By Peter Citron, Lovells
One of the key tools that the European Commission uses in its fight against cartels and other anticompetitive behaviour is a dawn raid, an unannounced on-the-spot investigation. There are some hard facts emerging from recent dawn raid practices which businesses should be aware of.
Wider use of dawn raids
In 2008, the Commission opened a sector inquiry into competition in the pharmaceuticals sector and dawn raided a number of pharmaceutical companies. This is the first time that the Commission has launched a sector inquiry by means of a dawn raid. The case illustrates the Commission’s determination to use its dawn raid powers increasingly widely.
IT Searches
Inspectors have the right to examine and copy documents stored on a computer system. The inspectors bring IT experts who can use forensic search techniques and can retrieve deleted documents. The documents do not have to be on the computer system on the premises. The Commission takes the line that they are entitled to review and copy all documents which are accessible from the premises, and this can include documents which are stored on a server outside the EU.
Privilege
The recent Akzo judgment has confirmed that communications with in-house lawyers can be reviewed and copied by inspectors in an EC investigation. Only communications with independent, external, European Economic Area-qualified lawyers are protected by legal professional privilege. So, for example, advice from a US qualified lawyer, which may be privileged under US rules, can be inspected and copied by Commission officials for use in their investigation.
Sealing
If a dawn raid lasts more than one day, it is standard practice for the Commission inspectors to seal rooms and filing cabinets. It is absolutely essential for companies to ensure that these seals are not broken or tampered with. In 2008, the Commission imposed a fine of Euro 38 million on E.ON Energie AG for breaking a seal fixed by the Commission during a dawn raid.
Obstruction
The Commission has a clear policy of punishing companies severely for obstructing investigations. In its first application of its new 2006 fining guidelines, the Commission imposed an increase of 30% to Sony’s fine for obstruction of the dawn raid. This was on the grounds that a Sony employee had refused to answer oral questions asked by the Commission’s inspectors and another employee was found to have shredded documents during the inspection.
Waiting for the company legal advisors
The presence of a legal advisor is not a legal condition for the validity of the inspection, and the inspection must not be unduly delayed or impeded by awaiting the arrival of legal advisors. Inspectors may be willing to wait a maximum of 15 minutes for legal advisors to arrive.
Home searches
The Commission has the power to raid private homes in addition to business premises. In May 2007 inspectors raided the home of a director in the marine hose cartel investigation, and another inspection at private premises took place in 2008.
Further guidance?
We have developed an e-learning course on how to deal with dawn raids for you and your teams in Europe. This is an interactive screen-based course which employs a series of role plays to deliver training to a number of staff within any organisation.
Peter Citron is Head of Practice Development and Knowhow for the Competition and EU law practice area of Lovells. Lovells is one of the largest international business legal practices with offices in Europe, Asia and the United States.
