Motor insurance companies active in Ireland have recently been the subject of dawn raids by the European Commission (Commission) for suspected cartel activity in breach of competition law. The Commission officials were accompanied by officials from the Competition and Consumer Protection Commission (CCPC).

These dawn raids should serve as an important reminder to Irish businesses of their obligations under competition law and the need for a comprehensive competition compliance programme, including a strategy for dawn raids.

Why did the dawn raids take place?

The Commission is concerned that the companies involved may have engaged in anti-competitive practices in breach of the EU competition rules which prohibit cartels and restrictive business practices and / or the abuse of a dominant position (Articles 101 and 102 respectively of the Treaty on the Functioning of the European Union (TFEU)).

While the Commission has not released details of the companies involved or the alleged anti-competitive conduct, press reports state that Insurance Ireland, the representative body for the industry, was one of the raided companies. Press reports also state that the motor insurance companies are suspected of fixing the price of insurance premiums in an attempt to inhibit new entrants to the market. Reportedly, the existence of a database of clients and claims used by insurance providers in Ireland is the focus of the investigation.

Price fixing is one of the most serious types of anti-competitive agreement. Price fixing cartels can take many forms, including competitors agreeing the price they will charge to customers, disclosing an intention to increase prices to each other and / or exchanging other commercially sensitive pricing information.

What happens next?

Dawn raids are a preliminary step into suspected anti-competitive practices. The Commission will conduct its investigation to determine whether the companies are guilty of anti-competitive behaviour. There is no legal deadline to complete inquiries into anti-competitive conduct.

What are the consequences of breaching competition law?

A breach of competition law can lead to provisions or entire agreements being unenforceable, fines of up to 10% of world-wide group turnover, claims for damages from customers and competitors, director disqualification orders and potential prison sentences of up to five years.

In addition, officials from the CCPC and the Commission have investigative powers which enable them to conduct dawn raids, ie entering and searching offices and directors’ homes unannounced.

How can businesses protect themselves?

Businesses should have in place a competition law compliance programme, including a dawn raid strategy. It is important that companies and their employees are well aware of what to do in the event of a dawn raid. We set out below our key guidelines for dawn raids:

Contact lawyers immediately

  • Make sure receptionists have numbers of lawyers to call in the event of a dawn raid

  • Tell the lawyers the location of the premises being raided, how many officials have arrived and which authority they are from (if known)

Inspect the authorisation or warrant

  • Check that the authorisation or warrant correctly identifies the business name and address and the officials’ names
  • Check the identity of the authority and the scope of the investigation, eg type of products, time period and alleged conduct
  • If not clear from the authorisation, ask for an explanation of the alleged conduct

Ask officials to wait for lawyers to arrive

  • Confirm to the lead official that you intend to cooperate fully

  • Ask officials to wait until lawyers arrive – they may wait a short time but can, and frequently do, start the raid without lawyers

  • Move officials into an empty meeting room
  • If officials do not wait for lawyers, ask that no copies are made, no substantive questions asked and no inspection of in-house lawyer offices or other offices where privileged material is likely to be kept occurs in their absence

Coordinate internally

  • Appoint a key contact for officials

  • Organise an internal dawn raid team (to include senior IT staff and enough employees to act as shadows to each official)

  • Brief the team to make detailed notes of the officials’ actions and not to reveal the raid to anybody outside the office
  • Hold regular debriefs with the team to find out what officials have observed / found

Cooperate

  • Do not obstruct the officials or destroy or conceal documents as it is an offence to obstruct a raid which can result in the company/employees being fined
  • Ask officials to raise any issues or concerns with you as soon as possible
  • Try to keep a co-operative atmosphere but be firm with officials

Shadow the officials

  • Ensure that each official is observed at all times throughout the raid
  • Make notes of what the officials are looking for (eg search terms), what they have found, what dates / names they are focusing on, where there are issues regarding legal privilege or relevance of documents
  • Two extra copies should be made of each document / electronic file the officials download, copy or see

Answer questions honestly but not expansively

  • Officials usually ask questions. You are obliged to answer questions of fact, eg the where to find a document or what an abbreviation means
  • Ask for any substantive questions to be left until the end of the raid when a lawyer is present
  • When answering questions, be honest but not expansive
  • If questions are vague, ask for clarification
  • If you do not know the answer to a question, say so
  • If in doubt, ask how the question is relevant to the investigation and if questions cannot be answered on the spot, offer to follow up after the raid
  • Keep notes of all questions asked and answers given

Protect legally privileged and irrelevant information

  • Make sure that the officials do not see legally privileged information or information outside the scope of the investigation
  • If there is disagreement about legal privilege or relevance of a document, ask for it to be placed in a sealed envelope for resolution at a later stage by lawyers

At the end of the day

  • Ask for a receipt of any documents or files which the officials take away
  • Check whether the officials will return the next day and follow all reasonable procedures they request, eg sealing of rooms and filing cabinets
  • Make sure you have contact details for the officials

After the officials have left

  • Debrief all employees involved and remind them to keep the raid confidential
  • Any incorrect information given to officials should be rectified as soon as possible and any outstanding questions answered
  • Review all questions asked and answered and documents viewed, copied or downloaded
  • Formulate an action plan on how to address issues identified during the raid