From time to time, the European Commission and other regulatory authorities conduct surprise onsite inspections called “dawn raids”. The Commission investigates suspicions of anticompetitive agreements or other conduct potentially violating antitrust law.
A dawn raid is stressful for the company’s employees. It is also risky for the company: if employees do not behave appropriately, the company can be fined millions of euros -- the company may be completely innocent but still face significant problems due to procedural irregularities during the dawn raid.
It is therefore in a company’s best interest to know what to expect and how best to handle the situation. These guidelines are intended to help achieve this objective.
We focus on inspections by the Commission but the basic principles are applicable to inspections by other regulatory authorities.
As its name suggests, a “dawn raid” will typically start early morning with a group of officials arriving at the reception of the company and announcing the purpose of their visit.
Inspectors from the Commission do not need a court warrant (just a decision by the Commission), whereas inspectors from national authorities often do (UK, France).
Upon arrival of the inspectors, the legal department should immediately contact external lawyers, but the Commission officials should not be prevented from beginning their inspection.
Officials may search a company’s entire IT network as well as all hardware and media storage (email and document servers, PCs and laptops, handheld devices, CDs, USB sticks, etc.).
The Commission is not entitled to remove company hardware.
Inspectors can ask for specific email accounts to be blocked for the duration of the inspection, including changing the passwords. Access to blocked accounts must not be reinstated unless approved by the officials.
The officials may take a duplicate copy of electronic data and store it on an external hard drive to continue their searches at the Commission’s headquarters in Brussels in presence of representative(s) of the company, who can check what is read and copied.
The European Courts have not yet reviewed the legality of this procedure, but the Commission contends it is legal.
Note: Legal privilege does not apply to documents containing legal advice from in-house lawyer. This applies when the investigation is under EU competition law or under national competition law and the national system in question does not extend Legal privilege to in-house lawyers.
Commission officials can interview staff members. The interviews should focus on issues connected to the subject matter and purpose of the investigation. Employees may also be asked to provide information on the organisational structure of the company and their responsibilities.
Officials can seal business premises as well as company records if the inspection cannot be completed in one day. Under no circumstances should the seal be breached. One company was fined more than 38 million euros for breaching a seal, even without any evidence that documents were missing.
Example of a seal from the EU Commission
At the end of the inspection, the officials will assemble all secured paper files in the meeting room allocated to them and identify electronic data. An index of the documents seized will also be made available to the company (and should be requested if not).
A company may oppose the taking of obviously unconnected documents. However, Commission officials should not be prevented from taking these documents. Your opposition should be recorded in the minutes.
Officials and company representatives should review the minutes so that any final remarks about the conduct of the inspection can be added, in particular about any incident which may have occurred (legal privilege, seals, scope of the inspection, interrogations). Once the content of the minutes has been approved, it must be signed by a representative of the company.
The company will be faced with a difficult decision once it becomes aware of an inspection, particularly one related to possible cartel behaviour.
The Commission’s Leniency Programme gives companies the possibility to co-operate with the investigation and, in certain circumstances, benefit from a fine reduction. According to the Leniency Notice, the Commission may grant a reduction of up to 50% of the fine if the company adds value to the evidence the Commission already has. The decision on whether to apply for leniency needs to be taken as quickly as possible – ideally, while the dawn raid is happening -- as the percentage of the fine reduction declines for each subsequent leniency applicant (50-30-20%).
White & Case can offer tailored toolkits containing detailed recommendations to be followed within the various departments of an organisation in the event that a competition inspection takes place. Such solutions would be customized to the specific needs of your company, jurisdiction and language requirements.
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