New practice during dawn raids

As previously reported, the Anti-monopoly Office has begun an unusual new practice when conducting dawn raids (for further details please see "Dawn raids – you may call your attorney to come, but cannot say why").

In general, inspectors have allowed undertakings subject to a dawn raid to call their attorneys by phone to come to the premises in order to provide legal aid during the inspection. However, inspectors expressly prohibit undertakings from informing their attorney as to why they should come. In case of non-compliance, inspectors have threatened undertakings with fines for failure to cooperate.

Interestingly, this new practice is not laid down in any legislation or publicly available document. Further, the practice has raised various legal issues – in particular, it could be seen as a breach of an undertaking's basic right to have legal representation present during a dawn raid, as provided for mainly in the Constitution. The practice could also be seen as a breach of legal privilege protection, since communications between a client and attorney should not be subject to an Anti-monopoly Office inspection.

Tesco dawn raid

The Anti-monopoly Office's first decision in respect of this practice was recently adopted. The decision relates to the dawn raid of food retailer Tesco (the largest food retailer in Slovakia) in respect of alleged anti-competitive practices in the sale of milk products. The case has provided an interesting view on this issue.

At the start of the dawn raid, inspectors informed Tesco's representatives that they could call outside legal counsel. However, they were also instructed to refrain from providing any information regarding the investigation to a third party (including over the phone) until the necessary steps to prevent obstruction were in place. Nevertheless, one of Tesco's representatives informed an external lawyer that the Anti-monopoly Office was conducting an inspection.

The Anti-monopoly Office found that by informing the external lawyer (from its perspective, a third party), Tesco had breached the instructions provided during the dawn raid and thus violated the obligation to cooperate with the Anti-monopoly Office. For this and other violations in this regard (eg, remote access to Tesco's old webmail was not blocked for approximately 45 minutes), the Anti-monopoly Office fined Tescp approximately €1.6 million.

Appeal

Tesco appealed the Anti-monopoly Office's decision before the Council of the Anti-monopoly Office.

In its decision, the council stated its views on the legality of the Anti-monopoly Office's practice. The council concluded that the practice is not illegal, since the private right of defence must be balanced with the Anti-monopoly Office's public right to conduct an inspection as regulated by law. Taking into consideration Slovak, EU(1) and European Court of Human Rights case law, the council held that restricting the right to defence in the initial phase of a dawn raid (ie, until the premises and equipment are secured for inspection) is possible; however, the Anti-monopoly Office must assess whether this restriction is necessary (proportional) and to what extent.

In the case at hand, the council found that this restriction was not sufficiently well founded and proportional. The council held that since Tesco has such a broad range of business in Slovakia, informing a third party that an inspection was taking place would only lead to a minimal risk of the inspection being thwarted. Any third person would hardly have the time or means to identify and destroy the documentation that the Anti-monopoly Office was looking for.

In light of its findings, the fine for informing a third party was repealed, while the fine for the second violation (remote access) was upheld. Tesco has already filed a court action against the appeal decision.

Consequences

In general, the appeal decision has concluded that the Anti-monopoly Office's practice is not in contradiction of the law, especially the right to defence. Nevertheless, the decision also clarifies that the Anti-monopoly Office cannot freely use this practice in all dawn raids, as its use must be based on necessity.

Although the appeal decision has set boundaries on the Anti-monopoly Office's use of this practice, as well as provided certain guidance as to how undertakings subject to a dawn raid and external lawyers should behave during the initiation of an inspection, the Anti-monopoly Office still has significant room to manoeuvre. The decision has in fact given the Anti-monopoly Office a new right which it can exercise during dawn raids. Undertakings should therefore be even more diligent when defending their rights during a dawn raid (and when reviewing the inspection report or appealing), while of course cooperating with the Anti-monopoly Office to the extent possible and necessary.

As the appeal decision repealed the Anti-monopoly Office's fine in this regard, this practice will not yet be subject to court review. It will be interesting to see if the courts, like the council, will see the Anti-monopoly Office's practice as complying with the law.

For further information on this topic please contact Jitka Linhartová or Michal Lucivjanský at Schoenherr by telephone (+420 225 996 500) or email (j.linhartova@schoenherr.eu or M.Lucivjansky@schoenherr.eu). The Schoenherr website can be accessed at www.schoenherr.eu.

Endnotes

(1) Such as decision T-357/06 Koninklijke Wegenbouw Stevin.

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