FEDERAL COURT OF AUSTRALIA Australian Competition and Consumer Commission v Valve Corporation (No 5) [2016] FCA 741 File number: NSD 886 of 2014 Judge: EDELMAN J Date of judgment: 27 June 2016 Catchwords: PRACTICE AND PROCEDURE – confidentiality orders – appropriateness of orders to prevent prejudice to the proper administration of justice – general allegations of commercially sensitive and confidential information – information not provided to the other party or the court – publicly available information relating to the alleged confidential information – need for transparent, open justice Legislation: Evidence Act 1995 (Cth) ss 75, 135(a), 135(b) Federal Court of Australia Act 1976 (Cth) ss 37AE, 37AF, 37AG(1)(a), 37AJ(2), 50 Federal Court Rules 2011 (Cth) r 2.32 Cases cited: Australian Competition & Consumer Commission v Origin Energy Electricity Ltd [2015] FCA 278 Australian Competition and Consumer Commission v Air New Zealand Limited (No 3) [2012] FCA 1430 Australian Competition and Consumer Commission v Air New Zealand Ltd (No 12) [2013] FCA 533 Australian Competition and Consumer Commission v Cement Australia Pty Ltd (No 2) [2010] FCA 1082 Computer Interchange Pty Ltd v Microsoft Corp [1999] FCA 198; (1999) 88 FCR 438 Hearne v Street [2008] HCA 36; (2008) 235 CLR 125 Hogan v Australian Crime Commission [2009] FCAFC 71; (2009) 177 FCR 205 Hogan v Australian Crime Commission [2010] HCA 21; (2010) 240 CLR 651 Yara Australia Pty Ltd v Burrup Holdings Limited (No 2) [2010] FCA 1304 Date of last submissions: 27 June 2016 Date of hearing: Determined on the papers Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Category: Catchwords Number of paragraphs: 27 Counsel for the Applicant: Ms NL Sharp Solicitor for the Applicant: Thomson Geer Counsel for the Respondent: Mr ADB Fox Solicitor for the Respondent: PricewaterhouseCoopers ORDERS NSD 886 of 2014 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant AND: VALVE CORPORATION Respondent JUDGE: EDELMAN J DATE OF ORDER: 27 JUNE 2016 THE COURT ORDERS THAT: 1. The respondent's interlocutory application filed 15 June 2016 is dismissed. 2. Costs reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT EDELMAN J: Introduction 1 This matter is listed for a hearing as to remedies, including pecuniary penalties. Pending that hearing, this is an application by the respondent, Valve, for confidentiality orders in respect of financial information contained in some of its proposed answers to interrogatories. Valve relies upon s 37AF of the Federal Court of Australia Act 1976 (Cth) for the confidentiality orders sought. Valve has not provided the answers to either the applicant (the ACCC) or to the Court. It submits that orders preserving the confidentiality of information that the Court has not seen are necessary to prevent prejudice to the proper administration of justice (see s 37AG(1)(a) of the Federal Court of Australia Act). It submits that the disclosure of the information that has not been provided to the Court would be "highly detrimental and prejudicial to Valve". Unsurprisingly, the ACCC opposes the application. 2 Valve's application is premature. Confidentiality orders are not usually made in the absence of the Court seeing the information which is said to be confidential. Further, there is presently no threat to any confidentiality of information that Valve might provide. When that information is provided to the ACCC it would be subject to equitable duties of confidence if it is confidential and the usual imposed duty upon the ACCC concerning its use. The ACCC has also undertaken in email correspondence that it will not disclose or use that information other than strictly for the purposes of this litigation. As for the information provided to the Court, it will not be publicly available before the hearing. 3 An assessment of whether confidentiality orders should be made would appropriately be undertaken at the commencement of the remedies hearing. At that time it would be appropriate to assess matters such as the interest of transparency in the administration of justice in circumstances, for instance, where matters such as gross revenue and net profit are important considerations in the quantum of a pecuniary penalty. However, based on the current submissions by the parties, I have serious doubts whether the information could meet the requirements for a non-disclosure order. One of the reasons for my current doubts is the vague and general nature of Valve's assertions of prejudice to it if the information is made public. Another is in relation to Valve's submission that it would be prejudiced if the public became aware that (if it were the case) Valve is a highly profitable business. This is a very surprising submission. It is difficult to see how there would be any surprise to a member of the public to discover that an enterprise with millions of subscribers in Australia alone, and operating in many countries across the world, is "highly profitable". This conclusion can be reached even without the evidence upon which the ACCC relied, but to which Valve objected, which suggested estimates of Valve's earnings in the region of multiple billions of dollars. The alleged confidential information and the test for non-disclosure 4 By an application brought on 15 June 2016, Valve sought interlocutory orders that subject to any further order of the Court, the publication or disclosure of certain information be restricted. The information over which these confidentiality orders are sought is as follows: (1) Valve's gross revenue (from all sources of revenue) worldwide, for the years 2011 to 1 June 2015 (interrogatory 11); (2) Valve's net profit worldwide, for the years 2011 to 1 June 2015 (interrogatory 12); (3) Valve's estimate of the net profit earned by Valve from purchases (subscriptions) by Australian subscribers to Valve's video games and third party games, for the years 2011 to 1 June 2015 (interrogatory 13); and (4) Valve's estimate of the gross revenue earned by Valve from purchases (subscriptions) by Australian subscribers to Valve's video games and third party games, for the years 2011 to 1 June 2015 (interrogatory 14). 5 Section 37AF read with s 37AG(1)(a) of the Federal Court of Australia Act includes a power for the Court to restrict or prohibit the disclosure of information where the order is necessary to prevent prejudice to the proper administration of justice. Valve relies upon this ground for the non-disclosure orders it seeks. 6 In Hogan v Australian Crime Commission [2010] HCA 21; (2010) 240 CLR 651, 666 [38], a joint judgment of the High Court said (quoting Hogan v Australian Crime Commission [2009] FCAFC 71; (2009) 177 FCR 205, 220-221 [42] (Jessup J)): the question will always be: is an order necessary to prevent prejudice to the administration of justice? Absent an affirmative answer to this question it is, in my view, almost meaningless to propose that documents themselves are, or that the information in them is, inherently confidential to an extent justifying, or assisting in the justification of, the making of an order permanently protecting them from public view. 7 Those remarks were made about s 50 of the Federal Court of Australia Act as it then stood. But they apply equally to s 37AF read with s 37AG(1)(a). 8 The onus of persuading the Court to make an order which restricts publication of evidence has been described as "a very heavy one" (see Computer Interchange Pty Ltd v Microsoft Corp [1999] FCA 198; (1999) 88 FCR 438, 442 [16] (Madgwick J)). The order must be necessary to prevent prejudice to the administration of justice, not merely that it is desirable to address a potential prejudice to the administration of justice. In Hogan v Australian Crime Commission (664 [30]) the joint judgment of the High Court emphasised that "'necessary' is a strong word". Justice Perram has explained that "[m]ere embarrassment or annoyance will not suffice": Australian Competition and Consumer Commission v Air New Zealand Ltd (No 12) [2013] FCA 533 [7]. 9 Valve asserts that there is prejudice to the proper administration of justice due to its claimed confidentiality in relation to the information in each of the categories outlined above. It is important to draw a distinction between information which is not public and information which is truly confidential. The mere fact that information relevant to a proceeding is not in the public domain will rarely be a sufficient basis to suppress its publication. The interest in confidential information can be different if the disclosure of that information could "become a vehicle for advantaging or prejudicing trade rivals": Australian Competition & Consumer Commission v Origin Energy Electricity Ltd [2015] FCA 278 [148] (Katzmann J); Australian Competition and Consumer Commission v Cement Australia Pty Ltd (No 2) [2010] FCA 1082 [23] (Greenwood J); see also Yara Australia Pty Ltd v Burrup Holdings Limited (No 2) [2010] FCA 1304 [25] (Barker J). 10 Valve asserts that the information in the categories above is both confidential and will cause prejudice to Valve if made public. Mr Quackenbush, Valve's General Counsel says that public disclosure of Valve's financial information would be damaging to Valve's business for the following reasons. (1) If the information discloses that Valve is a highly profitable business, this may motivate current competitors to increase their presence in the market, or encourage new competitors to enter into the market. Valve claims that this may disrupt Valve's relationships with third party game developers and other suppliers. (2) If Valve's private financial information is made public, Valve submits that it could make negotiations with potential business partners more difficult. (3) Disclosure of the size of Valve's business could, according to Valve, attract more third party claims such as "patent troll cases". (4) Disclosure of the relative size of Valve's business could also, according to Valve, encourage an increase in "fraudulent equipment orders" which Valve is currently attempting to address. This is a type of criminal activity whereby a person or person impersonating Valve employees makes online orders for expensive computer equipment for shipment to an address in the United States. Valve says that currently it has managed to identify all fraudulent orders. 11 I currently have serious doubts about these assertions. 12 First, it may be that these same points could be made about nearly every case involving a private corporation where pecuniary penalty orders are considered. These points involve assertions and speculation, and they do not currently appear to be supported by any clear evidence of a real likelihood of concrete prejudice. 13 Secondly, even without examining the details of Valve's net profits, it is very difficult to see how any disclosure that Valve is a highly profitable business will come as a great surprise to any fraudster, third party game developer, potential business partner, patent troll, or supplier. There are related matters to profitability that are already public information, which were discussed without any suggestion of confidentiality in the liability hearing. Those matters include that Valve has approximately 2.2 million subscriber accounts in Australia and that it operates in many countries worldwide. 14 The ACCC also provided affidavit evidence that the "Welcome to Valve" webpage on Valve's website says that Steam is the world's largest online gaming platform and that it "connects its 35 million active users to each other" and that it is "available in 237 countries" (a curious claim). 15 The ACCC also referred to numerous publicly available articles which provide financial estimates which are closely related to the information that Valve seeks orders to suppress. In one public article in a magazine in 2011 it was reported that Forbes claims various sources have valued Valve between $US 2 billion and $US 4 billion with estimated revenue in the "high hundreds of millions". In 2012, Forbes said that the "most conservative estimates put Valve's enterprise value at more than $3 billion" (although the New York Times reported in 2012 that its value was estimated at $2.5 billion). 16 The ACCC also refer to a website called Steam Spy which claims to rely on actual data provided by Valve. Information from that website has been reported more generally in the media. The website estimates that Valve generated $3.5 billion in earnings in 2015. 17 Valve objects to the evidence of the ACCC described in the three paragraphs above on the basis that the evidence is hearsay. It also objects on the basis that its probative value is substantially outweighed by the danger that the evidence might (a) be unfairly prejudicial to a party; or (b) be misleading or confusing within s 135(a) and s 135(b) of the Evidence Act 1995 (Cth). As to the hearsay basis for the objection, Valve does not appear to have considered s 75 of the Evidence Act. As to the second basis, Valve submits that this material is liable to mislead the Court and is highly speculative. 18 Ultimately, it is unnecessary to rule on either of these bases for objections (as to which no response has been received by the ACCC because the objections were made in reply submissions, apparently without conferral with the ACCC beforehand). It suffices to observe that the evidence is not asserted to be evidence of conclusive fact. It is relied upon for the very limited purpose of showing that there is unlikely to be great surprise by any revelation that Valve's business is "highly profitable". Indeed, even without this evidence it involves more than a little intellectual strain to accept the submission by Valve that there would be real prejudice to it by disclosure that its business, with millions of subscribers in Australia alone, and operating in many countries across the world, is "highly profitable". 19 Valve also submitted that a "cursory review" of the public material "does not disclose any insight into, or the substance of, the detail of the Confidential Information". That assertion cannot be adequately assessed by the Court because Valve has not provided the Court with the "detail of the Confidential Information". 20 Thirdly, it is not immediately obvious how information from, say, 2011 will be of any real commercial interest to any of the persons to whom Valve refers in late 2016. It is noteworthy that, as the ACCC submitted, the information runs only to 30 June 2015. It is sometimes the case that historical information, combined with other matters, can be sufficient for a confidentiality order: Australian Competition and Consumer Commission v Air New Zealand Limited (No 3) [2012] FCA 1430 [34] (Perram J). But in this case the Court has not seen the confidential information and the basis for confidentiality is expressed at a high level of generality. 21 Even apart from these doubts there is another fundamental obstacle for Valve. Any assessment of any prejudice to the administration of justice will require consideration of the interest in transparency and open justice. Section 37AE of the Federal Court of Australia Act provides that in deciding whether to make a suppression order or non-publication order, the Court must take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice. Each of the matters over which Valve seeks confidentiality orders may be matters which are relevant to the assessment of remedies including pecuniary penalties. 22 Further, s 37AJ(2) of the Federal Court of Australia Act also requires that the order should operate for no longer than is reasonably necessary to achieve the purpose for which it is made. It might be open to doubt, for instance, whether it is necessary to maintain a suppression of the publication of Valve's financial information, including in any reasons for decision which are given, even for the year 2015 beyond, say, 2017 or 2018. The extent and importance of each of these matters can only be properly assessed in light of the evidence and written submissions at the remedies hearing. 23 There is no need for an immediate determination of this issue, particularly one conducted without the Court having seen the information. Rule 2.32 of the Federal Court Rules 2011 (Cth) lists documents that are "unrestricted", and available for public inspection. Answers to interrogatories are not unrestricted. This means that a third party who wishes to be granted access must obtain the Court's leave to do so. At the very least, leave would not be granted without submissions from Valve. And in circumstances in which the material has not been relied upon in open court and may be the subject of further argument about confidentiality, any such application might face formidable obstacles. 24 As to the possibility that the ACCC would disclose the information prior to a hearing, the ACCC is a model litigant. In email correspondence, the ACCC confirmed that "ACCC officers in receipt of the information… would not disclose or use that information other than strictly for the purposes of this litigation". There is also no suggestion in any of Valve's evidence that this informal email undertaking by the ACCC would be breached. The ACCC is also subject to the obligation imposed by law not to use the information for any other purpose than the purpose of the proceeding: Hearne v Street [2008] HCA 36; (2008) 235 CLR 125. Although Valve submits that without court orders there "is a risk that the Confidential Information may be made publicly available" there is no basis in the evidence upon which this submission can be supported other than the refusal of the ACCC to consent to a confidentiality regime which is broader than the orders sought in this application. Conclusion 25 This application was premature and should be dismissed. It can be renewed at the commencement of the remedies hearing, if Valve considers that it is necessary to do so, when all relevant information is before the Court. 26 The premature nature of this application was implicitly recognised by Valve in its written submissions. Those submissions sought to confine its application to "an interim regime" which would continue only until the penalty hearing. Although Valve asserted this limited basis in some correspondence with the ACCC, it is contrary to the broad terms of the application and contrary to Valve's expressed concerns that the application was needed to protect confidential information "adduced in evidence or otherwise disclosed during the hearing" (email on 1 June 2016). Nevertheless, in circumstances in which this Court was not provided with the information which Valve says is confidential, and in light of the very general nature of Valve's assertions of prejudice and the lack of any real prospect of prejudice prior to the hearing, there is currently no sufficient basis for such a regime. The orders sought by Valve are not currently necessary to prevent prejudice to the proper administration of justice. 27 The usual order would be that Valve pay the costs of the ACCC in relation to this application. However, it may be that some of the costs of preparing this application will be duplicated if another application is brought. Although I dismiss this application on the ground that it is premature, I should not be taken to suggest that a new application should be brought. Nevertheless, it is appropriate that the costs of this application be reserved to the commencement of the remedies hearing although, on any view, the ACCC should be entitled to some, if not all, of its costs of this application even if a new application is brought. I certify that the preceding twenty seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edelman. Associate: Dated: 27 June 2016