The (not so) long arm of the Commerce Commission

The Commerce Commission’s powers are not as extensive as the Commission thought they were, according to a recent Supreme Court judgment.

The decision means that personal liability does not extend to the offshore chief executive of a firm which breaches the Commerce Act in New Zealand provided he or she does not visit New Zealand, act in New Zealand or communicate with anyone in New Zealand.


Poynter v Commerce Commission [2010] NZSC 38 is the latest chapter in the long-running wood chemicals price-fixing saga.  Mr Poynter is an Australian executive who had managerial responsibility within Fernz NZ, Nufarm and FChem (the Fernz Group).  The firms involved in the litigation have already received large penalties and face private actions for substantial damages.

The Commission alleged that although Mr Poynter did not reside in New Zealand, did not carry on business in New Zealand, or act in New Zealand, he instructed a Mr Greenacre to implement the price-fixing arrangement and was responsible for his subordinates’ actions in this country.  That meant he was liable for penalty under the Commerce Act 1986 (the Act). 

Mr Poynter argued that section 4 provided an exhaustive statement of the Act’s application to overseas conduct and that, as he did not reside in, or carry on business in, New Zealand he could not be liable under the Act.

The Commission’s case

The Commission alleged that Mr Poynter was responsible under s80(1) because he was - directly or indirectly - knowingly concerned in one or more of the breaches by the Fernz Group defendants, and by reason of his having “conspired with another defendant or defendants to breach [the provisions of the Act]”.  

The Commission advanced two lines of analysis in support of this allegation, one based on agency and the other on conspiracy.  The Court of Appeal was persuaded to accept the Commission’s contention that the conduct should be captured by the Act and found that Mr Poynter could be liable for acting in New Zealand:

  • if he, for example, met with and directed employees of a New Zealand subsidiary at a lunch meeting in Sydney, and those actors then returned to New Zealand and implemented the breach, and

  • by Mr Greenacre’s acts as another member of the conspiracy.

Supreme Court

The Supreme Court overturned these findings and allowed the appeal. 

The Chief Justice, Elias CJ, made short work of the Commission’s arguments.  Her Honour held that section 4, by its heading, was clearly not intended to have extraterritorial effect beyond the terms of that section.  She said this was further evidenced by the fact that the section had been extended twice – in 1990 and in 1996 – to apply to further classes of overseas conduct so the Act was not silent on the extent of its intended jurisdiction.  Accordingly, for Mr Poynter to be liable to penalty for conspiring with another person to contravene the Act, he would have to have acted inside New Zealand. 

The other four Supreme Court Judges, in a judgment written by Tipping J, elaborated on the reasoning behind the Court’s decision, beginning with the principle that a statute is presumed to have extraterritiorial jurisdiction only if it contains clear words or a necessary implication to that effect.

Other findings were:

  • that s90 (attributing the conduct and state of mind of employees and agents to a company or non-corporate principal) did not apply to Mr Poynter’s situation as the subordinates were not acting on behalf of their superior personally

  • that Parliament had not intended to extend the extraterritorial scope of the Act by including the concept of conspiracy in the penalty section.  The only justification for liability under s80(1)(f) was Mr Poynter’s conduct, the ‘nod and the wink’ as it were, and that conduct had occurred overseas.  Therefore, Mr Poynter was not liable as he was not a person resident or carrying on business in New Zealand

  • that “a necessary implication is not the same thing as a reasonable implication” – this finding being in rebuttal to the Commission’s argument that there were strong policy reasons for catching people like Mr Poynter in the Act.  Instead the Court declined to fill the perceived gap in the Act by interpreting the law to mean what the Commission thought it should mean, saying that if the Commission’s interpretation was what Parliament intended, Parliament would have to provide the remedy

  • Tipping J et al distinguished two key cases relied on by the Commission-Bomac (the international defendants had essentially been carrying on business in New Zealand) and Bray (the overseas companies had communicated to Australia, therefore, acting in Australia) and expressed reservations about Harrison J’s decision in Bomac, and

  • Tipping J et al found that the common law conspiracy cases presented by the Commission only established that a New Zealand court has jurisdiction if a person enters a conspiracy overseas targeted at New Zealand and then enters New Zealand.  Not, as here, where Mr Poynter had remained overseas.

Where does that leave us?

The Supreme Court has been very clear in its interpretation of the Act.  If you procure unlawful conduct in New Zealand from Hong Kong (or Australia, or overseas generally) or, as Goddard QC argued at the hearing, instruct your secretary or second-in-charge to communicate with competitors in New Zealand, you have nothing to fear from the Commission in terms of personal liability – although your firm will attract substantial sanctions.

This result may seem to run contrary to the current Ministry of Economic Development proposal to criminalise cartel behaviour, but that is not a relevant consideration for the courts.  Criminal liability should not be extended by implication to individuals – especially foreigners who are not currently subject to our law.  Such extension should only happen as a result of Parliament’s clear intention.

For further information please contact the lawyers featured.

Our thanks to Daniel Street, Solicitor, for writing this Brief Counsel.

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Related topics: Competition, regulatory & antitrust; Commerce Commission

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