Supreme Court examines scope of Commerce Commission's information gathering powers
The Supreme Court of New Zealand has recently clarified the circumstances when New Zealand's competition regulatory agency, the Commerce Commission ("Commission"), can exercise its information gathering powers (AstraZeneca Limited v Commerce Commission & Anor [2009] NZSC 92). It held that the Commission's power to issue information gathering notices is limited to where, at the time the notice is issued, the matter being investigated is capable of amounting to a contravention of the Commerce Act 1986. The Commission cannot, later, justify the notice based on information obtained pursuant to it that could relate to some other contravention of the Act. This may seem commonsense but, given the frequent reliance of the Commission on these information gathering notices, the decision by New Zealand's highest Court is a useful confirmation of the commonsense view.
Facts
AstraZeneca Limited ("AstraZeneca") was contracted by the Crown's drug funding agency, Pharmaceutical Management Agency ("Pharmac") to supply two products, Betaloc CR and Betaloc IV. AstraZeneca's patent protection was about to expire on only Betaloc CR. It sought to negotiate a new long term agreement with Pharmac for continued supply of Betaloc CR. During these negotiations, AstraZeneca indicated to Pharmac that losing the supply of Betaloc CR would risk the commercial viability of Betaloc IV (a low volume/marginal profitability item).
The Commission was concerned that AstraZeneca may have been trying to tie the availability of the specialised Betaloc IV (for which there was no ready substitute) to the supply of the more generic Betaloc CR. It began an investigation into whether this tying or 'bundling' conduct had breached section 36 of the Commerce Act, which prohibits persons with a substantial degree of power in a market from taking advantage of that power for specified anti-competitive purposes in that market or other markets.
The Commission issued a notice under section 98 of the Commerce Act, compelling AstraZeneca to provide it with all documents and information relating to the possible tie between Betaloc CR and Betaloc IV. Section 98 of the Commerce Act gives the Commission the power to compel a person, by notice in writing, to furnish information, produce documents or give evidence which it considers necessary or desirable for the purpose of carrying out its functions or exercising its powers under the Commerce Act.
AstraZeneca sought to judicially review the Commission's decision to issue the section 98 notice. It contended that an exemption relating to Pharmac in section 53 of the New Zealand Public Health and Disability Act 2000 ("NZPHDA") meant that the Commission had exceeded its powers, rendering the notice invalid and of no effect. Section 53 NZPHDA provides that the restrictive trade practices sections in the Commerce Act do not apply to agreements entered into with Pharmac that relate to pharmaceuticals paid for by the Crown, or to anything done for the purposes of entering into, or giving effect to, such an agreement. Consequently, AstraZeneca contended that its actions could not constitute a breach of the Commerce Act and the Commission did not have sufficient grounds to issue the section 98 notice.
Both the High Court and the majority of the Court of Appeal rejected AstraZeneca's argument and held that the notice was valid.
Decision
The Supreme Court overturned the decisions of the courts below and held that the section 98 notice was ultra vires and invalid.
The Supreme Court held that the Commission's power to issue a section 98 notice is limited to the investigation of an activity which is capable of being found to be unlawful under the Commerce Act. An activity which is plainly not unlawful (by reason, for example, of the section 53 NZPHDA exemption) cannot be investigated and cannot be the subject of a section 98 notice. Furthermore, the Supreme Court also commented that the Commission cannot issue a section 98 notice merely in the hope that the response may reveal some other unsuspected anti-competitive conduct that is outside the scope of the investigation to which the notice relates. Rather, the Commission must have a reasonable basis, at the time it issues the notice, to believe that the matter identified in the notice is itself capable of amounting to a contravention of the Commerce Act. The Commission cannot issue a section 98 notice first and then have its power to do so judged retrospectively by reference to what it may later discover from a "fishing expedition" under that notice,
Turning to the facts of the case, the Supreme Court found that, while AstraZeneca did appear to be seeking to tie the availability of Betaloc IV to the supply of Betaloc CR, its purpose in taking this stance must have been to obtain an agreement with Pharmac for the continued supply of Betaloc CR. Since AstraZeneca's objective was to reach agreement with Pharmac, the section 53 NZPHDA exemption applied. When the Commission issued its section 98 notice, it should have appreciated that AstraZeneca's actions were within the section 53 NZPHDA exemption and could not amount to a breach of the Commerce Act. For these reasons, the Supreme Court held that the Commission did not have a proper basis for issuing the section 98 notice
Comment
This is the first decision of the Supreme Court on the lawfulness of the exercise of the Commission's information gathering powers. While the decision turns largely on the interpretation of the NZPHDA exemption, the decision clarifies the circumstances when the Commission can exercise its power to issue a section 98 notice. This decision puts it beyond doubt that the subject matter of the Commission's investigation must be capable of amounting to a contravention of the Commerce Act before the Commission can issue a section 98 notice. This interpretation of section 98 confirms consistency of New Zealand's approach to that in Australia in this area
A specialist litigation firm