Mr Key said that wasn't true.
"Why are you turning red, Prime Minister?" Mr Dotcom asked.
"I'm not. Why are you sweating?" responded Mr Key.
"Ah, it's hot," Mr Dotcom replied.
The exchange drew laughter from the crowd watching and brought the debate to a close.
"See you later," Mr Key said. "It's been fun."
Mr Dotcom was joined at the hearing by his colleague Bram van der Kolk, who remained silent at his side throughout.
Proponents say the bill helps clarify a legal gray area; opponents say it amounts to an unwarranted intrusion into domestic affairs.
The agency's spying on Mr Dotcom was found to be illegal because Mr Dotcom, a German citizen by birth, was a legal resident of New Zealand at the time. Although embarrassing for the agency, the misstep to date hasn't significantly impacted the underlying case.
US prosecutors are trying to extradite Mr Dotcom, Mr van der Kolk and two other Megaupload executives from New Zealand, claiming they facilitated massive copyright piracy through the site. Mr Dotcom and his colleagues deny the charges, saying they can't be held responsible for users who chose to illegally download music or movies.
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