It is a little known procedural rule that inspectors on a dawn raid investigating one matter can also seize evidence on an unrelated matter if they happen to come across it while on the premises. To critics which say that this enables the European Commission to camp out on the defendants' premises fishing for violations, the European Court of Justice (ECJ) judgment in Deutsche Bahn AG v Commission (C-583/13 P) gives some respite. It does not fully curtail the commission's fishing power, but it does constrain its most blatant abuses.
In Deutsche Bahn the raiding inspectors were briefed on other violations to look out for while raiding Deutsche Bahn on another matter. The ECJ ruled that coincidence must be a genuine coincidence. If inspectors suspect a second violation ahead of the raid, they should get an appropriate authorisation to inspect it.
The commission raided Deutsche Bahn and its subsidiaries three times between March 2011 and July 2011. Before the first inspection, the EU inspectors received information about an unconnected complaint against Deutsche Bahn concerning its subsidiary DUSS. No mention of this was made in the inspection decision.
During the first inspection – which took place between March 29 2011 and March 31 2011 – inspectors supposedly coincidentally came across evidence concerning the alleged DUSS violation. Under the rule in Dow Benelux,(1) inspectors are not required to be blind to evidence of a previously unsuspected violation found during a dawn raid. If the commission "happened to obtain" such evidence, it can start an investigation into the new matter.(2) The commission – purporting to apply the Dow Benelux rule – used the DUSS evidence as a basis for issuing a fresh inspection decision for the new matter. This inspection took place in parallel with the first raid on March 30 2011 and April 1 2011. The commission conducted a third and final raid on July 26 2011.
The ECJ(3) held that the commission may only rely on evidence within the scope of the subject matter of the inspection. The Dow Benelux rule allowed the commission to initiate:
"an inquiry in order to verify or supplement information which it happened to obtain during a previous investigation if that information indicates the existence of conduct contrary to the competition rules in the Treaty."(4)
The ECJ held that Dow Benelux should be construed narrowly. It was applicable only to situations where the commission happened to come across evidence coincidentally. Deutsche Bahn did not involve a coincidental discovery. The commission had specifically briefed inspectors that another complaint had been made that did not relate to the subject matter of the first inspection. Advocate General Wahl held that:
"given the evident lack of any clear relationship between the two suspected infringements, and the acknowledgment by the Commission that the information given to its staff regarding the second suspected infringement was not truly useful for the search for information on the first one, the inevitable conclusion… is that there must have been another reason behind the briefing of the Commission staff. The only plausible explanation… is that information on the DUSS suspected infringement was given to the Commission staff so that they could 'keep their eyes peeled' for evidence related to the second complaint."(5)
The ECJ held that commission agents may be provided with all the information that could be useful to them to understand the nature and scope of the possible infringement. However, this information must relate solely to the subject matter of the inspection ordered by decision. The ECJ concluded that the second complaint was not general background information, but rather:
"pertained to the existence of a separate complaint… unrelated to the subject-matter of the first inspection decision. Accordingly, the lack of reference to that complaint in the description of the subject-matter of that inspection decision infringes the obligation to state reasons and the rights of defence of the undertaking concerned."(6)
The ECJ accordingly annulled the second and third inspection decision.
Inspections are highly intrusive measures which can effectively put an undertaking's business on hold for the duration of the raid. The commission should be held to account for going beyond the scope of its mandate. The Dow Benelux rule must be read narrowly and apply to genuinely fortuitous discoveries of unrelated violations. The commission decision should articulate the violation targeted by the raid. It cannot brief inspectors to fish for other potential violations while on site.
The case is a welcome iteration on Nexans setting limits to inspection decisions. In Nexans the issue was an overbroad sweep-up drafting by the commission in its inspection decision, stating that the subject matter of its investigation was:
"the supply of electric cables and material associated with such supply, including, amongst others, high voltage underwater electric cables, and, in certain cases, high voltage underground electric cables."
However, the commission had only information about a possible infringement of competition rules in the voltage underwater cable sector. It was given a rap on the knuckles by the General Court, which found that the commission had not demonstrated that it had reasonable grounds for ordering an inspection covering all electric cables and the material associated with them.(7) On appeal, the ECJ reiterated the principle that the commission should indicate as precisely as possible the evidence sought and the presumed facts that it intends to investigate.(8) The commission must thus restrict searches to those matters.
Judicial challenge to inspection decisions will remain the exception, not the rule. The ECJ tends to be deferential to commission investigatory powers, not wanting to hinder inspectors at the earliest stages of their suspicions. However, after a long drought in judicial control, the ECJ's willingness to step in to curtail raid abuses is welcome. A raid is a highly intrusive and extremely stressful experience for employees. The IT-focused nature of raids these days mean they last longer (while data is extracted and searched) and businesses are essentially shut down while the raids are ongoing.
Companies suspecting that the commission has exceeded its brief during a raid – by using unrelated search terms, requesting documents or questioning employees on out-of-scope matters – should ensure that their objections are noted and, if necessary, that the inspection is judicially reviewed before the EU courts.
For further information on this topic please contact Bill Batchelor or Hannelore Wiame at Baker & McKenzie by telephone (+32 2 639 36 11) or email (email@example.com or firstname.lastname@example.org). The Baker & McKenzie website can be accessed at www.bakermckenzie.com.
(1) Dow Benelux NV, Case 85/87, ECLI:EU:C:1989:379.
(2) Ibid, paragraph 19.
(3) Deutsche Bahn lost at first instance. September 6 2013, Deutsche Bahn AG, Joined Cases T-289/11, T-290/11 and T-521/11, ECR, ECLI:EU:T:2013:404.
(4) Deutsche Bahn AG, C-583/13 P, ECLI:EU:C:2015:404, paragraph 59.
(5) Opinion of Advocate General Wahl delivered on February 12 2015 in Deutsche Bahn AG, C-583/13 P, ECLI:EU:C:2015:92, paragraph 77.
(6) Deutsche Bahn AG, C-583/13 P, ECLI:EU:C:2015:404, paragraph 64.
(7) November 14 2012, Nexans France SAS v Commission, T-135/09, ECLI:EU:T:2012:596, paragraphs 46 and 91.
(8) Nexans SA v Commission, C-37/13 P, ECLI:EU:C:2014:2030, paragraph 36.
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