Destruction of documents brings criminal charges in Commerce Commission investigation

Recent judgments relating to the obstruction of an investigation by the Commerce Commission (Commission) offer a timely reminder to businesses and their staff that if they receive a statutory information notice from a New Zealand regulator, they should comply with it; not begin deleting or destroying information they think might get them into trouble.

The Commission’s investigation

In 2020, the Commission commenced an investigation into potential anti-competitive conduct in the supply of consumer electronics. Particularly interested in communications between manufacturers and retailers, the Commission issued a statutory notice requiring LG Electronics (LG) and other manufacturers to provide it with certain documents. The notice specified that “documents” included those in electronic form such as instant messages, including but not limited to messages sent on Facebook and WhatsApp. LG provided the Commission with evidence of its communications with retailers, but did not include any instant messages.

Criminal charges laid against employees

The Commission queried the lack of instant messages in LG’s response and requested that LG provide such communications, along with any further email chains between LG and retailers. On the understanding that LG’s external legal counsel would uplift the phones of certain LG staff members, Mr Dowan Kim instructed two staff members to delete any messages that might be an “issue”. The staff members duly complied. Steps were later taken to recover some of the deleted material, but LG did not advise the Commission that messages had been deleted, and some material could not be recovered.

The Commerce Commission’s investigation into anti-competitive behaviour (which included a review of the recovered messages) did not result in the Commission taking any enforcement action against LG. However, the Commission received an anonymous tip that Mr Kim may have instructed staff to delete potentially relevant communications. Following an investigation into Mr Kim’s conduct, the Commission charged him with one count of attempting to obstruct the course of justice – an offence under the Crimes Act 1961 that carries a maximum penalty of seven years’ imprisonment. The other two staff members who deleted the messages were also charged under the Commerce Act 1986 for refusing to comply with a statutory notice, which is also a criminal offence carrying a fine for individuals of up to $100,000.

All three individuals pleaded guilty. The Judge described the seriousness of their offending as “moderate” and, after considering the individuals’ personal circumstances, granted them discharges without conviction.

Lessons for businesses and individuals

Charging Mr Kim and the other two staff members reinforces that it is crucial for businesses and their staff to comply fully with statutory notices. Businesses and individuals have a legal obligation to do so, with failure by an individual potentially resulting in criminal charges being laid on them personally. This could be the case even where (as in this case) compliance with the statutory notice may not have revealed any unlawful activity in the first place. While LG was not charged in relation to the conduct of its former staff members, it did apply for (but was refused) name suppression on the basis of potential disproportionate prejudice to LG’s reputation from publication of its name. Businesses should ensure their staff are aware of the importance of complying with statutory notices, given the significant risks of reputational and legal consequences.

If you have any questions about statutory information notices including how best to comply, please feel free to contact the Regulatory & Prosecutions team at Wynn Williams.

Ellie Harrison, Partner – Regulatory & Prosecutions Team

Jasper Fawcett, Senior Associate – Regulatory & Prosecutions Team

Angela Black, Law Clerk – Regulatory & Prosecutions Team