Shame first, ask questions later?

With little fanfare, the Commerce Commission ("NZCC") has recently released new Investigation Guidelines that include a new default position that the NZCC will publish details on its case register whenever an investigation is opened. This changes the NZCC's previous position and, from our perspective, marks a concerning development.

What is the NZCC's new position on publicising investigations?

Previously the NZCC would only publish details of an open investigation if the investigation was a "matter of considerable public interest."¹ Appropriately, this was a high bar requiring that the matter was already in the public domain; there was a risk to public safety; or an announcement was necessary to elicit information from persons who may have been harmed by the alleged conduct.

The key changes indicated by the NZCC's updated Investigation Guidelines are that:

• The NZCC will "generally" publish information on its case register when an investigation is opened. This may include:
  • under which statute the alleged conduct is being investigated;
  • the name of the party/parties under investigation; and/or
  • the industry the party/parties are in.
• In a criminal matter, the NZCC will consider publishing a party's name if there is a risk to the public, the information is already in the public domain or if the conduct has been self-reported.
• In a civil matter (including those which are quasi-criminal in nature), the NZCC will publish a party's name unless the party is an individual or there is a need to preserve evidence.

The NZCC argues these changes are necessary to improve the "consistency and transparency of [its] investigation work" and to "raise awareness" about the types of conduct it investigates.

However, we are concerned that these changes:

• are inconsistent with the principles of natural justice;
• are inconsistent with established best practice; and
• have been made without public consultation.

More details on our views are as follows.

Natural justice considerations

A person's reputation is protected by law and, as a public body, the NZCC is under a duty to observe the principles of natural justice when taking any steps that may impact a person's reputation.² By making public statements on its case register at an early stage of an investigation (potentially before engaging with the party), the NZCC is at risk of making statements that will be interpreted adversely against a person, even in the absence of any wrong-doing and without that person having an opportunity to protect its reputation.

We also do not consider that a disclaimer on the case register that an open investigation does not imply impending enforcement proceedings or any wrong-doing will mitigate the adverse impact of such publicity given the mere fact of an NZCC investigation can, in the eyes of some audiences, be interpreted adversely.

Regulatory best practice 

We consider that the Commission's proposed new approach is inconsistent with established best practice:

• The Solicitor-General's Prosecution Guidelines state that as a general rule prosecutors and the New Zealand Police should not comment on whether a person is under investigation or if charges are considered and that prosecutors should be "extremely cautious in making comment prior to charges being filed."
• The Serious Fraud Office states it will usually make an announcement concerning an investigation "only after charges have been filed." An exception is made if the fact of an investigation is already public or if public cooperation is needed.
• The Financial Markets Authority will only publicise when it takes enforcement action following an investigation, aligning with the NZCC's previously established position on publication.
• In the United Kingdom, the Financial Conduct Authority ("FCA") initiated consultation on a proposal to publicise the identity of a party when an investigation is opened to "be more transparent around what enforcement activity we are doing." The announcement that a party was under investigation would be accompanied by a statement that an investigation does not automatically amount to misconduct. The backlash against the FCA's proposal resulted in the House of Lords Financial Services Regulating Committee issuing a report "Naming and shaming: how not to regulate", with Lord Forsyth of Drumlean noting: 

It was incumbent on the FCA to make a strong and unequivocal case for why such a fundamental change was needed and it has failed to do that. Its consultation on the changes has been an abject failure and even the FCA Chairman acknowledged this has not been the FCA’s ‘finest hour’.

No consultation on draft guidelines

We are also concerned that the NZCC did not publicly consult on these proposed changes. The NZCC's explanation is available on the NZCC's website (if searched for), but was not circulated via its mailing lists and its updated Investigations Guidelines were published without notification.

This is different to the NZCC's usual (and commendable) approach of actively consulting on guidelines before issuing them.³

We consider the NZCC should revisit its updated Investigation Guidelines

Given the concerns outlined above, we encourage the NZCC to revisit the approach proposed in its updated Investigation Guidelines and to consult prior to reaching a concluded view.  

If you or your business would like to discuss the implications of the new Investigation Guidelines, please get in touch with one of our experts below.

This content is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice. If you require any advice or further information on the subject matter, please contact a Russell McVeagh partner/solicitor.