New Zealand Law Society - Law firm critical of why Commerce Commission names each business complaint

Law firm critical of why Commerce Commission names each business complaint

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One of the country's largest law firms is critical of how the Commerce Commission names each business it receives a complaint about.

The Commerce Commission recently released their Consumer Issues Report 2016.

Law firm Russell McVeagh says a complaint is not evidence of wrongdoing and publishing statistics of this nature is open to manipulation and misreporting.

"It is important that the Commission is encouraged to make public useful information like the commentary around prioritisation of its enforcement activities that is contained in the Consumer Issues Report.  It would be a terrible outcome if the media attention to this issue were to reduce the amount of information the Commission releases.  The Commission is generally world class amongst competition authorities in terms of transparency, and we acknowledge that.  What we are saying is that this annual report could be improved by not including lists or info graphics naming and ranking companies who were the subject of complaints, by number of complaints," says Russell McVeagh partner, Sarah Keene. 

Complaint volumes don't tell you anything about wrongdoing – so why are they there?

The law firm says the 'naming and shaming' risks reputational damage to those businesses that outweighs any benefit to consumers. It says this is particularly the case given the caveats to the disclosure of the number of per-business complaints acknowledged by the NZCC itself:

  • Complaints do not, in themselves, indicate that any law has been breached;
  • Complaints do not, in themselves, establish that any consumer harm has been generated by the conduct complained about;
  • Larger traders are more likely to generate complaints simply by virtue of their scale, rather than greater culpability, which is not adjusted for in the NZCC's table;
  • Orchestrated complaints campaigns against traders can inflate complaints numbers;
  • Where the public is aware the NZCC cannot act on a matter this can discourage complaints;
  • Complaints can be about a single matter or many matters, meaning that matters attracting greater publicity may yield greater numbers of complaints, regardless of actual illegality or extent of consumer harm; and
  • Some complaints on the same matter are likely to have reached other complaint bodies instead of the NZCC.

Sarah Keene warns that "where there is smoke, there's fire".

"In the Fair Trading Act area, enforcement is typically by way of criminal prosecution, which makes it all the more important the Commission, as an enforcement agency is only identifying individual companies who the Court has found or who have admitted guilt.  The Commission quite appropriately typically does not name companies under investigation on due process grounds including the obvious risk that the public read an investigation by the Commission as indicating wrongdoing," she says.

The law firm is also critical of the Commission's voluntary Trader Compliance Programme which was established to monitor compliance with consumer laws.

Senior Associate, Troy Pilkington says it would encourage the Commission to review how it describes the programme.

"The Commission refers to the Trader Compliance Programme as being a programme to "work with a few chosen traders or industries to encourage compliance", and goes on to state that "Candidates for the programme are selected based on a range of factors, such as high complaint numbers, the candidate's presence in the marketplace, previous compliance history, the business model or structure, any current compliance activity, and identified issues and risks affecting consumers.

However, the reality is that the programme is voluntary, so the businesses in the Trader Compliance Programme have chosen to participate in that programme in the interests of forming an open and collaborative dialogue and relationship with the Commission," he says.

He goes on to say the way the Commission describes the Trader Compliance Programme this year risks giving the incorrect impression that the businesses that participate in that programme are businesses that have been found to do wrong or are businesses that require oversight from the Commission to comply with their legal obligations. 

"We would encourage the Commission to revert to the language used in last year's Consumer Issues Report, in which it made clear that the programme focuses on "those traders willing to engage voluntarily with the Commission in a positive and collaborative manner," he says.

He says in particular, the Commission will need to consider the impacts on the ongoing viability of its Trader Compliance Programme into the future if the participants take the view they are incorrectly being identified as non-compliant traders. 

"Already the number of participants in the programme has halved since last year from eight to four, so the Commission will need to ensure that it describes the programme publicly in a way that encourages ongoing participation," he says.

You can read the full Russell McVeagh analysis here.

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