A general counsel with a burgeoning litigation workload? It's enough to make any managing partner prick up their ears in today's counter-cyclical environment. But as Commerce Commission general counsel Peter Taylor points out, outsourcing is not the only viable option available.
The Commission
The Commerce Commission, like its Australian counterpart the ACCC, is responsible for the enforcement of competition and consumer protection legislation. Its influence also extends to legislation specific to particular industries such as telecommunications, dairy and electricity. The Commission also examines sectors not currently subject to regulation with a view to establishing whether any is required. These reviews can be initiated by either a request from the government or the Commission.
New Zealand saw a change of government last year, with the more conservative National Party coming to power. It's still early days, but Taylor says there is no sign of a change in direction from the government on the issue of competition policy. "We can't see any major change - there doesn't seem to be an appetite for reform," he says. "The expectation seems to be that we'll continue to do our job under the current legislation."
Core functions
In contrast to private companies, where legal work might comprise only a small part of the business, the Commission's core operations as an enforcement agency have a strong legal focus. Taylor has 30 lawyers in his team advising on a number of different issues, such as use of the Commission's statutory powers by investigative teams, merger queries and industry regulation. But in recent times it is litigation work that has come to the fore as the Commission steps up its enforcement activities. "The Commission has an enforcement program which has a focus on the major cases that involve conduct of the most potential detriment to New Zealand," Taylor says.
Litigation, with the ever-present potential for lengthy appeals, is a costly process and Taylor says that the renewed emphasis on enforcement has been underpinned by a significant increase in funding. When Taylor joined the Commission in 2000, there was a budget of NZ$1.5m to fund litigation. That annual figure is now NZ$10m. "The enforcement work has become increasingly complex - pursuing international cartels, for example," Taylor says, noting the increasingly serious nature of cases which are coming before the body.
Is this a sign of companies becoming more brazen in their flouting of competition legislation? Taylor notes that there is another potential inference, namely that it is the exposing of cartels, rather than cartel activity itself, which is on the rise. And, as in Australia, there is always an incentive for parties to come clean - the first member of a cartel to break ranks can apply for leniency and immunity from Commission initiated proceedings, on the condition of full cooperation. "There are a greater number of cartels being disclosed," Taylor says.
Outsourcing
Litigation work might seem an obvious candidate for outsourcing, but at the Commerce Commission there has been an attempt to perform at least part of this work in-house. It's a way of managing cost and also managing the skill level of the team. "Litigation is a core area of work and we're trying to build a high-quality team in-house - so why outsource the work?" Taylor says. "It's a strategic reason for giving lawyers a compelling reason to stay."
There's also another important reason for building up expertise in-house - ironically, at a time when firms are scrambling for work, they are frequently precluded from acting for the Commission for conflict reasons. "It is hard to find firms which have the requisite capacity that are not conflicted," Taylor says. "It's a major issue for us. Frequently, the decisions [of what firm to use] are made for us because of the conflict issue." That said, the Commission is not shopping around for a new deal, with Taylor describing its relationships with external advisors as "reasonably settled".
The Commission does not have a formal system for internal billing, but Taylor flags this as an issue of interest now that it is performing more work in-house. "When you're working with a firm, you can be creative with the negotiations and give the firm an incentive to get the work done at an appropriate delegated level - but where is the incentive to do that internally?" It comes down to an issue of productivity rather than cost and - as Taylor points out - the cost of doing work in-house is always significantly lower.
Time and place
Taylor has been general counsel at the Commission for nearly nine years, prior to which he practised in London with Denton Wilde Sapte and in Wellington with Simpson Grierson. "It was a question of place and time," he says of the move to the Commission in 2000. "There were a number of partners and work was dwindling. I've always been interested in competition law and it seemed an interesting opportunity." And what advice does he have for lawyers who are advising clients on compliance with the legislation administered by the Commission? "Make sure you have the right expertise," Taylor says. "If you need assistance, seek it out."
Ultimately, he says it's a question of respect: "Treat the Commission with respect - don't play games. It pays to be honest and upfront." ALB