Anything you say (to the ACCC) can be used against you (many years later) in court

The Federal Court recently held that submissions and internal documents provided by a party to the ACCC to support or oppose a transaction pursuant to the ACCC’s informal clearance process could be used against the same party in proceedings – seven years later.

The decision means that parties and their advisors will need to ensure submissions and internal documents provided to the ACCC are not inconsistent with future plans or transactions.

Merger review in 2013

In August 2013, BlueScope Steel Limited (BlueScope) sought informal merger clearance from the Australian Competition and Consumer Commission (ACCC) for its proposed acquisition of certain OneSteel Sheet and Coil assets from Arrium Limited (Merger Review).

As part of the Merger Review, BlueScope provided the ACCC with various documents, including submissions, correspondence, economic reports and other materials on the steel industry, BlueScope’s business and the markets in which it competed (merger documents). Some of the merger documents were authored by economists and legal advisors.

Following the acceptance of undertakings provided by BlueScope in August 2014, the merger was not opposed by the ACCC.

Current proceeding (2019 and ongoing)

In 2019, the ACCC commenced proceedings in the Federal Court against BlueScope and BlueScope’s former General Manager of Sales and Marketing, Jason Ellis, for alleged cartel conduct in contravention of s 44ZZRJ of the Competition and Consumer Act 2010 (Cth) (CCA) (Proceeding).

The ACCC alleges that, from approximately September 2013 to June 2014, BlueScope and Mr Ellis attempted to induce competitors of BlueScope to make a contract, arrangement or understanding containing a cartel provision, which had the purpose or likely effect of fixing, controlling or maintaining prices of flat steel products.

Arguments by the parties

In seeking to support its case with evidence about the market and Bluescope’s competitors, the ACCC sought to rely upon the merger documents Bluescope had previously submitted in 2013 as part of the Merger Review. 

The ACCC submitted that the merger documents were admissible in accordance with the “business records” or “admissions” exceptions to the hearsay rule.

Bluescope submitted that the merger documents were hearsay. It said that the above exceptions did not apply to the merger documents because:

1. those documents should not be properly characterised as “business records” as they were prepared to obtain informal clearance from the ACCC (and avoid litigation); and
2. the representations in the merger documents were not “admissions” because they were statements of law or mixed fact and law and were not made by a person with sufficient authority.

BlueScope also submitted that statements regarding competition or competitors in the merger documents (which addressed the issue of whether the transaction substantially lessened competition in a market) were irrelevant to the Proceeding where the relevant issue was whether the parties to the contract, arrangement or understanding were competitors.

The decision in favour of the ACCC

The merger documents were held to be admissible in the Proceeding.

The Court rejected BlueScope’s contention that the merger documents were not business records and were prepared for the purposes of litigation.  While his Honour acknowledged that BlueScope was seeking to avoid litigation by seeking informal clearance, there was “no evidence to suggest that, at the time the documents were prepared, the ACCC had threatened legal proceedings to prevent the merger”.

The Court held that the representations contained in the merger documents constituted admissions because they contained a detailed description of BlueScope’s business including its manufacturing process, distribution channels and prices. These were facts not opinion. The court also held that submissions and reports from lawyers and economists had the authority of their client.

The Court also held that while statements regarding competition in the Merger Review were different to the issue of competition in a cartel case, “the enquiry concerns the same question: the existence of competition in respect of the supply of particular goods or services”.

What you need to know

• Information that you provide to the ACCC (whether under a merger, authorisation or other process) could be used in subsequent ACCC matters including a prosecution against you.  It may be impossible to know what you will do in the future in terms of acquisitions or conduct, but you should ensure your submissions to the ACCC do not contradict any future plans or proposals (even if they are longer term). This may include how you describe your “competitors”, the markets in which you compete and the current and future competitive dynamics. To minimise the risk of your documents, submissions and reports coming back to bite you, your legal team should be “in-sync” with the longer terms plans of the company and your commercial team should approve the content of those materials.
   
• Consider whether you can employ any other strategies to limit information that is provided to the ACCC on a voluntary basis. Although the decision does not expressly state whether the merger documents were provided to the ACCC voluntarily or pursuant to a compulsory notice under section 155 of the CCA, we expect that the ACCC would not distinguish between these two processes in terms of its ability to use such documents in future proceedings. Indeed, the ACCC says that the there is no restriction on the ACCC’s use, including future use, of such information in accordance with its statutory functions. In light of this, it will be important to seek legal advice on whether there are any other strategies that could be adopted to minimise the risk of voluntary disclosures being used in future proceedings.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).