The Commerce Commission (Commission) has issued new Enforcement Response Guidelines.

These replace the previous version, published in 2013, and reflect changes in how the Commission has approached enforcement over the last decade.

The Enforcement Response Guidelines outline what enforcement responses are available to the Commission, the factors taken into account when deciding which response to use, and its approach to enforcement action.

Enforcement tools

The Enforcement Response Guidelines focus on five enforcement tools:

• compliance advice letters
• warning letters;
• agreed outcomes;
• infringement notices; and
• court proceedings.

The Commission will provide a compliance advice letter where it considers the recipient’s conduct to be potentially problematic. Alternatively, it may consider an individual or organization has broken the law but to an extent that it is not necessary to take full enforcement action at that time. A compliance advice letter will typically advise the recipient of the risks of breaking the law and the relevant penalties and explain how future breaches can be avoided. Note that a compliance advice letter is not a substitute for legal advice, and organisations should seek their own specialist advice.

A warning letter informs the recipient that it has breached or likely breached the law, and provides the recipient an opportunity to fix the issue or conduct before further action is taken. Warning letters will typically be made publicly available on the Commission website.

The Commission’s recent practice has been to issue the draft warning letter to the recipient and ask them to comment on whether there are any factual errors or commercially sensitive information which should be redacted from the final version. The warning letter will only refer to ‘likely breaches’ rather than ‘findings’, and explicitly state that only a court can find breaches of the Act. These practices have now been incorporated in the new guidelines, to ensure that they align with the Solicitor-General’s Prosecution Guidelines (see below).

The Commission may also reach an agreed outcome with an organization, including securing an enforceable undertaking from the organization to adopt a certain course of action. This could include an agreement to cease or prevent further misconduct, admitting a breach, making a formal apology to affected consumers, and/or making a payment.

The Commission can issue infringement notices for some breaches of legislation that are straightforward to establish, such as the failure to disclose information required by law. Any fee or penalty specified in the infringement notice is payable immediately, and failure to pay may be met with further civil or criminal enforcement action.

The Commission will initiate court proceedings as a last resort to prevent an organisation from breaking the law. Court proceedings the Commission may bring include formal injunctions restraining the person or organisation from engaging or conspiring to engage in conduct that may breach the law. Where relevant, the Commission may also seek compliance orders from the court under legislation such as the Credit Contracts and Consumer Finance Act 2003. In accordance with its Model Litigant Policy, the Commission should consider other means of avoiding or resolving a dispute with an organisation, including by using the enforcement tools referred to above.

Notable changes

Following are the changes to the guidelines. As noted above, these changes reflect practices that the Commission has already adopted in the decade since the last guidelines were published.

Encouraging more self-reporting of breaches and cooperation

The new guidelines have a strong focus on cooperating with individuals and businesses to find a solution to potential breaches. When considering its response, the Commission will take into account whether the breach or potential non-compliance was self-reported. The Commission will also consider the extent to which the entity assists or cooperates Commission.

Introducing the ‘Stop Now’ letter that may be issued by the Commission

As an alternative to court proceedings, the Commission may issue a Stop Now letter to put the recipient on urgent notice of the Commission’s concerns. The Commission may publicise the fact they have issued a Stop Now letter or sought an injunction so that the public is made aware of any conduct that may be a danger to consumers.

Giving practical examples of other mitigating steps that can be taken

Mitigating steps the Commission may suggest include product safety recalls, admitting to a breach, compensating customers or donating to an appropriate public cause.

Listing more factors that the Commission will consider before deciding to prosecute

The new guidelines promote consideration of individual-specific factors, and the Commission will draw attention to any relevant details or request further information in the course of its investigation.

Where the breach concerns an individual, the Commission may consider their role in the organization, whether they acted deliberately and/or directly benefitted from the conduct, and whether the individual has demonstrated remorse for the breach.

Aligning with the Solicitor-General’s Prosecution Guidelines, particularly regarding the use of warnings

The Commission will consider alternative means of avoiding or resolving issues before taking further legal action. Where possible, the Commission will attempt to use warning or Stop Now letters to prevent further misconduct rather than immediately take legal action.

Warnings from the Commission will set out the key facts that led to the warning, and the reasons for issuing the warning. The Commission is also expected to comply with the rules of natural justice when administering warnings. This may include putting the potential adverse findings before the individual or business for comment before making a final decision.

A decision by the Commission to provide a formal warning does not prevent it from taking an individual or organization to court if the unlawful conduct continues.

Consideration of personal circumstances

When considering enforcement steps, the Commission will also take into account the personal circumstances of individuals involved, such as personal or professional hardships that mean individual enforcement could lead to an unusually detrimental effect.

If you would like to know more about the new Enforcement Response Guidelines or the Commerce Commission’s investigation process, please contact one of our experts. 

This article was written with the assistance of Jori Whitfield-Topp, a Solicitor in the Wellington Litigation team.