Commerce Commission will use search warrants to detect anti-competitive behaviour

The recent admission that an employee of the former Tranz Rail destroyed emails and possibly documents relating to the subject of a Commerce Commission investigation into anti-competitive conduct by the company is likely to justify the Commission’s use of search warrants after an earlier reversal for the Commission in the Court of Appeal.1

The Commerce Commission’s initial investigation centred around allegations against Tranz Rail of anti-competitive conduct in the provision of ferry services between the North and South Islands in 1999 and 2000.

During its investigation, the Commission sought and used a search warrant to uncover certain information relating to the investigation. The validity of the search warrant was subsequently challenged by Tranz Rail, upheld by the High Court and then appealed to the Court of Appeal.

The 2002 decision of the Court of Appeal reversed the High Court’s judgment, found the search warrant employed by the Commission invalid and declared the documents seized under it to be beyond the scope of the Commission’s investigation. The Commission was unable to show adequate grounds for the warrant and was criticised by the Court of Appeal for its generality and lack of disclosure in the search warrant process.

The Commerce Commission was unable to establish that Tranz Rail had exploited a dominant position in the market by using targeted low prices, had substantially lessened competition in the market or that it had entered into an arrangement with the effect or purpose of substantially lessening competition in the market.

The recent findings of the Commission and confirmation by Tranz Rail that one of its employees had directed the destruction of emails relating to the ferry service negotiations under Commission investigation has drawn a response from the Commission.

While roundly condemning any destruction of information pertaining to its investigations it has also indicated its preparedness to continue to employ search warrants where necessary and to use the instance of Tranz Rail information destruction as an example when applying for warrants in future.

1 Tranz Rail Ltd v District Court at Wellington & Anor [2002] 3 NZLR 780 (CA)

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