Commission abused rules, court says

Mark Berry was last week permanently appointed chairman of the Commerce Commission after taking over the role from Paula Rebstock in April last year. Photo / Mark Mitchell

The Commerce Commission is seeking clarification of its powers after a judge ruled it had abused gagging orders while investigating alleged collusion between Air New Zealand and other airlines.

In what was seen as an important test of the commission's investigative powers, a High Court judge found the airline's rights had been breached under the Bill of Rights Act and has quashed the orders.

The commission had argued that under section 100 of the Commerce Act it could prevent those it had spoken to from disclosing the content of interviews to anyone else at the airline. The airline's lawyers said it could not defend itself properly without knowing what investigators were interested in.

In her ruling, Justice Pamela Andrews found that Air New Zealand was unfairly disadvantaged.

"The orders allow the commission to enjoy a significant advantage over Air New Zealand and the executives which would not be available to an ordinary litigant."

She said a continuation of the section 100 orders relating to 13 current or former employees was unreasonable and an abuse of process.

In the High Court hearing last August the Commerce Commission had argued the investigation was continuing, in spite of court proceedings against Air New Zealand and 12 other airlines beginning in December 2008.

"I am satisfied that the 'continuing investigation' of Air New Zealand does not go beyond analysis of the material the commission already has. There is nothing to suggest that new information is being sought," Andrews said.

A commission spokeswoman said yesterday that it was appealing against the judgment to clarify the law and was not seeking to keep the section 100 orders in place.

Air New Zealand's general counsel, John Blair, said the airline was disappointed that the commission was going to the Court of Appeal "in the face of a very clear and reasoned analysis by the High Court".

The commission's actions were rightly condemned by the High Court, he said.

"Such tactics by a regulator have no place in the fair administration of justice."

Blair said that as part of "normal proceedings" Air New Zealand has subsequently filed its objection to the commission's appeal with the Court of Appeal.

It is alleged that from December 1998 to February 2006 Air New Zealand and the other airlines were part of a cartel which imposed fuel surcharges for air freight and could have cost customers up to $600 million.

Air New Zealand and other airlines will fight the claims, which have yet to make it to a substantive court hearing in this country.

In other countries, including Australia and the United States, dozens of airlines have been investigated. Some have paid billions of dollars in fines and jail sentences have been imposed on executives.

Grant David, a partner at Chapman Tripp who specialises in corporate and competition law, said Andrews' ruling showed the commission had over-extended itself with the exercise of a valuable power to grant confidentiality.

"Certainly section 100 had never been seen as something of a gagging order particularly once proceedings had been commenced."

He said the commission's pushing of the boundaries in the airline case brought into question any moves to further extend its powers, as had happened in Australia where its counterpart, the ACCC, can now tap phones and put electronic tracks on vehicles.

"If you are looking at giving the commission more significant enforcement powers then you'd have to question the wisdom of doing that."

WIDE POWERS
* Section 100 of the Commerce Act covers any information or document or evidence and applies to information given to and obtained by the Commerce Commission.
* Last year the commission said details of a cellphone pricing deal were covered by the section and it warned media against publishing them.