In a June 25 2015 decision(1) the Supreme Court held that a dawn raid carried out by the Competition Authority on February 4 2014 at the premises of an IT company was unlawful. The court held that the authorisation to carry out the dawn raid lacked justification and proportionality, and that the scope of the raid was excessive, causing the whole raid to be unlawful. As a result, the court ordered the Competition Authority – for the first time – to destroy all data obtained during the raid.
Competition Authority inspectors may carry out dawn raids based on authorisations issued by the chair of the Competition Authority. Act 136/2001 on the Protection of Competition empowers the chair to issue authorisations. Authorisations are the fundamental and only legal act based on which the Competition Authority can carry out dawn raids. The legality of the authorisation underpins the legality of any subsequent action (ie, where the authorisation is unlawful, any further action based on it will also be considered unlawful).
According to the court, in order for a dawn raid not to be considered a fishing expedition (ie, a random search for data and documents), the authorisation must include:
- a reasonable suspicion of a breach of competition law; and
- the scope and purpose of the dawn raid (ie, the definition of the alleged breach of competition law and the market in which the breach is suspected to have occurred).
Although the Competition Authority need not provide a detailed legal analysis to the raided company, the authorisation must be sufficiently justified and specific, as it defines the necessary scope of the raided company's cooperation with the Competition Authority.
As the Competition Authority has broad investigative powers, it is obliged to respect its constitutional and legal obligations to ensure that its powers are used appropriately. On the one hand, the Competition Authority must secure the legitimate aims pursued by the dawn raid. On the other hand, under the principle of proportionality, it must also respect the principle that only inevitable and justified interventions are permissible.
Lack of justification of dawn raid authorisation In the case at hand, the court found that the authorisation lacked certain legal prerequisites. The authorisation's reasoning was too broad and failed to identify sufficient evidence for which the inspectors should have searched. The authorisation also lacked a description of the alleged delict.
The court stated that the authorisation to carry out a dawn raid must include:
- a description of the essential characteristics of the alleged anti-competitive conduct;
- the market in question;
- the nature of the alleged restrictions;
- an explanation of the serious allegations of anti-competitive conduct;
- an explanation of how the anti-competitive act was committed; and
- a precise explanation of the purpose of the dawn raid and what the Competition Authority is looking for.
Proportionality of dawn raid The court considered the entire dawn raid procedure disproportionate and therefore unlawful. The inspectors selected data according to broad keywords, copied the data and removed the information from the premises of the raided company without determining whether it fell within the material scope of the dawn raid and without excluding private information and attorney-client privileged documents.
The court concluded that there was no need for such a procedure, and that the inspectors could have carried out a more detailed selection on the spot (ie, at the company's premises) in order to copy relevant data only. The inspectors had five business days to carry out the dawn raid, yet finished on the first day.
According to the court, the Competition Authority could not argue that the assessment of documents is time consuming and takes weeks or even months to complete. The inspectors need not assess the relevance and content of individual documents in detail. Their assessment should focus only on whether the documents:
- are private;
- are protected by attorney-client privilege; and
- relate to the scope of the dawn raid.
Moreover, the Competition Authority continued to review data obtained during the dawn raid on its premises and assess its potential relevance during the court proceedings. The total net time of this process (staggered over several months) was about 60 hours. Hence, had they carried out a detailed selection, the three inspectors present at the dawn raid would have been able to complete the entire process in about two and a half days.
Effective judicial review The court also assessed the admissibility of the suit. In this respect, the court referred to the European Court of Human Rights decision in Delta Pekarny(2) (also discussed in relation to dawn raids carried out in the Czech Republic, for further details please see "Competition Authority resumes dawn raids on business premises"). The court underlined that legislation must be interpreted in a way which upholds the right to judicial protection. A dawn raid is a one-time intervention into the rights of a company and its employees. There must always be an effective judicial review procedure against such interventions – in this case, Section 250v of the Civil Procedural Code.
In terms of lawfulness, justification, proportionality and the scope of dawn raids, the court strictly interpreted the Competition Authority's obligations with respect to the requirements for authorisations to carry out dawn raids. If an authorisation does not meet the strict requirements for justification and proportionality and the definition of the material scope of the dawn raid – including the alleged anti-competitive conduct, the definition of the relevant market and the alleged breach of competition law – it will be considered unlawful. At the same time, a dawn raid carried out on the basis of an unlawful authorisation will also be unlawful. Accordingly, information seized during the dawn raid cannot be used for any lawful purpose and must be destroyed.
Any Slovak company may be subject to a dawn raid on the basis of an authorisation issued by the Competition Authority. As such, companies should have dawn raid policies in place and inform their employees about the issue to ensure that their rights and the rights of the company are duly respected and that they fulfil their legal obligations.
For further information on this topic please contact Jitka Linhartová or Claudia Bock at Schoenherr by telephone (+420 225 996 500) or email (firstname.lastname@example.org or email@example.com). The Schoenherr website can be accessed at www.schoenherr.eu.
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