Competition Dawn Raids
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.
What happens during an inspection?
Beginning of the inspection
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.
The powers of a Regulatory Authority during a Dawn Raid
Search of business premises
- The officials have extensive powers to search for evidence supporting their suspicions of anticompetitive conduct:
- They are allowed to examine files, including confidential files, located at your premises, such as paper documents and electronic data.
- Private residences can also be searched, if approved by a judge.
- Officials are allowed to make copies of documents and data.
- During the dawn raid, employees whose offices or documents are being searched have the right to be present (although the inspection can’t be delayed if they are not there).
- The authority’s search may not exceed the scope of the inspection decision or court warrant. It is therefore important to have a lawyer review it to find out:
- What are the allegations against the company?
- Which business line is the subject of the inspection?
- What is the time period (years/months) in question?
- What is the geographic scope of the alleged conduct?
- If the officials are looking for evidence beyond the scope of the inspection decision, you can raise objections and, in case they insist, request that a mention be made in the minutes. But if the officials find evidence of other infringements beyond the scope of the original inspection decision, the Commission is empowered to issue further inspection decisions.
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.
Limits to the officials’ power: legal privilege
- Commission officials are not allowed to read, copy or seize documents which are subject to legal privilege or on which legal privilege has been invoked.
- A company’s written communications with an EEA-qualified lawyer can be generally considered to be covered by legal privilege.
- Legal privilege also applies to i) documents that describe or restate the advice of an external EEA-qualified lawyer, even if prepared by employees within the company; and ii) documents that have been prepared by the company for the sole purpose of obtaining legal advice for the exercise of its rights of defence.
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.
- If you refuse to be interviewed or provide untruthful information, the company can be fined. Employees cannot refuse to answer a question because it concerns commercially sensitive information, although you can flag the issue with the officials.
- Inspectors cannot ask self-incriminating questions such as asking an employee whether the purpose of a specific meeting was to fix prices.
- The interviews will be recorded and/or minuted and you will receive a copy after the investigation.
Seal of business premises
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
End of the inspection
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.
During and after the inspection
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%).
How to get ready for a dawn raid
- Identify an internal dawn raid team consisting of a team leader (preferably from the legal department), a member of senior management, a senior member of the IT staff, and any other appropriate staff members. The dawn raid team will be responsible for interacting with the officials (together with external counsel) and taking decisions during the inspection.
- Ensure that all key employees of the company have received appropriate training and know what they should do in the event of a dawn raid. These employees are:
- the dawn raid team
- other staff of the legal department
- key members of the IT department
- reception staff
- staff working in more “vulnerable” departments
- Consider hosting a mock dawn raid if local data protection rules permit.
- Make sure key people are given a checklist of what to do.
- Draw up a directory of personnel who need to be informed in case of an inspection (legal, management, communications).
- Have a draft internal email ready to send to company staff with preliminary instructions.
- Discuss possible ways to address the prospect of a dawn raid with communications officer. Prepare a draft press release or answers for journalists.
- Make sure inspectors will have a place to work, with the necessary equipment.
At the beginning of the inspection
When the inspectors arrive
- Courteously greet the officials, inform them of your intent to cooperate fully, and ask whether they would be willing to delay their inspection until external lawyers arrive, indicating when you think that will be.
- Call your external competition law advisors; ideally email or fax a copy of the inspectors' authorisation documents.
- Check the inspectors' authorisation documents, in particular:
- The correctness of the name and location of the company.
- The date and signature of the decision/warrant.
- The subject matter of the investigation (product scope, geographic scope and time frame of the alleged infringement)
- The legal basis for the dawn raid – is the dawn raid conducted under national or European law?
- Under national law, a search warrant signed by a judge is sometime required.
- Under European law, a decision from the European Commission is sufficient.
- If anything is unclear, ask for explanations from the inspectors and inform external lawyers.
- Make sure all inspectors are given a badge identifying them.
- Try to find out from the officials whether they are also conducting investigations at any of the company's other sites or at the homes of any company employees. If they are, then arrange comparable support for each of those other locations.
What should we do?
- Make sure receptionists are following their checklist.
- Inform your external lawyers specialised in competition law:
- Give them details about where the officials are from, how many officials there are.
- Fax or email them a copy of the decision or warrant.
- Ask the lawyers when they are likely to arrive.
- Inform management and the relevant communications contact person about the inspection.
- Immediately organise a meeting with the dawn raid team (and external lawyers by telephone if they are not onsite):
- Discuss the scope of the inspection and key employees who may be targeted; schedule briefings for these employees.
- Appoint people to follow the inspectors during the inspection (preferably internal or external lawyers).
- Inform all company employees by email.
- Do not inform people outside the company (particularly competitors).
What to do while the inspection is happening
- Behave in a helpful and cooperative manner towards officials.
- Do not hamper the officials’ search for any reason.
- Make sure no documentation or electronic files are deleted during or after the investigation.
- Make sure that officials are supervised at all times.
- Follow/observe the inspectors; answer technical questions; keep written notes of their actions; record which offices they enter; what types of documents they look at; what questions are posed and the answers given, etc.
- Ensure that inspectors do not copy i) documents covered by legal privilege; ii) documents falling outside the scope of the investigation.
- Make sure inspectors return paper documents to their original location.
- Keep a set of the documents the inspectors have copied.
- Do not volunteer documents not expressly requested by inspectors.
- Minutes of the inspection:
- Do not sign anything without carefully checking content and, when in doubt, seek legal advice.
- Make sure any incident is recorded in the minutes.
- Interrogation of employees:
- Ensure employees are briefed before the interview.
- Ensure that no employee is interviewed without a member of the legal department and/or an external lawyer present.
- Ensure that minutes are taken and/or that the interview is recorded.
- Raise objections to questions that are self-incriminating or obviously outside the scope of the investigation. Ensure that such objections are recorded.
- Seal of premises:
- Pay close attention to the preparation of minutes relating to this process.
- Do not breach or damage the seal under any circumstances.
- Protect the sealed premises so the seals are not accidentally damaged (by cleaning staff for example): employing security guards might be appropriate and, if possible, a sealed entrance should be filmed continuously by a security camera.
- Legal privilege:
- Notify an official if you think one of the documents requested is covered by legal privilege.
- In order to substantiate your claim, provide information about the document, such as the author and the addressee of the document, as well as its purpose and the circumstances of its preparation -- without revealing the contents.
- In case of doubt, ask external lawyers whether a document is legally privileged.
- In case of disagreement with the officials, request that the document(s) be put in a sealed envelope.
- Have your objection noted in the inspection minutes, in case officials refuse to leave the document or put it in a sealed envelope.
What to do at the end of the inspection
- Carefully check the minutes before signing them. Ensure that all incidents have been reported accurately. You cannot refuse to sign the minutes.
- Ensure that inspectors provide you with an index of all documents copied/seized.
- If relevant, agree with the inspectors on:
- list of factual points to be clarified;
- list of outstanding documents to be produced; and
- any areas of dispute.
Important issues to consider after the search
- Inform all employees that the inspection has ended.
- Collect reports from the employees who accompanied the officials, noting any incidents.
- Quickly hold a debrief with the dawn raid team and external lawyers:
- Consider whether there are any grounds to challenge the inspection decision.
- Decide as quickly as possible to what extent you will cooperate with the Commission: consider the option of applying for leniency.
- Determine whether there are any other documents related to the investigation which the Commission officials did not find.
- Decide on how to deal with any outstanding issues in relation to relevance of certain documents, application of legal privilege, or questions you have agreed to answer in writing after the end of the dawn raid.
- Consider further audit of relevant activities.
- Consider notifying insurers and auditors (and regulators where appropriate).
- Decide how to manage publicity issues – both internally and externally (the authorities, or other companies that have been inspected, might issue a press release making the inspection known).
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.
Request your copy from one of our Partners.
Dawn Raid Team Leader
- The dawn raid team leader should be a senior leader of the company, e.g. general or in-house counsel, general manager or upon arrival an external competition law advisor.
- The dawn raid team leader is in charge of the investigation on the company’s side.
- The dawn raid team leader must carefully read the inspector authorization documents and ensure throughout the investigation that the search does not stray outside the scope and subject-matter of the investigation.
- The dawn raid leader must also ensure that the company complies with its obligations (e.g. no documents are destroyed, no seals are broken, etc).
How should I interact with the inspectors?
- Immediately inform the designated contact person who in turn should contact your external competition law advisors.
- Ask the inspector(s) for proof of identity, the reason for their visit and their authorisation.
- Make copies and scans of the inspectors’ IDs, reason for their visit, and authorisation.
- Make a list of everyone’s names and the organisation they are from (Commission, etc.). Find out who the lead investigator is, and make a note of his/her name and phone number.
- Take the inspectors to a waiting area that does not contain any files or access to the company's IT system, even if they insist on going directly to the offices.
- Offer refreshments.
- Do not volunteer any information.
- Book a meeting room with a phone, fax and photocopier for the inspectors.
- Issue name badges clearly identifying the inspectors as visitors to the premises.
- Do not inform other employees (or anyone outside the company) about the inspection!
- Do not start to answer questions until a lawyer from the Legal Department or an external lawyer is present.
- Keep answers truthful, short and to the point.
- Do not intentionally mislead the inspectors.
- Avoid making self-incriminating statements.
- Do not speculate and do not provide extra information on your own initiative. If you do not know the answer or are not sure, say so. Seek clarification if a question is not understood.
- Answer only questions of fact, not of opinion.
- Do not answer questions outside the scope of the investigation.
- If in doubt about your obligation to respond to a question, ask to confer with the lawyer present with you during the interview.
How should I interact with the inspectors?
- Provide explanations of the IT system if requested.
- Comply with any requests by the inspectors to shut down telephone and/or e-mail systems during the dawn raid, and any requests which may arise when searching electronic documents/data. If this would cause problems with the integrity of the system, explain this clearly.
- Shadow the officials’ IT staff and try to identify the keyword searches being carried out.
- If the inspectors wish to take a forensic copy of an entire hard drive, consult in-house/external lawyers to confirm whether this is allowed.
- Permit access to the company’s IT hardware, as well as any built-in search tools. Ensure that investigators are also able to use their own forensic software and hardware.
What else should I do?
- Ensure that any routine document destruction is suspended immediately until further notice.
- Do not divert incoming emails to other accounts or servers, issue new passwords, create new email accounts, or do anything which may potentially compromise the inspection.
- Try to identify the search terms used by the inspectors.
- Keep a directory of which computers were searched.
- Get a copy of all data (directories, files, storage paths) the officials copied, preferably at the same time the officials are making their copies.