Eva Škufca February 13 2014 Dawn raids: how far does the duty to cooperate go? Schoenherr | Competition & Antitrust - Slovenia Eva Škufca Competition & Antitrust IntroductionLegislative frameworkInvestigative powersRecent agency practiceCommentIntroductionThe Competition Protection Agency has increasingly used unannounced investigations (dawn raids) in recent years to secure evidence of potential competition law breaches. Determining how undertakings should react to such inspections is therefore of increasing importance.Although the Prevention of Restriction of Competition Act provides little detail on this topic, the agency (encouraged by a recent Supreme Court decision) has demonstrated in public announcements that it intends to interpret the general duty to cooperate rather broadly. The question is therefore how far the agency should (and will) actually go.Legislative frameworkDuring an investigation, agency officials may enter the premises of an undertaking's registered corporate seat, as well as any other premises in which the undertaking (or other authorised undertakings) carries out activities and business operations from which a competition law violation might have arisen. Access to all premises related to a business may be requested and all data carriers inspected. The only exemptions are attorney-client privileged correspondence and employees' private correspondence.Furthermore, at present, agency officials may carry out inspections (and enter business premises) of undertakings subject to agency proceedings, based only on an order for inspection issued by the agency. However, this is anticipated to change shortly following a recent Constitutional Court ruling that this regime contravenes basic constitutional principles – the requirement for an ex ante court order should apply to legal persons subject to agency investigation when the privacy of dwellings and/or communications is being impaired (for further information please see "Court finds agency dawn raids unconstitutional and orders new law").Investigative powers Among other things, agency officials may exercise the power to:enter and inspect premises, land and means of transport at the registered office of the undertaking and at other locations;examine books, contracts, papers, business correspondence, business records and other information relating to the undertaking's business, irrespective of the medium on which they are stored;take or obtain (in any form) copies of or extracts from relevant documentation, and retain originals for the necessary period where copying is not possible (although seizure is limited to 20 days);seal any business premises and business books and other documentation for the duration of, and to the extent necessary for, the inspection;ask any representative or member of staff of the undertaking to give an oral or written explanation of any facts or documents relating to the subject matter and purpose of the inspection, and record such information; andperform other actions in line with the purpose of the inspection.The Competition Act implies that undertakings subject to investigation have a rather general duty to cooperate by establishing that they "must allow authorized persons access to premises and business books and other documentation". The agency can impose a penalty equal to a maximum of 1% of the implicated undertaking's turnover if the undertaking obstructs an authorised person in the exercise of his or her powers.Recent agency practice The agency has demonstrated that it will be strict when it comes to exercising its powers and has so far issued two penalty decisions for obstruction of investigations.In late 2011 Produkcija Pro Plus, doo received a penalty amounting to 0.2% of its annual turnover. The agency argued that the undertaking had failed to cooperate by not allowing agency officials to enter the premises (immediately) on their arrival. In a decision issued in December 2013, the Supreme Court upheld the agency's decision and stressed that implicated undertakings have a duty to cooperate at least to a minimal extent. By way of example, the court listed providing access to the building and showing where the respective documentation can be found.In a second recent case the agency fined Geoplin doo for obstruction of an investigation carried out in July 2013. In a December 2013 press release, the agency stressed that an "undertaking's passive stance in the search of documentation and mere enabling of access to requested premises and documentation will represent a refusal to cooperate and hence investigation obstruction". The fine imposed also amounted to 0.2% of the undertaking's annual turnover.CommentWhile undertakings should not attempt to obstruct investigations, the reasoning provided by the agency nonetheless seems (too) far reaching.The Competition Act requires undertakings to "allow authorized persons access to premises and business books" and the Supreme Court argued that this imposes a minimal duty to cooperate. However, in a recent press release the agency has interpreted this to mean that undertakings have "an active cooperating duty" and should "actively help in the search of documentation".Within the EU competition law framework, it is established practice that undertakings cannot take a passive stance only, but should assist the European Commission in its search for documents (eg, by providing passwords for access to computers or online databases) and provide any information requested by European Commission officials.The agency's wording seems to go even further, implying that employees of an implicated undertaking should take an active role in the search for documentary evidence. This appears not to be limited to assistance following an agency request. It goes without saying that the initiative should always come from the agency and should be concrete enough for the undertaking to be able to provide the respective information and/or document sought. In any case, it seems at least doubtful that the agency has forgotten that implicated undertakings, though under an obligation to provide assistance, should still enjoy their constitutional privilege against self-incrimination.The agency's rather controversial view has thus far been communicated only in a press release (although this was officially published on its website) and not in an official policy document. However, this nonetheless indicates how the agency plans to use its prerogatives. Further decisions and case law on the subject will be an interesting read.For further information on this topic please contact Eva Škufca at Schoenherr by telephone (+386 1 2000 980 or +32 2 743 4040), fax (+386 1 4260 711) or email ([email protected]). The Schoenherr website can be accessed at www.schoenherr.eu.