The European Commission’s (EC) “Explanatory Note” describes the extent of the EC’s inspection powers and a company’s obligations during a dawn raid. Not only is this document available on the DG Competition website, but it is also distributed by the inspectors to company representatives at the start of a dawn raid. Last month, the Explanatory Note was updated in order to reflect the EC’s evolving practice, particularly in view of the increasingly paperless environment in which companies operate. Competition Commissioner Joaquín Almunia stated that “company information is nowadays essentially stored in IT environments like e-mail systems and can be quickly modified or deleted.

The update comes a few months after the EC received comfort from the General Court (GC) on the way it can elect to retrieve evidence from inspected companies’ IT systems. In the high voltage power cables cartel investigation, the EC inspected the premises of Nexans, a European supplier of electric cables. During the inspection, the officials made three copies onto data recording devices (DRDs) of the electronic files found on an employee’s computer. They handed over one DRD to Nexans and placed the remaining two in sealed envelopes. The sealed DRDs were brought back to Brussels for subsequent examination at EC’s premises in the presence of Nexans’ lawyers (a so-called “continued inspection”). Nexans contested the legitimacy of the measure arguing, among other things, that the data retrieval had seriously and irreversibly affected its rights of defense. In the company’s view, the method used went beyond the mere implementation of the inspection decision and, therefore, was an act severable from the inspection decision, challengeable as such before the GC.

In its ruling on November 14, 2012, the GC took a different view. Relying on Article 20 of Regulation 1/2003, which authorizes the EC to take copies of business records in whatever form, including DRDs, and irrespective of the format of the original document (electronic or physical), the GC ruled that the EC recourse to a sealed envelope procedure was a measure taken to implement the inspection decision. Therefore, the process used by the EC in that case could not be deemed as an act separable from the inspection decision, capable of being challenged as such before the EU judicature. According to the GC, until the EC adopts a final decision in the main proceedings, the aggrieved party can only challenge the EC’s practice relating to the EC’s retrieving and copying of electronic files for latter examination at the EC premises if the aggrieved party succeeds in getting the whole inspection decision discarded. However, nothing prevents the aggrieved company from challenging the legality of the measures taken during the inspection as part of a legal action challenging the EC’s final decision finding an infringement of EU antitrust rules.

The GC’s unwillingness to address the EC’s practice directly may be interpreted as meaning that the Court found no problem with it, assuming of course that the rights of the undertaking—especially its rights of defense—have not been compromised as a result. Relying on the Court’s implicit validation, the EC has clarified in point 14 of its updated Explanatory Note:

If the selection of the relevant documents for the investigation is not finished during the inspection on the undertaking's premises, the copy of the data still to be searched is secured by placing it in a sealed envelope and the undertaking will be provided with a duplicate. The Commission commits to return the sealed envelope to the undertaking or to invite the undertaking to attend the opening of the sealed envelope at the Commission premises and assist in the continued selection process.”

The update also takes account of the EC’s decision in Energetický a průmyslový holding (EPH), which constitutes a recent application of the Orkem and the Société Générale case-law dealing with the duty of active cooperation for an undertaking under investigation.

In EPH, following notification of the inspection decision to the dawn-raided companies, the inspectors requested that they block the e-mail accounts of key individuals until further notice. A new password—only known to the inspectors—was set so that the inspectors could search the relevant e-mail accounts without employees tampering with them. On the second day of the inspection, the EC discovered that the password for one account had been modified. The next day, the inspectors discovered that instructions had been given to divert all incoming e-mails of several key individuals to a separate computer server, which caused such e-mails to be invisible to the inspectors.

The EC concluded that these two incidents amounted to EPH providing incomplete books or records, which under Regulation 1/2003 can lead to a procedural fine of up to 1% of the worldwide turnover of the company. The EC imposed a fine of € 2.5 million on EPH and its affiliate EPIA. The fact pattern of this decision has now been incorporated under Point 11 of the Explanatory Note as follows:

[T]he undertaking may be required to provide appropriate representatives or members of staff to assist the Inspectors, […] for specific tasks such as the temporary blocking of individual e-mail accounts, temporarily disconnecting running computers from the network, removing and re-installing hard drives from computers and providing 'administrator access rights'-support. When such actions are taken, the undertaking must not interfere in any way with these measures and it is the undertaking's responsibility to inform the employees affected accordingly.”

While Nexans and EPH are at the heart of the changes made to the Explanatory Note, Nexans has lodged an appeal against the GC ruling before the European Court of Justice and EPH has challenged the EC’s fine before the General Court. As judgments in both cases are pending, companies should nonetheless pay close attention to and incorporate those updates in their compliance strategies and training.

Co-authored with Jean-François Guillardeau