Air NZ seeks to have 'gagging order' lifted

Air New Zealand claims it is being prevented from defending itself against accusations of cargo cartels. Photo / Supplied

Antagonism between Air New Zealand and the Commerce Commission spilled over yesterday as the regulator hit back at claims by the airline it was being prevented from defending itself against cargo cartel accusations.

Air New Zealand took a case to the High Court on Thursday seeking to lift what it called gagging orders on staff being interviewed over allegations the airline, and 12 others operating in this country colluded to skim up to $600 million from freight customers.

The airline also called on the Government when "reappraising" the commission to consider appointing an ombudsman to mediate some issues before they end up in court.

In a lengthy statement it accused the commission of chasing headlines instead of pursuing justice.

But the commission said it was disappointed the airline had chosen to file the litigation, and by doing so seeking to delay the proceedings.

In its detailed response to the airline's statement, the commission noted Qantas - which is alleged by the commission to have colluded with Air New Zealand - had already admitted cartel conduct in the United States and Australia and incurred fines of US$61 million and A$20 million.

In December when the cartel action was announced, Air New Zealand accused the commission of grandstanding to "justify its existence" and on Thursday the airline's general counsel John Blair said the airline had repeatedly but fruitlessly asked the commission to present it with any evidence that it had breached any laws.

"To date they have been either unwilling or unable to do so and it is regrettable that we have had to resort to the courts even to be able to speak freely to our own employees," he said.

Blair said that in the course of interviewing some current and former airline staff, the commission issued Section 100 orders making all such interviews confidential during the course of its investigations.

"This tactic of frustrating preparation of the defence underlines the Commerce Commission's preoccupation with 'winning' litigation and securing fines and headlines. They have lost sight of the fact that the proper role of a regulator involves the fair and proper administration of justice," he said

Air New Zealand had no issue with the commission conducting its investigation, adding that the company shared the same view that cartels were insidious and anti-competitive and that price-fixing should be prosecuted.

The commission's general counsel, Peter Taylor, said it would normally decline to comment on the matters as they are before the court, but took the airline up on four points:

Section 100 of the Commerce Act was a means by which the commission could prevent the targets of its cartel investigations tipping each other off as to the commission's likely lines of inquiry following an interview.

"The orders are an important tool in the commission's battle to stamp out hard-core cartel conduct - conduct that is often covert, of long duration, difficult to detect and internationally recognised as doing enormous harm to the economy."

Orders do not prevent employees or other witnesses from discussing with their employer the facts of a case as they know them, Taylor said.

The commission had tried to engage with Air New Zealand, offering to amend the orders so as to allow Air New Zealand's internal and external lawyers access to the commission's confidential areas of inquiry.

"Air New Zealand refused this offer, preferring instead to file these proceedings," Taylor said.

The commission had always been prepared to engage with Air New Zealand on the underlying investigation and had offered to meet and discuss the investigation with Air New Zealand if it was prepared to co-operate.

"Air New Zealand has refused to do so, on the basis that it could not risk being seen to co-operate due to the risk of jeopardising its defence of a class action brought against it and other airlines in Australia," Taylor said.

Air New Zealand already had much of the same information as the commission, from which it was able to see the basis for the commission's claim. The proceedings allowed for standard means of exchanging information.

The commission's practices and procedures were at all times in accordance with international standards in relation to the investigation and prosecution of cartels.

COLLISION COURSE

2003: The commission blocked a plan by Qantas and Air New Zealand to co-operate on New Zealand domestic routes and those across the Tasman. A High Court appeal by Air New Zealand failed.

2008: The commission in December initiated High Court proceedings against Air New Zealand, seven staff and 12 other airlines for alleged "extensive and long-term cartel activity in the air cargo market".

* Overseas competition authorities are also investigating the air cargo market, with courts in the US having already awarded penalties of $2.2 billion against airlines.