A dawn raid is an unannounced – and most often unexpected – inspection by a competition authority, during which the authority will look for evidence of a suspected competition law infringement. These inspections can take place at the undertaking’s premises, but also – more rarely – at private premises of employees, such as homes and cars, if this is approved by a judge. However, for inspections of non-business premises there must be a reasonable suspicion that books or other records relevant to the inspection are being kept there.
Pursuant to Article 20(2) of Regulation 1/2003 the Commission officials are empowered to (i) enter any premises, land and means of transport of undertakings and associations of undertakings; (ii) examine the books and other records related to the business, irrespective of the medium on which they are stored; (iii) take or obtain in any form copies of or extracts from such books or records; (iv) seal any business premises, books or records for the period and to the extent necessary for the inspection; and (v) ask any representative or member of staff of the undertaking, or association of undertakings, for the explanation on facts or documents relating to the subject matter of the inspection and to record the answers.
More recently, the Commission updated its explanatory note on dawn raids in order to provide more clarity on its powers of inspection. These updates mainly focused on the Commission’s powers of inspection regarding undertakings’ IT environments, as the former guidance document did not reflect the new technological developments.
Inspections by the European Commission are usually conducted pursuant to a formal decision, and they will usually be assisted by the competent national competition authority in whose jurisdiction the European Commission is conducting the dawn raid. This is because the national competition authority has the competence to request police assistance. As a result, when the European Commission comes knocking on your door, its representatives will usually be assisted by the national competition authority, who, in its turn, will be assisted by the national police forces.
Undertakings that are subject to a dawn raid have many obligations, and failing to comply with those obligations can lead to significant fines. Therefore, it is vital that every single employee knows what his or her obligations and duties are during the dawn raid. The presence of properly trained employees who know how to act during a dawn raid can make an enormous difference.
The reception staff are usually the first personnel to encounter the authority. It is very important that they follow the internal response strategy that outlines the key initial steps that they have to undertake. Such steps include requesting, copying and checking the inspection team’s authorisation, initiating the internal response mechanisms, and contacting the external lawyers.
Because the Commission’s inspection team is most likely not willing to postpone its inspection until the external lawyers have arrived, a senior member of the internal response team should take the lead in coordinating the dawn raid from the perspective of the raided undertaking. The internal response team leader should review the scope of the Commission’s authorisation document and make sure that every inspector is being shadowed and that all employees cooperate with the Commission’s requests. It is important to understand that the inspectors should not encounter delaying tactics.
Cooperation is of paramount importance. An undertaking that is subject to a dawn raid has the duty to cooperate, and competition authorities all over Europe, including the European Commission, are becoming increasingly tough on undertakings that fail and/or refuse to cooperate during an inspection. For example, E.ON was fined €38 million by the European Commission for breaching a seal, and the Spanish authority fined a company for €2 million for delaying the start of an inspection for 55 minutes.
Once the external lawyers have arrived, an experienced senior lawyer/partner will take over the role of the team leader. The team leader will allocate the various tasks, coordinate the dawn raid support, and double-check the scope of the Commission’s authorisation documents. Particular attention should be paid to the document review by the Commission officials, the interrogations of employees, legal privilege and the use of seals.
For example, during a document review it is very important that a record is kept of all documents the Commission officials have copied and/or searched, and that all interrogated employees are properly assisted by in-house or external lawyers.
Once the Commission has terminated its inspection, it will produce a record of minutes of the inspection. It is of the utmost importance that these minutes are thoroughly checked before they are signed (please note that you cannot refuse to sign the minutes). The minutes should be completely accurate and should reflect all incidents from the inspection. This is very important as this will be the departure point for further analysis and strategic decisions in the overall investigation.
The above text merely describes a few of the key aspects that should be kept in mind when an undertaking is subject to a dawn raid. Proper dawn raid training of employees, the existence of an internal response team, and the presence of and guidance from external lawyers are essential to bringing a dawn raid to a good end.