Defective products or defective powers?

By Madeleine Kearney.

Key Points:
Suppliers of goods should consider whether the ACCC is entitled to documents/evidence in the event of a product safety scare. Companies should consider asking the ACCC for a formal request for documents.

A number of recent high profile product safety scares have focused attention on the ACCC's role in Australia's product safety regulatory system. As it is the national product safety regulator, most suppliers of consumer goods would assume that the ACCC has the power to fully investigate product safety incidents and as part of that obtain a company's records.

But is that really the case?

Close examination of the ACCC's powers reveals that there are important limitations. In particular, where there is no current supply of the goods in question (such as where the goods are superseded models, the issue relates to an isolated batch or the products have already been recalled) and where there is no mandatory product safety standard or banning order under the Trade Practices Act 1974 or past false or misleading representation in respect of the goods, there are real questions regarding the ACCC's powers to investigate and obtain documents.

We are not suggesting that suppliers of goods should not co-operate with the ACCC's investigations (indeed, it is our experience that most corporations have a genuine desire to maintain good relations with regulators). It is important however to recognise that there are a number of legitimate reasons why a supplier might be reluctant to provide certain documents to a regulator, not least of all that the documents, be the subject of a claim for legal professional privilege, and/or contain admissions that could expose the supplier to civil and criminal liability. To this end, sections 155 and 65Q of the Trade Practices Act limit the manner in which documents obtained under those sections can be used in subsequent court proceedings, meaning it is worthwhile considering asking that the ACCC formalise any request for documents.

Companies should also consider their indemnity under global insurance arrangements. Notwithstanding that section 65T provides that provision of information to government officials in these circumstances will not affect an insurer's liability under a contract of insurance, this provision will not have legal effect outside Australia.

What are the ACCC's investigatory powers?

The Trade Practices Act gives the ACCC reasonably broad investigatory powers. Section 65Q empowers "authorised officers" to obtain, without a warrant, information, documents and evidence where the officer:

"has reason to believe that a corporation which, in trade or commerce, supplies goods of a particular kind which are intended to be used or are of a kind likely to be used by a consumer and which will or may cause injury".

In addition, under section 155, the ACCC has the power to obtain information, documents and evidence where there the Commission has:

"reason to believe that a person is capable of furnishing information, producing documents or giving evidence relating to a matter that constitutes, or may constitute, a contravention of this Act".

Limits?

At first glance, the powers seem broad indeed - which they are - however, there are some significant limitations that it's important to be aware of.

Section 155 is clearly limited by the requirement that the Commission must have "reason to believe" that the documents/evidence relate to a potential contravention of the Trade Practices Act. While this is a low threshold, as a practical matter this means that without a mandatory consumer product safety standard or banning order in respect of the product (or some other circumstance which might give rise to a contravention of the Trade Practices Act) it is unlikely that section 155 will entitle the ACCC to any documents or evidence in respect of a potentially unsafe product.

Section 65Q is not limited to suspected breaches of the Trade Practices Act - rather, the power to obtain documents exists where consumer goods "will or may cause injury". Section 65Q's power can only be exercised, however, where the corporation "supplies goods" [emphasis added]. Does this mean section 65Q applies to goods which have been supplied in the past, but no longer? Or must the goods still be supplied? This issue is relevant where the goods in question are discontinued or superseded models, where the safety issue relates to an isolated batch or where the goods have already been withdrawn from sale/recalled. So far, no-one knows the answer.

In addition, as the sections do not contain clear words to the contrary, legal professional privilege is a valid ground to decline to produce documents.

How can documents/evidence obtained be used?

A further difference between sections 155 and 65Q is how documents obtained under those sections may be used in legal proceedings.

Both sections offer protections, but section 155 offers less than section 65Q. Documents obtained from a corporation under section 155 are not admissible in criminal proceedings, other than criminal proceedings for a breach of the Trade Practices Act, but can still be used in civil proceedings.

The protection offered by section 65Q is more extensive - documents obtained under it are not admissible in proceedings against that person, other than in proceedings for breach of section 65Q. Unlike documents obtained under section 155, they cannot otherwise be used in criminal proceedings for breach of the Trade Practices Act, nor in civil proceedings.

Implications

When making a decision whether to comply with a request for information it is useful to know what your legal rights are, regardless of the ultimate decision made.

A supplier firstly needs to consider whether it has breached the Trade Practices Act. If there are no mandatory product safety standard or banning order in respect of the product, or no false or misleading representation about the standard, suitability or quality etc of the goods, then it is unlikely that there has been any breach, meaning that section 155 will not apply. Similarly, if the product is not currently being supplied, it is unlikely that section 65Q will apply.

Often, the ACCC will make an informal request for documents rather than exercising its powers formally. If the ACCC is entitled to any documents, it is worthwhile considering requesting the ACCC to issue a formal notice, so as to take advantage of the protections offered by sections 155 and 65Q regarding admissibility of evidence in subsequent proceedings.

For further information, please contact Jocelyn Kellam.