The Commerce Commission (Commission) has issued updated Enforcement Response Guidelines (ERGs) this week. The ERGs replace the 2013 version and better reflect the Commission’s approach to enforcement as it has evolved over the past decade.
Broadly, the ERGs outline the Commission's enforcement response options, being the "Enforcement Tools" in its regulatory toolkit, and what factors are considered when the Commission decides which response to use. These Enforcement Tools include compliance advice letters, warning letters, infringement notices, agreed outcomes (such as negotiated settlements and enforceable undertakings), "stop now" letters, and court proceedings. In deciding which Enforcement Tools will best address an issue, the Commission considers factors such as the extent of any detriment or harm to consumers, the seriousness of conduct, whether the matter was self-reported, and the public interest.
Anyone acting in trade who may potentially be in breach of any of the laws enforced by the Commission (including where they have received complaints from third parties), or who is considering whether to "self-report" conduct to the Commission (which can take different guises), should review the ERGs before making decisions on their next steps.
What's changed?
Helpfully, the ERGs now apply to all legislation enforced by the Commission, some of which was previously excluded in the 2013 ERGs (eg Part 4 of the Commerce Act 1986).
The Commission has also updated the ERGs to better reflect how its approach to enforcement has changed in the past decade. The key updates include:
- A strong focus on self-reporting: The 2024 ERGs provide that the Commission will consider whether a breach or potential non-compliance was self-reported and the extent to which a business or an individual cooperates with the Commission. This includes the extent to which the self-reporting was voluntary, any remediation undertaken or planned, and the business's or individual's attitude towards future compliance.
- Stop Now Letters as an Enforcement Tool: The Commission issued its first Stop Now Letter last year in relation to false and/or misleading advertising. The 2024 ERGs highlight that a Stop Now Letter as an Enforcement Tool will be issued to put a business or individual on notice of the Commission's concerns and provide an opportunity to correct behaviour. Importantly, a Stop Now Letter will not prevent the Commission from pursuing other enforcement action.
- Consideration of "personal or professional hardships" in making enforcement decisions in relation to individuals: The 2024 ERGs, in contrast to their 2013 predecessor, now make express that the Commission will consider "whether and to what extent [an] individual is suffering under personal or professional hardships" in making enforcement decisions. We consider this express acknowledgment is an appropriate and necessary development as we have long advocated that regulators must never lose sight of the human toll that their investigative and enforcement decisions impose on individuals - particularly on their mental health (see: here).
The Commission has also updated the ERGs to align with the Solicitor-General's Prosecution Guidelines for the use of Warnings. Updates include:
- Engagement before issuing warning letters: Reflecting current practice, the 2024 ERGs provide that before issuing a warning letter, the Commission will engage with the individual or business to discuss the proposed content of the letter.
- Further guidance on what information may be published: The 2024 ERGs provide more information regarding the Commission's decision to publish information about its enforcement responses, particularly in relation to its decision to publish warning letters on its website.
- One month review period for recipients: A person who has been issued a warning by the Commission can request a review of the decision to warn within one month of the warning letter. The 2024 ERGs clarify that the review is processed as a complaint by the Commission and dealt with in accordance with the Commission's complaint process.
- Take-down process: The Commission has provided that its practice is to take down a published warning letter to an individual where an individual would have been eligible for the clean slate scheme under the Criminal Records (Clean Slate) Act 2004 if they had been convicted of the offence that is the subject of the warning letter.
In relation to the Commission's approach to potential cartel conduct under the Commerce Act 1986, this move to update the ERGs can be seen as a companion to the Commission's updated Cartel Leniency and Immunity Policy, which was updated in February 2024 (see our article on those updates here).
Takeaway
The 2024 ERGs provide helpful guidance and clarification of current practice for individuals and businesses when engaging with the Commission. The ERG updates are a helpful reminder that the Commission attaches weight to voluntary self-reporting and overall collaboration with the Commission throughout each step in its enforcement process.