia, New Zealand does not grant private parties the right to obtain divestiture orders in merger cases. Section 85(1) of the Act provides that the court may issue such orders "on the application of the Commission." It does not make any reference to applications by other persons.
(3) Damages:
Under §§ 82 and 84A of the Act, private parties are entitled to claim damages for any loss or damage caused by a contravention of the restrictive trade practices or merger provisions of the Act. To date, however, damages have been claimed in only a small number of cases and no damages appear to have been granted.175 The main reason for this seems to have been an inability to establish a sufficient causal connection between the plaintiff's loss and the anti-competitive conduct in question.176
The discussion document took the position that the role of damages under the Act should be to deter anti-competitive conduct as well as compensate plaintiffs for their losses. It said:
The Commerce Act, like competition laws in some other jurisdictions, provides for both public and private enforcement. This private right of action implicitly recognises that the public enforcement agency has limited resources to take cases and that private enforcement can supplement public enforcement.
The main issue that we consider ... is whether the role of damages under competition law is to compensate or deter or both. We conclude that there is a deterrence role and that the current approach to damage awards does not achieve the deterrence objective. We present two options for change, on which we seek views: multiple damages and awarding pecuniary penalties in private actions. ....177
To make private actions an effective deterrent supplementing public enforcement, the discussion document suggested awarding either multiple damages or pecuniary penalties.
After reviewing the discussion document and a number of submissions that were made in response to it, the Cabinet Economic Committee declined to recommend either suggestion.178Instead, it chose the alternative of increasing the availability of exemplary damages. The committee suggested that the Act be clarified to indicate that exemplary damages are available and that Parliament signal to the courts during the passage of a Commerce Act Amendment Bill that it "anticipated that the application of exemplary damages would be relatively more frequent in Commerce Act cases. This is because the wider economic damage from anti-competitive conduct typically far outweighs the damage to a single rival."179 Cabinet agreed to make this amendment, and § 9 of the Commerce Act Amendment Bill expressly authorized the court to order the payment of exemplary damages, "even though the Court has made or may make an order directing the person to pay a pecuniary penalty." 180
(4) Class Actions:
The High Court rules in New Zealand permit class actions to be brought for, inter alia, contraventions of the Act. At the moment, however, the rules are very restrictive and are regarded as unlikely to be of assistance to large groups of potential litigants. There is no record of a class action ever being decided under the Act.181
(5) Declarations:
A declaration is an order issued by a court that has no other effect than to make an authoritative ruling upon a particular issue. It does not grant damages or other relief to any of the parties. Declarations are available in private actions in the High Court and have been issued in at least two private actions under the Act.
In Union Shipping New Zealand Ltd. v. Port Nelson Ltd.,182 for example, the court refused to enjoin Port Nelson from charging a wharf user levy that allegedly deterred competition in contravention of the abuse of dominance provisions of § 36 of the Act. Instead, the court declared that there appeared to be some elements of double counting in the calculation of the levy and that the parties should carry out at their own expense an independent cost accountancy analysis.
In Clear v. Telecom (1993),183 the Court of Appeal declared that Telecom's negotiating stance contravened the abuse of dominance provisions of § 36 of the Act. It refused, however, to award any damages or injunctive relief to Clear because of Clear's own unreasonable negotiating stance. Instead, the court directed the parties to return to negotiations and warned that if they could not reach agreement they might have to seek the assistance of an arbitrator or face the prospect of direct government regulation.
(6) Other Orders:
Under § 89(1) of the Act, the court is "granted wide powers to make any other order, whether or not it grants an injunction, if it finds that a party to the proceedings has suffered or is likely to suffer loss or damage from a contravention of Part II (restrictive trade practices)."184 Section 89(1) reads as follows:
89(1) Where, in any proceedings under this Part of the Act, the Court finds that a person who is a party to the proceedings has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in contravention of any of the provisions of Part II of this Act, the Court may, whether or not it grants an injunction or makes any other order under this Part of this Act, make such order or orders as it thinks appropriate against the person who engaged in the conduct, or any other person who in relation to the contravention did any act referred to in section 81(b) to (f) of this Act. ....
The court may grant any order "it thinks appropriate" against the person who contravened the Act and any other person who, under §§ 81(b) - (f) of the Act aided and abetted, induced or conspired in the contravention.
Under § 89(2) of the Act, the court is empowered to vary or cancel contracts that contravene the Act, or order restitution or compensation to parties to the contract. Section 89(2) provides:
89(2) Where a contract is entered into in contravention of this Act, or as the case may be, a contract contains a provision which if given effect to would contravene this Act, the Court may, in any proceedings under this Part of the Act, or on application made for the purpose by a party to the contract or any person claiming through or under any party to the contract, make an order--
(a) Varying the contract, in such manner as it thinks fit, not being a manner inconsistent with the provisions of this Act:
(b) Cancelling the contract:
( c) Requiring any person who is a party to the contract to make restitution or pay compensation to any other person who is a party to the contract.
These powers may be exercised regardless of whether the suit originally filed by the plaintiff claimed damages or injunctive relief.
To date, it seems that there has been only one case in which the court has exercised its powers under § 89(2) of the Act. In Shell (Petroleum Mining) Company Ltd. and Todd Petroleum Mining Company Ltd. v. Kapuni Gas Contracts Ltd. and Natural Gas Corporation of New Zealand Ltd.,185 the court declined to award compensation to the affected party but varied the contract to eliminate the provision that contravened the Act. According to the discussion document, "this is the only instance of an 'other' order being made."186
3(b) Remedies Available to the Commerce Commission:
(1) Interim, Permanent and Mandatory Injunctions:
Under §§ 81, 84 & 88 of the Act, the Commerce Commission has the same powers as private parties to obtain interim, permanent and mandatory injunctions against restrictive business practices and mergers. Most of the key injunction decisions under the Act, however, were obtained in private actions.
One of the main reasons for the lack of Commission-initiated injunction actions appears to be the limited budget of the Commission. This was noted in the Cabinet Economic Committee's review of the Act, which stated, in pertinent part:
The Commerce Commission has stated that one of the key impediments to the Commission seeking interim injunctions to halt anti-competitive conduct is the requirement for the Commission to give undertakings as to damages. The Commission is particularly concerned that if an undertaking for damages has to be given and that undertaking had to be honoured, the amount involved would become a debt against the Commission's finances.
Although the amount for which the Commission could be liable is capped at $40 million (under § 88(3A) of the Act), there is at present no agreement, or understanding, for the Government to write off any such debt. This places an impediment on the Commission's ability and willingness to seek interim injunctions. This means that this enforcement tool is not being used to halt anti- competitive conduct throughout the economy to the extent desired. Nor is the threat of interim injunctions likely to be offering an adequate deterrence. ....187
The impediment to the Commission's budget that would result from having to honour an undertaking for damages effectively induced the Commission to avoid seeking interim injunctions. In most circumstances calling for interim injunction, it sought to negotiate deeds with the parties "freezing the competitive situation until the completion of the Commission's investigation , and/or any court action."188
To make injunctions more attractive, the Commission proposed an amendment to the Act excepting it from giving undertakings in applications for injunctions, or, alternatively, an understanding that the New Zealand government would fund the cost of any undertaking for damages that the Commission was required to honour.189 The Cabinet Economic Committee noted that the proposed statutory amendment would bring New Zealand into line with Australia, stating:
One way to greatly increase the use of the interim injunction remedy would be to exempt the Commission from giving undertakings as to damages. This situation currently applies in Australia where undertakings to damages are neither required nor given, by the Australian Competition and Consumer Commission. ..190
The Committee declined, however, to recommend the proposal. It concluded that "it would be inequitable for the Commission not to be liable for the damage it may cause to firms through interim injunctions,"191and it also "would increase the Commission's ability to distort markets, unfettered by the disincentive to do so that is currently imposed by the liability for costs."192
Instead of adopting either of the Commission's proposals, the Committee recommended, and Cabinet agreed,193 that the Commission should be given the power to issue cease and desist orders. It was thought that if the Commission had this power, "it would not need to apply for interim injunctions except in exceptional circumstances .... (where) although unsure of all the facts, (it) sees a need for urgent action."194
(2) Cease and Desist Orders:
As envisioned by the Cabinet Committee, a cease and desist order under the Act would be "a formal administrative injunction to cease conduct allegedly in contravention of (the restrictive business practice provisions of) the Act."195It would be issued by the Commissioners in response to investigations of alleged contraventions by the Commission's staff. The order "would be limited to stopping conduct .... (It) would not involve requiring positive undertakings on the part of businesses."196An order of the Commissioners "would be appealable to the High Court and be subject to judicial review; however, the order would apply pending any judicial review or appeal. The Commission would be liable for damages where it was shown that it acted unreasonably or in bad faith."197
Interestingly, the Commerce Commission opposed being granted the power to issue cease and desist orders. It favoured making improvements in its ability to apply for interim injunctions and continuing to rely upon its ability informally to negotiate deeds freezing the competitive situation pending investigation and/or court proceedings. The Commission also expressed concern over the need to develop procedures granting due process, such as a right to be heard and right of appeal, to those who would be affected by a cease and desist order.198 The Department for Courts noted in a similar vein that "the rights of appeal and judicial review associated with cease and desist orders could result in minimum improvement in terms of the time and cost problems associated with Commerce Act litigation."199
The Cabinet Committee discounted these concerns. It noted that in the United States, cease and desist orders from the Federal Trade Commission were very effective and, in practice, were subject to relatively little appeal.200 The Committee added:
(I)n the view of officials, interim injunctions do not currently afford all of the advantages offered by cease and desist orders. Rather, cease and desist orders would be a desirable supplement to interim injunctions because they
- avoid court proceedings;
- are low cost;
- are preferable for infringements of the Act which do not justify court action by the Commission;
- can be introduced quickly; and
- avoid the continuing cost to the economy of a likely breach of the Act. ...201
It was proposed in principle to empower the Commission to issue cease and desist orders, with a final decision being made by Cabinet following receipt of an official's report "on the procedures and structures and any sanctions required for the Commission to undertake this function."202 Cabinet agreed, and after review of the report placed the cease and desist power on the Supplementary Order Paper.203
(3) Pecuniary Penalties:
Like Australia, New Zealand does not criminalize anti-competitive conduct. The Act provides instead for the Commission to obtain pecuniary penalties in civil proceedings in the High Court.204Currently, the maximum penalty is $5 million for corporations and $500,000 for natural persons.205
In August, 1998, the High Court awarded more substantial pecuniary penalties against corporations and individuals than it ever had before. It awarded pecuniary penalties totalling $5.5 million against nine meat companies. It also awarded a penalty of $380,000 against a Christchurch bus company and a penalty of $10,000 against its chief executive.206
The Cabinet Economic Committee concluded that even penalties of this order were too low to serve the deterrence objective of the Act.207 It said, "the maximum penalty for bodies corporate is less than one day's turnover for the largest firms in the New Zealand economy. Furthermore, cartels in some of the larger oligopolistic markets in New Zealand would recover the cost of the penalty in a few weeks."208
After reviewing the penalty regimes in other jurisdictions, the Cabinet Economic Committee recommended, and Cabinet agreed,209 that New Zealand adopt the Swiss model. The Committee said:
(I)t is proposed that penalties be allowed to be imposed of up to three times the illegal gain, or 10% of annual turnover (i.e. the Swiss model). The Swiss model is preferred as it has the advantage that it sends a signal to the courts that penalties should be punitive by using a multiple of the illegal gain. The model then acknowledges the difficulty of calculating illegal gain by providing a proxy - the percentage of turnover. ....210
The Swiss model was regarded as best serving the deterrence objective of the Act. It was embodied in § 6 of the Commerce Act Amendment Bill.
The Committee did not recommend any change to the $500,000 maximum penalty for individuals. It considered this to be high enough to promote deterrence. Noting that little use of this penalty had been made, however, the Committee suggested "(s)ignalling to the High Court, via a statement in the Act, that there is a greater need to impose pecuniary penalties for individual perpetrators."211It was also recommended that the Act prohibit "bodies corporate from indemnifying their agents for any penalties imposed upon them."212Cabinet agreed to both amendments. The Commerce Act Amendment Bill provided that a court "must order an individual to pay a pecuniary penalty, unless the Court considers that there is good reason for not making such an order." It also prohibited indemnification of corporate agents.213
The Committee further recommended, and Cabinet agreed,
(4) Orders Prohibiting Individuals From Directing or Managing Corporations:
This power does not yet exist under the Act; however, the Cabinet Committee recommended that the Act be amended to give the courts "the discretion of prohibiting offenders from directing or managing a body corporate for up to five years."218Section 7 of the Commerce Act Amendment Bill would insert a new § 80(c) into the Act to implement this change.
(5) Divestiture Orders:
Unlike Australia, New Zealand does not permit private plaintiffs to seek divestiture orders in merger cases. Under § 85(1) of the Act, only the Commission is entitled to obtain such orders. Under §§ 85(1)(b)-(d), an order may direct the disposal of assets or shares as determined by a court or as established in an undertaking given to the Commission in an application for clearance or authorization.
(6) Administrative Enforcement:
As in Australia, New Zealand grants the Commission the power to issue authorizations permitting certain restrictive business practices and mergers, so long as their public benefit outweighs the lessening of competition.219 Proposed mergers may be given advance clearances.220 The parties requesting authorizations or clearances may be required to give written undertakings to the Commission. These undertakings form part of an authorization or clearance once it is issued.221
In the course of its investigations, the Commission may issue warnings or negotiate staff or Commission settlements. Warnings are informal attempts to persuade the targets of investigations to change their conduct. They may be issued by telephone or in a meeting, followed by a letter setting out the opinion of the Commission that the conduct in question breaches or is at risk of breaching the Act. Staff settlements take the form of signed undertakings to alter the impugned conduct and introduce, e.g., compliance programs. Commission settlements are similar in nature, but are reserved for major market participants, conduct in significant markets, or conduct having a significant impact upon competition. All settlements are published in the Commission's newsletter.
The Commission may also negotiate deeds with the targets of investigations in which they agree to freeze the competitive situation pending the outcome. In its submission to the Cabinet Committee in which it opposed being granted the power to issue cease and desist orders, the Commission indicated that it had managed to negotiate such deeds in the majority of cases where an interim injunction might have been sought. The Committee responded, "These deeds are negotiated within the context of the threat of court action. ...(They) are akin to cease and desist orders. In this sense empowering the Commission to impose cease and desist orders will create a greater degree of transparency in the processes and procedures of the Commission."222
The Cabinet Committee also invited the Commerce Commission to publish a whistleblowers program which would incorporate some of the features of the amnesty program of the United States Department of Justice. The Committee said:
The United States Department of Justice has had a leniency program since 1993. This programme provides amnesty from criminal charges to the first conspirator to come forward in hard core cartel cases. Since the programme began, an average of one company per month in a wide variety of industries has come forward. The programme has led to the prosecution of illegal activity that the Department would never otherwise have detected. Indeed, the success of the American programme led the European Commission to adopt a formal leniency programme.
The Commerce Commission can already contract and agree not to institute court proceedings against both individuals and bodies corporate in particular cases. However, it is unlikely that this informal programme would have the same impact in terms of increasing detection in comparison with an explicit and formalised programme. ...223
A formal leniency program was regarded as a valuable detection tool. In this sense, it would be far superior to the ability of the Commission informally to negotiate leniency in individual cases. Cabinet invited the Minister for Enterprise and Commerce to request a report from the Commerce Commission on the feasibility of establishing a transparent amnesty program.224 To date, the proposed amendments to the Act do not contain a provision authorizing the establishment of such a program.
3(c) Are Damages Awarded:
As indicated previously in this chapter, damages have not been awarded in any private action under the Act. Some actions for damages have been settled, but the terms of the settlements have been made confidential.
3(d) Cost Awards in Private Actions:
Cost awards in private actions tend to be at a nominal level. They are governed by the Second Schedule to the High Court Rules. The schedule provides for costs in the form of fixed dollar amounts for particular legal tasks.225 The discussion document stated that it would be inappropriate to consider cost reform in the context of the Act because the High Court Rules Committee was currently reviewing inter-party costs on a wider basis.226 The Cabinet Economic Committee review indicated that the High Court reform process would likely be completed by some time in 2000.(227
3(e) Comparison With Costs Awarded in Public Actions:
The Commission is subject to the same costs rules as private parties. If the Commission is unsuccessful, it will be liable for costs in the same way as an unsuccessful private litigant. If it is successful, it can seek and be awarded costs.228
In one case, Commerce Commission v. Hewlett Packard,229 Ellis J. factored into the pecuniary penalty the Commission's costs in bringing the action, which were in the order of $50,000. Later, however, in Commerce Commission v. Wrightson NMA Ltd.,230 McGechan J. specifically rejected this approach, saying that he was not inclined to merge the concepts of penalty and costs. Since then, no other judge has applied the approach taken in Hewlett Packard.231 This situation seems likely to continue into the future. In the current statutory review process, the option of empowering the Commission "to seek orders to recover their full investigation costs"232 was considered and declined.233
IV. The Role of the Commerce Commission in Private Actions:
4(a) Power to Bring Representative Actions:
Unlike Australia, New Zealand does not seem to be taking any steps toward permitting the Commerce Commission to bring representative actions on behalf of consumers and small businesses. In the statutory review process, the government did not even consider this option. Moreover, the Cabinet Committee declined to recommend an option expressly creating an ability in private parties to take class actions under the Act.234
4(b) Right of Intervention in Private Actions:
Under Rule 97 of the High Court Rules, the Commission could seek leave to join a private action. In considering whether to grant leave, the court would consider whether the presence of the Commission "may be necessary to enable the Court effectually and completely to adjudicate upon and settle all questions involved in the proceeding."235 It seems unlikely, however, that the Commission would seek to be joined in a private action in this way. Because of its limited budget, the Commission generally declines to take action where third party action is likely or has already been taken.236Moreover, in the statutory review the Cabinet Economic Committee declined to recommend an option allowing the Commission to act as amicus curiae to represent the consumer interest.237
4(c) Takeover of Private Actions:
It follows from the above that the Commission would not be inclined to intervene in and, ultimately, take over a private action. It seems that at most, the Commission might be inclined to institute a follow-on action for pecuniary penalties and injunction to take up where a private action left off.
The Commission appears to have done so in at least one case, Commerce Commission v. Port Nelson Ltd.,238 which followed on from a private action, Stevedoring Services v. Port Nelson,239 in which the plaintiffs ran out of funds after being denied an interim injunction. In the follow-on action, Port Nelson Ltd. was required to pay a $300,000 pecuniary penalty for exclusionary conduct contravening the prohibition of abuse of dominance and two $100,000 penalties for contravening the prohibition of agreements substantially lessening competition. The court also granted injunctions restraining Port Nelson from (1) offering discounts that effectively tied pilotage or towing services to other services; and, (2) refusing to hire its tugs to ships using non-Port Nelson pilots.
4(d) Power to Confer Immunity via Authorizations and Clearances:
Like Australia, New Zealand permits certain restrictive business practices and proposed mergers to be immunized from legal proceedings via authorizations or clearances. Part V of the Act vests the Commerce Commission with the power to grant authorizations for agreements substantially lessening competition (§§ 27, 28), agreements with exclusionary provisions (§29), and acts of resale price maintenance (§§ 37, 38).240 Before issuing an authorization, however, the Commission must be satisfied that the benefit to the public outweighs the lessening of competition that would, or would likely, result.241 The Act does not grant any express power to issue authorizations immunizing price fixing agreements (§ 30)242 or abuse of dominant position (§ 36).
Part V of the Act also authorizes the Commission to grant clearances for proposed business acquisitions.243 As in the case of authorizations, the Commission must first find that the public benefit from the acquisition will outweigh the likely lessening of competition.244 It must also find that the acquisition will not create or strengthen a dominant position.245
Prior to the current statutory review, it was unclear whether the Commission could authorize for the future, conduct that commenced before the filing of an application for authorization. In response to a recommendation of the Cabinet Economic Committee, Cabinet agreed "to amend the Commerce Act 1986 to make it clear that the Commerce Commission can authorise future conduct even if the same conduct had been given effect to in the past."246 This clarification was made in § 5 of the Commerce Act Amendment Bill, which proposed to insert a new § 59A into the Act to deal with this matter.
There appears to be one recorded case in which a defendant in a private action applied for an authorization to immunize it from legal proceedings. In Bond & Bond, Ltd. v. Fisher & Paykel, Ltd.,247 a terminated franchisee unsuccessfully sought an injunction against enforcement by Fisher & Paykel, a manufacturer of domestic appliances, of an exclusive dealing provision in its franchise agreement. Thereafter, Fisher & Paykel, which had a dominant position, applied to the Commission for an authorization of its practice of exclusive dealing. The Commission refused, saying that the alleged public benefits from the practice were outweighed by its anti-competitive effects.248 On appeal, however, the High Court reversed the Commission and the authorization was granted.249
Appeals from the determinations of the Commission are made to the High Court.250 The Governor General may appoint lay members to the court for purposes of assisting the judges in hearing the appeals.251 A sitting of the court in an appeal is constituted by one judge and at least one lay member. The decision of the judge prevails where there is an equal division of opinion; otherwise the decision of the majority constitutes the decision of the court.252 Leave may be granted to appeal to the Court of Appeal.253
4(e) Policy Re Taking Up Cases or Leaving Them to Private Action:
The Commerce Commission has several enforcement criteria that determine the circumstances in which it is likely to take action. It set out a number of these criteria in its Newsletter, Compliance, for April, 1999, as follows:
Commerce Act enforcement criteria
In deciding what action should be taken if an investigation produces evidence of a breach of the Act, the following matters are considered:
- strength of the available evidence;
- significance of the market;
- extent and significance of the impact on competition in that market;
- corrective action by the offending person(s);
- conscious and deliberate breach;
- industry-wide breaches (or similar breaches);
- disregard for Commission policy statements;
- precedent value; and
- significant educational or deterrent effect. ....
Court action
Court action is likely to be undertaken where:
- a precedent is sought;
- a person has contravened the Act despite a previous warning or settlement;
- there has been a conscious and deliberate breach of the Act;
- there is extensive detriment to competition; or
- a person has refused to enter into a settlement.
These are, however, not the only circumstances under which court action will be taken. The decision to take court action is entered into only after the matter has been considered in terms of the enforcement criteria.
It was also indicated in a written response from the Commission in November, 1998, that an additional factor that is considered in determining whether to take court action is the likelihood of third party action.
4(f) Availability of Information Collected by the Commerce Commission:
As to the availability of information to private parties, the Commerce Commission has provided the following details:
The Commission (like most other government and quasi- government bodies in NZ) is bound by the Official Information Act 1982. That Act is founded on the principle that information is available unless there is good reason for withholding it (§ 5). The Act provides a number of grounds for withholding information, the most relevant to the Commission are maintenance of the law (§ 6(c)), commercial sensitivity (§ 9(2)(b)), protecting confidences (§ 9(2) (ba)) and maintaining privilege (§ 9(2)(h)).
Accordingly, unless the Commission considers that one of the grounds above is made out, then even during an investigation its documents and information will be publicly available. In practice, during investigations the Commission often relies on § 6(c) to withhold information, particularly from potential defendants.
After the investigation is completed and once proceedings have been instituted, defendants use the discovery process under the High Court Rules (for civil proceedings) ... to obtain all relevant material to prepare their defence.
As for third parties "tapping into" the Commission's evidence, they could certainly use the OIA to request the information and the Commission would provide it (subject to any of the grounds for withholding, as above). While § 100 orders (under the Act) provide absolute grounds for withholding information, you will note they expire at the conclusion of an investigation. At that time, any confidential information previously covered by an order could be withheld under the relevant provision of the OIA. ....254
V. Case Management and Efficiency of Proceedings:
5(a) Caseflow Management & Efficiency vs. Quality of Justice:
One of the basic premises of the current statutory review was that "court processes should not hinder the goals of the Act and should balance justice and efficiency."255 In this respect, two major concerns were expressed regarding the processing of Commerce Act cases. They were as follows:
(1) Commerce Act cases that were litigated in the High Court were inordinately lengthy and expensive; and,
(2) The tendency of the Commission to settle cases rather than litigate them meant that there were few judicial precedents to guide those who were subject to the Act and few judges in the High Court who were experienced in handling Commerce Act cases.
As previously discussed in this chapter,256 in at least a partial response to these concerns Cabinet agreed to empower the Commerce Commission to issue cease and desist orders for contraventions of the restrictive business practice provisions of Part II of the Act, and that such orders would apply pending appeal to the High Court. It was thought that this move would reduce the cost and delay inherent in litigation in the courts and make available more reliable guidance to the business community.257
Cabinet did not agree to make any changes to the judicial system in the High Court. While the Cabinet Economic Committee recognized that Commerce Act cases tended to be more costly than other commercial proceedings and subject to inordinate delays,258 it declined to recommend any improvements to the wider court system. The committee said:
One option to reduce the cost and delay associated with Commerce Act cases would be to establish a Commercial List for the Wellington High Court. Currently a Commercial List applies only to the High Court in Auckland. The Commercial List enables commercial disputes to be decided as quickly and as cheaply as possible, by confining the action to those issues that are really in dispute. As well, by having specific Commercial List judges, this ensures that any case is more likely to be heard by a judge familiar with Commerce Act cases.... Submitters have estimated that by having cases on the Commercial List, the time involved in litigation is reduced by 12 - 18 months. However, the Department for Courts has pointed out that this improvement is more likely to reflect the gains secured through the case management programme that has operated for all civil proceedings in the Auckland High Court since 1 May 1994. ... The High Court judiciary are currently considering whether and how to introduce case management nationally. At this point, it seems likely that the judiciary will seek to do so over the next 12 - 18 months. The Department for Courts is supporting these judicial initiatives as a key part of that Department's change programme, which substantially redesigns court processes and introduces significant technological improvements in the Court system. ....259
Because the judiciary was already involved in a wide ranging program to introduce, inter alia, a national case management system within the next 12-18 months, the Committee essentially decided to defer to the judiciary and the Department for Courts.
5(b) Experience in the High Court With Private Actions Under the Commerce Act:
In 1996, the Ministry of Commerce estimated that, on average, it took 121.4 weeks for a Commerce Act case to be litigated in the High Court.260 According to the Cabinet Economic Committee, "this estimate ignores appeals and experience to date suggests that cases relating to network industries are often subject to the maximum number of appeals."261 The Committee also noted that because expert economic witnesses were generally engaged in Commerce Act cases, they were relatively expensive compared to other commercial proceedings.262
In one case, Shell Petroleum Mining and Todd Petroleum v. Kapuni,263 Barker J. issued a decision in which he criticized the parties for presenting an overkill of economic evidence. The hearing took 48 days. Six expert witnesses were called. The cross-examination of just one of these witnesses took three days. The decision suggested that in future cases, economic evidence should be heard in a roundtable manner to reduce the time spent hearing from experts.264
5(c) Contribution of Private Actions to Competition Jurisprudence:
Private actions have made a major contribution to competition jurisprudence in New Zealand. Virtually all of the key injunction decisions under the Commerce Act were made in private actions.265 The only relevant Court of Appeal decision was also made in a private action , Clear v. Telecom.266
The Cabinet Economic Committee indicated that it regarded private actions as ideal vehicles for the enforcement of prohibitions against exclusionary conduct or other conduct directed at harming current or potential competitors. The Committee said:
A significant proportion of anti-competitive conduct aims to exclude would be competitors or harm current competitors. Market participants can detect this type of conduct as it has an obvious economic impact on them. .... 267
As opposed to cartel activity, which almost always occurs in utmost secrecy, exclusionary conduct is readily detected by market participants. The potential for effective response through private action under the Act was regarded by the Committee as "a necessary corollary to public enforcement in achieving an optimal deterrence to would-be offenders."268
The task that the Committee saw before it was to "strike the right balance between the remedies being too weak to achieve effective deterrence on the one hand, and being too attractive or strong so that private enforcement is used strategically for anti-competitive purposes on the other."269 Its review of private enforcement indicated that, like public actions by the Commerce Commission, private actions failed to achieve effective deterrence. The remedies granted in private actions were not strong enough to effect "the deterrence of future contraventions."270 The courts did not award damages. In considering applications for interim injunctions, the courts failed adequately to consider, inter alia, the broader interests of consumers. The costly and protracted nature of proceedings under the Commerce Act encouraged violators of the Act to adopt delaying tactics and deterred potential private plaintiffs from taking action.
In light of these observations, the Committee made a recommendation, and Cabinet agreed, to save time and cost by empowering the Commerce Commission to issue cease and desist orders that would remain in effect unless and until overturned on appeal. Cabinet also agreed to signal the courts that awarding exemplary damages was permissible in private actions under the Act and that the broader consumer interest should be considered in determining applications for injunctive relief. It will remain to be seen whether these amendments will achieve the desired balance in private actions between effective deterrence and avoidance of strategic usage for anti-competitive purposes.
UNITED KINGDOM
Introduction:
Competition law in the United Kingdom is currently in a state of transition. A new Competition Act (the Act), which was designed primarily to bring domestic competition law into line with that of the European Union (EU), is being phased in over time to replace the former restrictive trade practices legislation. It is anticipated that this process will be completed by March 1, 2000.
None of the provisions of the Act expressly establishes a private right of action. The task of developing civil liability for breach of the Act has been left to the courts. It is contemplated in the Act, however, that any civil liability that is developed for breach of its provisions will be consistent with decisions of the European Court addressing civil liability for breach of the competition prohibitions of the Treaty of Rome. If this course is followed, private parties might eventually be granted standing to sue for damages, restitution, and a form of injunctive relief.
The Office of Fair Trading (the Office), which is the United Kingdom's counterpart to Canada's Competition Bureau, has not been given any role to play in private actions under the Act. Like its counterparts in Australia and New Zealand, however, the Office has the power to immunize anti-competitive conduct or arrangements from attack by issuing so-called guidances or exemptions. The Office may also impose monetary penalties upon those who breach the Act. The penalties are recoverable as civil debts.
The litigants in any private action that is developed in the courts will be subjected to a rigorous case management process. The process is designed to improve efficiency, equality and proportionality in civil actions, with resolution through litigation being regarded as a last resort. Like the Act, the process is being implemented in phases. The first phase is scheduled to be implemented on April 26, 1999.
I. Private Actions: Overview:
It is difficult to present an overview of the role of private actions in the enforcement of competition law in the United Kingdom. Parliament recently enacted a new statute, called the Competition Act 1998 (the Act),271 to replace the United Kingdom's restrictive trade practices legislation.272 The new statute has received Royal assent and its prohibitions are expected to come into force on March 1, 2000.
The Act does not expressly provide for a private right of action.273 Its primary purpose is to bring domestic competition law in the United Kingdom into line with that of the European Union (EU) under Title V of the Treaty of Rome (the Treaty).274 The prohibitions in the Act essentially mirror the prohibitions of §§ 85 and 86 of the Treaty, with amendments to reflect their application to domestic, as opposed to international, conduct.275
It is anticipated, however, that the courts will develop a private right of action under the Act, either by way of the tort of breach of statutory duty276 or inference from the wording of the statute. As to the latter, the most significant provision of the Act appears to be § 58, which purports to make certain findings of fact by the Director of the Office of Fair Trading binding in proceedings for infringement of the prohibitions of the Act "brought otherwise than by the Director." This would appear to be a reference to proceedings brought by private parties.
Moreover, the Act contemplates that civil liability that is developed for harm caused by infringement of the prohibitions of the Treaty will also apply under the Act. Subsection 60(6) of the Act was inserted by Parliament at a late date in the evolution of the statute to signify this intention. It essentially provides that courts in the United Kingdom must decide questions of liability under the Act consistently with decisions reached by the European Court regarding, inter alia, civil liability for harm caused by "infringement of Community law."
Given this, it seems possible that the national courts in the United Kingdom might grant private parties standing to sue for damages, restitution277 and a form of injunctive relief278 for contraventions of the prohibitions under the Act. The European Court established that private parties possess the right to claim relief under the Treaty in the Delimitis case,279 where the court said, "(T)he prohibitions of Articles 85(1) and 86 produce direct effects in relations between individuals, and create rights directly in respect of the individuals concerned which the national courts must safeguard."280 It appears that to date, however, no national court in the EU has actually awarded damages for contravention of either article of the Treaty.
Prior to Delimitis, in 1984, the House of Lords said in dictum that , in its view, a contravention of the prohibition against abuse of dominance in article 86 of the Treaty would give rise to a claim for damages.281 Thereafter, in 1998, the English Court of Appeal indicated, again in dictum, that a contravention of the prohibition against anti-competitive agreements in article 85 could give rise to a claim for damages or restitution, so long as the claimant was not a party to the agreement.282
These decisions regarding civil liability for contraventions of the prohibitions of the Treaty indicate that the courts in the United Kingdom likely will be receptive to private actions under the mirror-image prohibitions of the new Act. Precisely how the courts will rule on issues such as standing to sue and the relief to be made available to private parties remains at this point a matter of conjecture. As is the case with all statements made by courts in dictum, the observations of the House of Lords and the English Court of Appeal regarding the relief available under the Treaty need not necessarily be followed in subsequent cases. Only time will tell whether damages, restitution and injunctive relief will be granted in private actions under the Act in line with the observations made in the Garden Cottages283 and Gibbs Mew284 cases.
II. The Role of the Office of Fair Trading in Private Actions:
As might be expected, the Act does not provide the Office of Fair Trading (the Office), which is the UK's counterpart to the Competition Bureau, with any express authority to intervene in or take over private actions. It also does not provide the Director of the Office with any authority to file class actions on behalf of small businesses or consumers who may have been injured by a contravention of its prohibitions.
The Director, however, has authority under the Act to immunize agreements and/or conduct from penalty by issuing guidances in response to requests from the parties, stating that they likely do not contravene the prohibitions against anti-competitive conduct or abuse of dominant position.285 If a guidance concludes that the agreement or conduct is unlikely to infringe the prohibitions or is likely to be exempt from them, the parties are granted this immunity. The immunity continues until removed by the Director upon a reasonable suspicion that the information upon which he or she originally acted was incomplete, false or misleading in a material particular.
The Director also has authority under the Act to issue or recommend exemptions conferring immunity upon arrangements that infringe the prohibition against anticompetitive agreements. The exemptions may be of an individual, block286 or parallel nature. Individual exemptions are granted for particular agreements. Block exemptions are recommended for categories of agreements. Parallel exemptions provide domestic counterparts to exemptions issued by the European Commission under the Treaty.287
In considering applications for individual or block exemptions, the Director must apply the criteria set forth in § 9 of the Act, which reads as follows:
9. This section applies to any agreement which -
(a) contributes to -
(i) improving production or distribution, or
(ii) promoting technical or economic progress, while allowing consumers
a fair share of the resulting benefit; but
(b) does not
(i) impose on the undertakings concerned restrictions which are
not indispensable to the attainment of those objectives; or
(ii) afford the undertakings concerned the possibility of eliminating
competition in respect of a substantial part of the products in
question.
Essentially, to warrant exemption the agreement must contain restrictions that are necessary to promote economic progress, give consumers a fair share of the resulting benefit, and eliminate something less than a substantial amount of competition.
The Director may also launch investigations on his or her own initiative. If the Director develops a reasonable suspicion before concluding an investigation that an infringement of the prohibitions of the Act has occurred, he may give directions to the parties to prevent irreparable damage to a particular person or protect the public interest.288 If upon completion of an investigation the Director decides that an agreement or conduct infringes a prohibition, he or she may issue a direction to bring the infringement to an end. The direction may require termination or modification of the agreement or conduct. Should a party against whom a direction is issued default in its compliance, the Director may seek a compliance order from the courts at the cost of the defaulting party.289
The Director may also impose a monetary penalty upon those who are found to have infringed the prohibitions of the Act. The penalty may not exceed 10% of the turnover of the guilty party.290 Penalties are recoverable by the Director as civil debts.291
