how should you respond to an aer investigation?
TRANSCRIPT
COMPETITION & REGULATION UPDATEHOW SHOULD YOU RESPOND TO AN AER INVESTIGATION?
The Australian Energy Regulator (AER) has broad powers to investigate suspected breaches of the National Electricity Rules (NER) including to issue section 28 notices to produce documents and information and to obtain search and seizure warrants. These powers may be used by the AER in investigating conduct such as false or misleading rebidding.
This update focusses on section 28 notices and includes the below a flowchart outlining key steps in this process and a list of key Do’s and Don’ts in preparing a response.
KEY STEPS IN RESPONDING TO SECTION 28 NOTICES
Who is the focus of
the notice?
Interpret scope of notice
Assess power to issue notice
Negotiate clarifications/
variations
Internal investigation
Develop project plan
Compile response
Section 28 notices: The AER obtains information both voluntarily (by requests) and pursuant to notices issued by it under section 28 of the National Electricity Law (NEL) (section 28 notices) which are mandatory and require the recipient to produce documents or information, or both. Understanding whether a request for information is mandatory (i.e. issued under section 28) or voluntary may be important in considering the degree of flexibility that the company may have in responding to the request. Section 28 notices are the primary method by which the AER exercises its coercive information gathering powers.
Is your company the focus of the investigation: A critical first step is to identify whether your company is the focus of the AER’s investigation. This may or may not be apparent from the face of the notice. However, even if your company is not the AER’s initial focus, it could still become a focus. Investigations into conduct by one company often expand into a broader investigation of conduct by multiple companies.
Focus of response: In responding, there are a variety of possible strategies including offence (notices can be challenged), conciliation, education, minimalist or kitchen sink. The right strategy will depend on the situation and may not be clear until a thorough internal investigation has been completed. Although it may be disruptive to business, taking the appropriate time at the start of the process, and preparing an thorough, considered response can shorten an AER investigation and may even help to avert litigation. Time spent upfront is likely to ultimately be recognised as a good investment. Although section 28 notices are issued relatively infrequently, there are a number of lessons to be learnt, and a significant body of precedent, from section 155 notices (see below) which may be applicable.
Meeting with the AER: The AER does not have the power to require persons to appear at an interview. In this regard, the AER’s power under section 28 of the National Electricity Law is more limited than the Australian Competition and Consumer Commission’s (ACCC) power under section 155 of the Competition and Consumer Act 2010. As such, in responding to a section 28 notice it is not strictly necessary to do more than provide the required documents and information. However, once a company has determined its strategy, it may be that a meeting with the AER will assist. In some circumstances face to face communication in combination with written correspondence may be more effective than written correspondence alone.
DO DON’T
Identify whether your company is the focus of the AER’s investigation
The AER can issue section 28 notices to companies that it suspects have breached the NER and also other companies that can assist its investigation. Specifically, it has power to issue a notice where it has reason to believe that a person is capable of providing information or producing a document that the AER requires for the performance of its functions which include investigating possible breaches of the NER and NEL).
Ignore a section 28 notice
Compliance with a section 28 notice is mandatory. Fines of up to $10,000 may be issued for a failure to comply.
Consider whether an internal investigation is necessary
Particularly where your company is the focus of the investigation, or could become a focus, it will likely be beneficial to undertake an internal investigation prior to responding to a section 28 notice. A full understanding of its own position, facilitates a company providing thorough and considered response, and taking any additional steps that may be warranted.
Start preparing a response without a project plan
Collecting documents is time consuming so it should be done only once. The correct interpretation of the scope of the notice is a critical first step. It is often possible to conduct electronic searches (depending upon IT policies) once the scope of the notice is resolved. However, a physical search may also be required if any relevant employees keep hard copy documents. Document retention notices may be required to prevent routine destruction of documents (and back-up tapes). Securing sufficient resources to review all potentially relevant documents prior to lodging is also critical.
Consider whether the timeframe and scope of the AER request is reasonable
The AER will not always be able to predict the scope of, or time required to respond to, a section 28 notice. If the volume of responsive material, or the time it would take to take to compile that material, is unreasonable, it will likely be useful to engage in a dialogue with the AER as to the scope of the notice.
Delay involving solicitors
Involving solicitors at an early stage is usually the best approach as it allows for legal input into all stages of the preparation of the response, which may help facilitate a more thorough and considered response.
Carefully consider the focus of the response
In addition to providing the requested documents and information, it may be useful to emphasise particular points. For example, it may be that the AER does not fully appreciate the difficulties faced by a participant arising from the complexity of their equipment. In such a situation, an explanation of these difficulties may assist to put in context a company’s conduct.
Meet with the AER until you understand your response
Meeting with the AER may well be useful, particularly to convey complex issues that are better suited to face to face conversation than written correspondence. However, any such meetings are likely to be more productive once the company fully understands its likely response, or once that response has been provided to and reviewed by the AER.
Back row (L-R): Alec White (Senior Associate), Simon Uthmeyer (Partner), Matthew Taylor (Solicitor)
Front row (L-R): Nadia Cooke (Senior Associate), Fleur Gibbons (Partner), Leanne Hanna (Special Counsel), Nicole Breschkin (Senior Associate), Natasha Apostolov (Solicitor), Sophia Grace (Senior Associate)
CONCLUSION
A company’s response to a section 28 notice can be critical in determining the investigation’s eventual outcome. As such, upfront time spent planning a response strategy and, if necessary, discussing that strategy with external solicitors, is likely to pay dividends in the long term. Our team is experienced in all stages of responding to regulatory notices from the initial interpretation of the notice, through the consideration of all legal options and, where necessary, developing plans to methodically identify responsive information, managing large volumes of documents and compiling responses. If we can assist you in preparing a response to a section 28 notice, please contact us.
DLA PIPER AUSTRALIA’S SPECIALIST TEAM
Simon UthmeyerPartner T +61 3 9274 5470 [email protected]
Alec WhiteSenior Associate T +61 3 9274 5144 [email protected]
For more information, please contact:
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What to do if the ACCC comes knocking?, 17 December 2015
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