April 24, 2015
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April 22, 2015
European Commission Dawn Raids: EU General Court Reins in “Fishing Expeditions”
On 14 November, the EU General Court ruled in related cases T-135/09 and T-140/09 that the European Commission had been too broad when setting out its mandate for the carrying out of dawn raids at the offices of companies in France and Italy. The Court viewed that the Commission was illegally “fishing” for evidence of possible further anti-competitive activity. In essence, this means that the Commission must confine itself to a specific, targeted sub category when authorising dawn raids.
On 14 November, the EU General Court ruled in related cases T-135/09 and T-140/09 that the European Commission had been too broad when setting out its mandate in the carrying out of dawn raids at the offices of companies in France and Italy.
In both related cases, the Commission had suspicions that the parties had engaged in anti-competitive activity in the supply of underwater and underground electric cables. The Commission conducted dawn raids to collect information, not only on these categories of electric cable, but also on all types of electric cable. After the raid had taken place, the parties involved learned through a Commission press release that the Commission was really only investigating anti-competitive activity in the underwater and underground electric cables market. The widening of the investigation to include all types of cabling could therefore be construed as a “fishing expedition”.
The parties appealed the expansive reach of the Commission’s search. The Court decided that the scope of the dawn raids should not have been expanded to the collection of information and documentation on the supply of all types of electric cable. It found that the Commission was illegally fishing for evidence of possible further anti-competitive activity. In essence, this means that the Commission must confine itself to only the specific sub category of products that it suspects of being the subject of anti-competitive activity.
Legal Basis of Dawn Raids
Dawn raids are provided for under Article 20 of Regulation 1/2003. They constitute an important tool in the European Commission’s fight against anti-competitive practices. The Commission is allowed to carry out an inspection of not only the business premises of their target companies, but also of the homes and cars of the persons involved. They can inspect documents, make copies, take screen shots, and question employees. All the information collected may then be used as evidence in any regulatory action against the companies involved.
Amongst other things, when authorising the inspection, the Commission has to specify the subject matter and the purpose of the inspection. It need not necessarily delimit precisely the relevant market, but it must outline in clear terms its intended areas of inspection. This outline then gives the inspected parties the ability to cooperate fully with the inspection officials, while also affording them the power to withhold information outside the ambit of the Commission’s inspection. Additionally, the Commission must be able to show reasonable grounds for investigating the subject matter in question.
Scope of The Dawn Raids in The Present Cases
The Court found that the Commission had properly delimited their inspection to all electric cables and all the material associated with those cables. It appeared from a Commission press release following the raid, however, that the Commission had only been interested in information on the supply of underwater and underground electric cables. This was reinforced by an analysis of the persons at the inspected companies to whom the Commission was interested in talking, as well as information from the leniency applicant that had incited the inspection in the first place. The GC concluded that the Commission didn’t have reasonable grounds to inspect all types of electrical cable, and should therefore have confined its investigation to underwater and underground electric cables only. It thus annulled the Commission’s decision authorising these dawn raids.
On one hand, it is clear that the Commission must expressly limit the areas of its inspection to areas where it has reasonable grounds for suspecting anti-competitive activity. Companies that are subject to a dawn raid should therefore note carefully the scope of the inspection outlined in the decision authorising the raid, and their corresponding obligation to cooperate within this scope. Any indication of a narrowing (or indeed, widening) of this scope should be duly noted by companies.
On the other hand, it is not clear as to what will happen to the evidence obtained illegally, as the GC didn’t rule on this point. The issue of whether this evidence can be used in tangible anti-competitive actions is still unresolved.
Gerard McElwee, stagiaire in McDermott's Brussels office, also contributed to this article.