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Competition Update – Regulator information requests need to be targeted and explained

Home Insights Competition Update – Regulator information requests need to be targeted and explained

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Contributed by: Sarah Keene, Troy Pilkington, Christopher Graf and Elisha Kemp

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Published on: March 14, 2016

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The recent decision from the Court of Justice of the European Union (CJEU), in HeidelbergCement AG v European Commission, serves as a useful reminder that requests from regulators for information must be reasonable and proportionate.1

New Zealand law also requires that use of power by statutory authorities, especially in conducting investigations, be reasonable.

The CJEU decision is useful as it sets out a careful analysis of “proportionality” in the context of compulsory information requests. New Zealand courts may also find the decision helpful in assessing whether information requests by regulatory agencies, including the Commerce Commission (NZCC), represent a reasonable limit on the recipient’s rights (under the New Zealand Bill of Rights Act 1990), including the right to be free from unreasonable search and seizure.  

HeidelbergCement AG v European Commission

In 2008 and 2009, the European Commission (EC) carried out dawn raids on cement companies in several European countries. Two years after the dawn raids, the EC issued information requests and questions that were “extremely numerous” and covered different types of information, including complex economic data.

The CJEU (in agreement with the Advocate General’s opinion provided to the CJEU)2 found these information requests were “excessively succinct, vague and generic – and in some respects, ambiguous” and did not fulfil the EC’s obligation to state reasons. The CJEU was particularly critical of the fact that the requests had been made two years after the dawn raids, meaning the EC ought to have already acquired information that would allow it to more precisely state the nature of the suspected infringement. 

Because the information requests were not precise as to the possible infringement and the types of information requested was so wide-ranging, the information requests were found to be unreasonable and disproportionate in light of the presumed infringements.

The following points can be drawn from the CJEU’s decision (and from the Advocate General’s opinion) in relation to what is required of information requests:

  • The level of detail required in a statement that outlines the reasons for an information request depends on the circumstances of the case. When the investigator should have more extensive information about presumed infringements, the statement of reasons ought to contain a sufficient explanation of the purpose for the request and the precise scope of the regulator’s investigation.
  • A statement of reasons should contain enough information to enable the person from whom information is sought to check whether information is necessary or proportionate for the purpose of the investigation (or alternatively whether the request should be judicially reviewed). When an information request does not outline the alleged infringement, it is difficult to evaluate whether a request is proportionate (or disproportionate) as the seriousness of the alleged infringement cannot be weighed against the difficulty of obtaining information.

New Zealand requirement that information requests be reasonable

The empowering statutes of New Zealand’s key financial and economic regulators, including the Commerce Act 1986, do not expressly require that information requests be reasonable. The requirement is derived from s 21 of the New Zealand Bill of Rights Act 19903 – the prohibition on unreasonable search and seizure – and the common law.4

Proportionality is therefore likely to be relevant; for example, to an assessment of whether a NZCC request for information is a reasonable restriction on a person’s right to be free from unreasonable search and seizure.5

Conclusion

New Zealand financial and economic regulators tend to be aware of the requirement that compulsory information gathering notices should be reasonable and proportionate, and should properly set out the reasons for the request (see, for example, the NZCC’s new Competition and Consumer Investigation Guidelines6). However, it will be useful for regulators to refer to cases such as the HeidelbergCement decision to guide them on the practical requirements of that obligation.

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FOOTNOTES
  1. Case C-247/14 P – HeidelbergCement AG v European Commission [2016] CJEU, available here.
  2. Case C-247/14P – HeidelbergCement AG v European Commission [2015] Opinion of Advocate General, available here.
  3. Perpetual Trust Limited v Financial Markets Authority (No 3) [2012] NZHC 2307.
  4. An unreasonable exercise of powers by a statutory authority or regulator can be judicially reviewable on the grounds of unreasonableness or on the grounds of being outside the scope of powers conferred by statute (ultra vires).
  5. Hansen v R [2007] NZSC 7.
  6. NZCC Competition and Consumer Investigation Guidelines (16 December 2015) at [128] and [140].

This publication is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice.

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