Commission warning to Auckland lawyer is a message to all lawyers: know the law before giving advice
Published07 May 2000
A Commerce Commission warning to an Auckland lawyer should be seen as a message to all lawyers: know the law before giving advice to clients.
The lawyer advised an importer on a contract that led to the importer and another company breaching the Act by price fixing. Under the contract the companies agreed to minimum wholesale and retail prices.
"The Commission is concerned that either through direct advice, or negligence, your involvement has led to a breach of the Commerce Act," the Commission has told the lawyer in a warning letter.
"The lawyer put his client and another company in a position where they faced possible court action and still could if they do not honour settlements with the Commission," the Commission's Commerce Act Manager Geoff Thorn said. "The Commission was unable to take court action against the lawyer because of legal professional privilege."
The lawyer's firm has its name on the cover of the contract, and the lawyer acknowledged providing advice on the contract. However, using legal professional privilege, he has refused to confirm or deny if he gave advice on the clause that made the contract price fixing.
The Commission has ended its investigation with a warning to the lawyer and settlements with the two companies.
The lawyer has been warned that if he did give advice on that clause, then he is likely to have breached the Act himself by aiding or abetting a breach.
"The only way you could not have breached the Act is if you failed to consider clause 4.1 [of the contract]. If that is the case, your failure to consider and provide advice on that clause has led to your clients breaching the Act," the Commission's letter states.
Mr Thorn said that without evidence to show that the lawyer acted deliberately, rather than negligently, the Commission will not release his name.
The two companies involved in the contract have given the Commission signed undertakings including:
acknowledgment that the contract was a price fixing arrangement and was prohibited by the Commerce Act
that they will modify the contract to ensure that it complies with the Act
to not enter into, enforce or attempt to enforce any contract, arrangement or understanding that fixes the price of goods or services, and
that if they do not honour their settlements the Commission will consider further action.
Background
The Commerce Act gives courts the power to impose penalties of up to $500,000 on an individual and up to $5 million on a company that aids or abets a breach (section 80(1)(c)), or that directly or indirectly, knowingly is party to a breach (section 80(1)(e)).
The Act prohibits price fixing, which is collusion among competitors over any part of a price (section 27 via 30). It prohibits formal and informal agreements among competitors about discounts, commissions, mark-ups, wholesale prices, retail prices, and all other parts of prices. Courts can impose penalties of up to $500,000 on an individual and up to $5 million on a company.
