Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Jim Chalmers MP)Chapter 9: Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
9.1 This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
9.2 The Bill overhauls the existing framework for merger review under the Competition and Consumer Act 2010 (CCA) and replaces it with a mandatory and suspensory administrative merger control system, with the Commission as the first instance administrative decision-maker.
9.3 A streamlined merger control system will enhance efficiency, predictability and transparency for businesses, stakeholders and the community, and remove the scope for strategic behaviour by merger parties. It will ensure the Commission is significantly better equipped to detect, review and act against those mergers that substantially lessen competition.
Human rights implications
9.4 Consideration has been specifically given to the guidance in the Parliamentary Joint Committee on Human Rights' Guidance Note 2: Offence provisions, civil penalties and human rights and to the Attorney General's Department's Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers.
9.5 The Bill engages the following human rights:
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- the right to a fair trial under articles 14 and 15 of the International Covenant on Civil and Political Rights (ICCPR);
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- the right against self-incrimination under article 14(3) of the ICCPR;
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- the right to protection from arbitrary or unlawful interference with privacy under article 17 of the ICCPR;
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- the right to access information held by public bodies under article 19(2) of the ICCPR.
The Right to a Fair Trial
9.6 The Bill engages the right to a fair trial, as well as the presumption of innocence in Articles 14 and 15 of the ICCPR. Article 14(2) of the ICCPR recognises that all people have the right to be presumed innocent until proven guilty according to the law. Articles 14 and 15 apply only in relation to the rights of natural persons, not legal persons, such as companies.
Civil Penalties
9.7 Civil penalty provisions may engage criminal process rights under Articles 14 and 15 of the ICCPR. Although there is a domestic law distinction between criminal and civil penalties, 'criminal' is separately defined in international human rights law. Therefore, when a provision imposes a civil penalty, it is necessary to determine whether the penalty amounts to a 'criminal' penalty for the purposes of Articles 14 and 15 of the ICCPR.
9.8 The Bill introduces the following civil penalties:
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- failure to notify the Commission of acquisitions (section 45AW of the Bill)
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- failure to notify the Commission of material changes of fact in relation to a notified acquisition (section 45AX of the Bill)
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- providing false or misleading information (section 45AZB of the Bill)
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- contravention of the 'suspension rule' by putting into effect a stayed acquisition (section 45AY of the Bill)
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- failure to comply with conditions when a putting a notified acquisition into effect is subject to conditions (section 45AZ of the Bill).
9.9 The civil penalty provisions contained in the Bill are not 'criminal' for the purposes of human rights law. While a criminal penalty is deterrent or punitive, these provisions are regulatory and disciplinary, and they aim to encourage compliance with the Bill. Further, the provisions do not apply to the general public, but to a sector or class of people - those undertaking certain acquisitions - who should reasonably be aware of their notification obligations under the CCA. Therefore, imposing these civil penalties will enable an effective disciplinary response to non-compliance.
9.10 While these civil penalties are large, they are appropriate in size. The Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers outlines that larger penalties are more appropriate for bigger companies, as they provide an adequate deterrent. The size of these penalties ensures that the price of misconduct is high enough to deter harmful, anti-competitive activities and thereby improve competition in Australia for the benefit of consumers and small businesses, an important objective of the Bill.
9.11 Further, the judiciary continues to have discretion to consider the seriousness of the contravention and impose a penalty that is appropriate in the circumstances. The civil courts are experienced in making civil penalty orders at appropriate levels having regard to the maximum penalty amount, taking into account a range of factors including the nature of the contravening conduct and the size of the organisation involved.
9.12 Therefore, a relevant consideration in setting a civil penalty amount is the maximum penalty that should apply in the most egregious instances of non-compliance with the Bill. These maximum penalties are explicitly outlined in the Bill itself.
9.13 The Bill can impose maximum civil penalty amounts which are intentionally significant and are in line with the penalties for other provisions in the CCA, following changes made to its penalty system in the Treasury Laws Amendment (More Competition, Better Prices) Act 2022.
9.14 Finally, there is no sanction of imprisonment for non-payment of these civil penalties.
Criminal Penalties
9.15 The Bill includes criminal offences for breaching the requirement to cease to hold shares in certain circumstances more than 12 months after the Tribunal has made a determination that an acquisition must not be put into effect (or imposes a condition that was not complied with) (section 51ABZZP of the Bill).
9.16 The offence of continuing to hold shares is a strict liability offence. Strict liability is appropriate in this circumstance, as it is necessary to strongly deter the holding of shares relating to an acquisition after the Tribunal has determined that the relevant acquisition must not be put into effect or where conditions were not complied with. The nature of the offence means that it is appropriate for a person to be penalised if they do not cease to hold the shares in question.
9.17 Strict liability reduces non-compliance, which bolsters the integrity of the new system and is appropriate as in this case where there is a need to ensure offences are dealt with expeditiously to maintain public confidence in the system. The strict liability offence meets the conditions listed in the Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers. For example, the penalty does not exceed 60 penalty units. The application of strict liability, as opposed to absolute liability, preserves the defence of honest and reasonable mistake of fact.
9.18 Consistent with Article 14(1) of the ICCPR, an independent, impartial court will preside over all criminal proceedings brought under the Bill, which will be subject to established Australian court processes and procedures that protect the right to a fair trial including requirements relating to procedural fairness, evidence and sentencing.
9.19 Given that the offence is appropriately designed to ensure integrity of Australia's acquisition control system and will be administered in accordance with Australia's standards for criminal law proceedings, the offence is consistent with Article 14 of the ICCPR.
Merits Review
9.20 Article 14 establishes rights to judicial due process and procedural fairness. These rights apply in both civil and criminal proceedings, and in matters before both courts and tribunals. [2]
9.21 Schedule 1, excluding Division 1A, of the Bill limits merits review by adopting the existing limited merits review process for determinations made by the Commission under the merger authorisation process.
9.22 The Tribunal's limited merits review means, broadly, that it can only consider the information before the Commission when making its determination (unless otherwise permitted), information the Tribunal requests from the Commission, new information, documents or evidence not in existence when the Commission made its determination but only in specified circumstances. The Tribunal may also consult consumer associations or consumer interest groups or other persons and ask questions or seek information from a technical expert as part of their review.
9.23 The adoption of limited merits review for the new system is reasonable, given its use in relation to the review of merger authorisation determinations, and necessary for ensuring the efficiency of the merits review process. Further, the limited merits review is proportionate as it balances the need for efficiency with a review process which is comprehensive even with the limitations.
9.24 A limited merits review balances the need for efficiency and timeliness, preserving the regulator's expertise and the avoidance of strategic delays or over litigation. Parties to the acquisition benefit from greater certainty and timeliness, reduced risk of re-litigation and a less resource-intensive process.
9.25 Therefore, the Bill does not unreasonably limit the right to a fair trial or fair hearing with respect to administrative decisions and judicial review.
Information gathering
9.26 The new information-gathering powers engage the right against self-incrimination under Article 14(3)(g) of the ICCPR because they provide that the Commission's existing information-gathering powers under section 155 of the CCA may apply to the new system.
9.27 The Bill balances the Commission's need to access information with a natural person's right against self-incrimination by limiting the use of incriminating material supplied by the individual. Information obtained using the powers cannot be used as evidence against the individual in criminal proceedings or in proceedings where the person may be liable to a criminal penalty unless those proceedings are for an offence under section 155 or for an offence against certain sections of the Criminal Code relating to section 155.
9.28 Engaging the right against self-incrimination in this way is necessary and justified as the public benefit in removing the liberty outweighs the loss to the individual. The information which would be obtained by the Commission is critical in it performing its regulatory functions, specifically seeking to prevent anti-competitive acquisitions that would harm the competitiveness of Australian markets.
9.29 The material and evidence necessary for the Commission to perform its regulatory function is likely to only be available from certain individuals in an entity. The new information gathering powers in the Bill are therefore consistent with the right against self-incrimination under Article 14(3)(g) of the ICCPR.
Right to Privacy
9.30 Schedule 1 of the Bill engages the right to protection from unlawful or arbitrary interference with privacy under Article 17 of the ICCPR because it requires parties to notify the Commission of acquisitions and of material changes of fact in relation to acquisitions. Some of the information provided in such a notification may be personal information. The Bill also requires the Commission to keep a public register of notified acquisitions, the contents of which will be prescribed by a legislative instrument. It is intended that the register will only include sufficient information to achieve the legitimate transparency objective of the Commission maintaining the register.
9.31 The right in Article 17 may be subject to permissible limitations, where these limitations are authorised by law and are not arbitrary. In order for an interference with the right to privacy to be permissible, the interference must be authorised by law, be for a reason consistent with the ICCPR and be reasonable in the particular circumstances. The UN Human Rights Committee has interpreted the requirement of 'reasonableness' to imply that any interference with privacy must be proportional to the end sought and be necessary in the circumstances of any given case.
9.32 The amendments are necessary as they help ensure the Commission has the required information to undertake its functions and powers under the new system to determine whether acquisitions would, or be likely to, substantially lessen competition in Australian markets.
9.33 These new provisions are appropriate as to the extent the Commission receives personal information as part of their functions and powers, it will handle that information in accordance with its obligations under the Privacy Act 1998 including under Australian Privacy Principle 3 to not collect personal information unless it is reasonably necessary for, or directly related to, one or more of the Commission's functions or activities.
Conclusion
9.34 The Bill is compatible with human rights as to the extent human rights issues are engaged, such engagement is necessary and proportionate to the intended policy outcome.