Dawn raids are an extremely effective weapon in the Competition Commission's (“the Commission”) arsenal, and they are a weapon the Commission uses often and effectively. By November 2015, the Commission had conducted dawn raids in four industries namely furniture removal services, fire control and protection systems, liquefied petroleum gas (LPG) and recruitment advertising. Typically, when possible, the Commission simultaneously raids all the offices of a firm countrywide and when it raids firms who are suspected to be members of a cartel, it raids all the members at the same time.
The performance targets cited in the Commission’s Strategic Plan for 2015 to 2020 suggest that we can expect the number of dawn raids to increase in 2016. At the BRICS conference hosted by the Commission in November 2015, the Commissioner emphasized that the Commission had carried out more dawn raids in the past two years than in previous years.
Dawn raids are carried out when the Commission suspects that the firms being raided have committed anticompetitive conduct. The focus thus far tends to have been on price-fixing, market division and tender collusion cartels, although not all raids fall within this content, for example, SAA has been raided in connection with investigations of alleged abuse of dominance.
Dawn raids are always newsworthy and proof positive that the Commission is on the job, but perhaps the most successful tool used against cartel conduct is the Commission's corporate leniency policy that came into force on 6 February 2004. This policy allows one firm to obtain immunity in exchange for blowing the whistle on its fellow cartel members and making full disclosure about the cartel to the Commission so that the Commission can prosecute the remaining cartel members. Leniency is not available in cases already being investigated by the Commission and it is only available to the first firm that reports the cartel to the Commission. The Commission also offers early settlement fine reductions to cartel members who don't qualify for leniency but agree to consent orders.
Coming back to dawn raids, what do you do when the Commission arrives unannounced at the door, usually with the police in tow?
The Competition Act, No. 89 of 1998, gives the Commission the power to enter and search premises, with or without a warrant, and to seize documents and other items such as computers and servers relevant to its investigation. While raids are disruptive and may be entirely unjustified, the Commission is lawfully entitled to carry them out. Resisting a lawful raid is likely to increase the disruption that the raid brings to your business. Resisting a lawful raid is not only futile, but it may also get you arrested for obstruction. The key is polite cooperation; more than that, however, is not required.
Preparation is critical. Every firm should know its rights if and when it is raided, who to contact and how to deal at a practical level with a dawn raid. At a minimum, this means having a dawn raid protocol and properly trained staff.
Your receptionist or security personnel should know who to notify about the raid (including your lawyers), have the relevant contact numbers immediately available and notify those people as soon as possible. You should escort the investigators to a suitable meeting room (not filled with handy filing cabinets) until a decision maker and/or your lawyers arrive. The Commission can (and usually does) start the raid before your lawyers arrive and it does not have to wait for your lawyers although it must give the owner or person in control of the raided premises a copy of the warrant before beginning the raid. If there is no warrant, the investigators must identify themselves to the owner or person in control of the premises, explain that they are authorised to search by the Act and either get permission to enter and search the premises or believe on reasonable grounds that they would get a warrant if they applied to court for one and that the delay involved in obtaining a warrant would defeat the object of the search.
You need to get legal assistance when dealing with a raid to ensure that it is carried out lawfully and in accordance with your rights and that privileged information is properly dealt with. It is also useful to formally agree with the Commission an orderly and efficient way of dealing with the copying of documents and access to electronic information. Anyone who is interviewed by the Commission during a raid is entitled to legal representation in that interview.
An internal team must know how to deal with a dawn raid. Members of this team need to be assigned to every inspector during the raid and must document their actions. The company’s IT team needs to observe the copying or seizure of electronic information and ensure that the copying does not damage the company's computer system. At a practical level, the firm being raided should ideally make copies of all the documents required by the Commission for the Commission. If it does not, the Commission can remove the originals. Keeping control of the copying process enables you to not only keep your originals but to make a duplicate set of documents seized by the Commission so that you have an accurate record of everything in the Commission's possession. This is crucial when dealing with the investigation going forward.
Have a clear internal and external communication plan. Know who needs to be told about the raid, what they need to be told and plan any press releases. Train your staff not to panic, destroy documents or send out any external communication, (including SMS's or emails) about the raid and during or after the raid. Staff should refer all external questions and requests for comment to a designated firm representative.
Training is always more effective if you practise it. Mock dawn raids are a good way of testing readiness. If mock raids are combined with a competition compliance audit, they can also identify potential noncompliance risks.
The Commission is not the only authority empowered to carry out dawn raids. The increasing frequency of these raids clearly indicates that the authorities consider them to be an effective compliance tool. A dawn raid is unpleasant and disruptive for everyone involved but it is so much worse when you are caught short and you have no idea how to deal with the situation.