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Esther Touma  
Solicitor

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Lisa Huett  
Partner
T +61 3 9643 4163

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Sydney
Vishal Ahuja  
Sharon Henrick  

Melbourne
Amanda Bodger  
Caroline Coops  
Lisa Huett  
Renae Lattey  
Andrew Monotti  
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Two recent victories for the Australian Competition and Consumer Commission (ACCC) have turned the spotlight firmly onto its enforcement process. One case vividly illustrates the dangers of non-compliance with statutory demands for information and documents. The other shows the difficulties involved in challenging these demands. Proposed legislative changes will clarify the ACCC’s powers, but will not restrict them.

• ACCC v Rana - the defendant was sentenced to six months imprisonment for refusing or failing to comply with a section 155 notice to produce information to the ACCC.
• Airlines cartel - Korean Air Lines (KAL) has recently been unsuccessful in its challenge to the validity of a section 155 notice to produce information relating to the ACCC’s investigation into the airline cartel.

Companies should therefore take care in complying with ACCC demands, but this does not mean blind compliance with requests. It is always worth verifying that a formal request has been properly issued and is within the ACCC’s powers.

Section 155 of the TPA

The ACCC has wide powers to obtain information, documents and evidence under section 155 of the Trade Practices Act 1974 (Cth) (TPA).

The threshold for the ACCC to issue a section 155 notice is very low. All that is required is for the ACCC to have “reason to believe” that the person is capable of supplying information, producing documents or giving evidence relevant to a matter that constitutes, or may constitute, a contravention” of the TPA, or other matters such as designated telecommunications and water matters.

Failure to comply with a section 155 notice can result in a criminal offence punishable by up to 20 penalty units or 12 months’ imprisonment.

ACCC v Rana [2008] FCA 374

On 20 March 2008, Justice North in the Federal Court sentenced Mr Paul Rana to 6 months imprisonment for failure to comply with a section 155 notice. This is the first custodial sentence imposed for a breach of section 155 of the TPA.

The ACCC had issued various section 155 notices in the course of investigating several alleged breaches of the unconscionable conduct and consumer protection provisions of the TPA in relation to Rana’s cancer cure claims. Justice North found that Mr Rana repeatedly requested extensions to the ACCC’s notices but ultimately failed to comply with them.

Justice North noted in his judgment that the maximum penalty of 12 months imprisonment confirmed the seriousness with which Parliament regards failure to comply with a section 155 notice.

In imposing the 6 month sentence Justice North took into account:

• the circumstances of the offence involved cruelty to vulnerable terminally ill people and their families
• the lack of contrition shown by Mr Rana and unwillingness to accept responsibility for his actions
• tactics adopted by Mr Rana, such as refusal to identify himself at the initial hearing and filing nonsensical documents, which Justice North found were aimed at thwarting the legal process
• Mr Rana did not cooperate with the ACCC when offered the opportunity to do so, and
• the need for the sentence to reflect general deterrence.

Justice North also considered Mr Rana’s personal circumstances in weighing towards leniency, including Mr Rana’s age and the fact that he had no prior convictions.

The Airlines Cartel

The ACCC has been investigating numerous airlines in respect of alleged price fixing conduct of air cargo fuel surcharges. Various airlines have challenged the validity of notices issued by the ACCC under section 155 in the course of the investigation.

KAL challenged the validity of an ACCC notice on the basis that the ACCC had already made a decision to institute proceedings and so was no longer permitted to issue such a notice. KAL also asserted that the ACCC was misusing its powers as it was seeking information to assist in determining a penalty against KAL.

Justice Jacobson rejected KAL's arguments. He found that no decision had been made by the ACCC to commence proceedings against KAL, that the notice had been issued within the scope of the ACCC's administrative function, that the power to issue the notice had not ceased and that it had not been issued for an improper purpose. Justice Jacobsen stated:

"The short answer to KAL's submission is that the evidence before me demonstrates that the purpose of the ACCC in deciding to issue the Notice was to obtain evidence of the extent of any contraventions by KAL and evidence going to the quantum of any penalty. All of this might ultimately be used in the event that the ACCC decides to commence proceedings. This purpose falls squarely within the Act."

Singapore Airlines and Emirates are each challenging the validity of various section 155 notices issued by the ACCC on the grounds that they request information that does not relate to a market in Australia for the purposes of the TPA. Emirates has also claimed that providing the broad range of documents sought by the ACCC would be hard, oppressive and unreasonable. The hearings are scheduled to be heard on 8 July 2008.

Proposed clarification of the scope of section 155 notices

The Exposure Draft of the Trade Practices Legislation Amendment Bill 2008, released by Chris Bowen on 2 May 2008 confirmed the approach taken by Justice Jacobsen, stating that the ACCC may continue to exercise its section 155 powers until either:

• the ACCC commences proceedings in relation to the matter (other than proceeding for an injunction, whether interim or final), or
• the close of pleadings in relation to an application by the ACCC for a final injunction in relation to the matter.