Austria’s Supreme Court has upheld a decision of the Austrian Cartel Court extending the scope of a search warrant based on a file note made after a chance finding at a dawn raid.
This issue of chance findings is controversial under European Union and National Competition laws since it places companies under risks that further suspicions and investigations may arise after a dawn raid has been conducted. Such chance findings regularly cause extensive and time-consuming court proceedings, since the companies in question look for ways to omit them as evidence in antitrust proceedings.
The Austrian ruling, made in November 2013, arose in a case that began with a search warrant issued by the Cartel Court to the Austrian Federal Competition Authority (FCA) in late April 2013 covering vertical price coordination between certain food retailers and a dairy producer and horizontal price coordination between those latter food retailers regarding the former dairy producer.
On 15 May 2013, the FCA searched the business premises and vehicles of the parties concerned – the food retailers and the dairy producer. A day later, the FCA submitted an application to the Cartel Court to extend the scope of the search warrant to cover vertical price coordination between food wholesalers and the companies concerned. This application was based on a file note made at one of the dawn raids carried out on 15 May 2013. One of the documents suggested that there was vertical price coordination with a number food wholesalers.
The same day – 16 May 2013 – the Cartel Court accepted the application and extended the scope of the search warrant to cover vertical price coordination as explained above. This decision of the Cartel Court was appealed by the companies concerned, which argued that the execution of a search warrant may not go beyond the suspicions it was initially based upon and that evidence outside the scope of the search warrant must be disregarded.
Regarding chance findings, the Supreme Court held that, according to Regulation 1/2003, information discovered through such chance findings may not be used in the initial investigation the dawn raid was based upon; however, there is no utilization prohibition. The Commission may therefore rely on chance findings to initiate new proceedings.
Regarding the extension of the scope of the initial search warrant, the Supreme Court held that the question in this case is whether a new proceeding has to be initiated by the FCA or whether the prosecution of the new suspicions shall be part of the initial investigation via the extension of the scope of the initial search warrant.
According to the AEB decision of the Court of Justice of the European Union (CJEU)(C-67/91), information obtained as part of an investigation may not be used outside of that investigation due to the utilization prohibition and rights of defense. However, in the case at hand the FCA did not use the chance finding as evidence to apply for an extension of the scope of the search warrant. Instead it used a file note made at one of the dawn raids declaring that four FCA officials had found documents supporting the suspicion of vertical price coordination between food wholesalers and the companies concerned.
It is at the discretion of the FCA to decide whether to extend the scope of the initial proceeding or to initiate new proceedings.
The Supreme Court held that its decision is not contrary to the Nexans decision by the EU General Court (C-135/09), since the FCA did not embark on a fishing expedition: both the initial and the extended search warrant were precise enough and not unlimited. Furthermore, it is permissible to review documents during a dawn raid which are not covered by the search warrant to assess whether these documents must be seized.
The consequence of this is that the FCA is able to circumvent the utilization provision and rights of defense by simply making a file note based on the chance finding in question and using that file note (instead of the chance finding itself) to extend the scope of the initial proceeding or to initiate new proceedings. Accordingly, an undertaking where a dawn raid was undertaken does not have legal certainty that documents not related to the investigation the initial search warrant was based upon may not be used to initiate new proceedings or extend the scope of the current proceeding when a file note was made on that chance finding.
The issue of the use of chance findings in Austria is therefore not entirely clarified, since it has to be seen how the Supreme Court will interpret this decision to decide upon chance findings which are not that closely related to the suspicion the initial search warrant was based upon or not even related to antitrust issues, but for example to tax or anti-corruption laws.
Since the issue of chance findings is not clarified and the decision clearly demonstrates that chance findings occur and are taken up by the authorities, undertakings and their lawyers should therefore react to the use of chance findings in an aligned manner.