With its judgment of 6 September 20131, the General Court of the European Union ("General Court") confirmed the legality of the far-reaching investigation powers of the European Commission ("Commission") in competition cases and provided instructive guidance on a number of practical issues likely to arise in the course of inspections (dawn raids).
Pursuant to Article 20 (1) Regulation 1/2003, the Commission may conduct all necessary inspections of undertakings. Commission’s officials and others persons authorised by the Commission, e.g. Member States’ officials, are empowered to enter any premises, examine books and other business records, take copies, and ask for explanations on facts or documents in relation to the subject matter and purpose of the inspection. With respect to electronic data, in March 2013 the Commission amended its notice explaining the far-reaching powers to conduct searches of electronic storage media, such as computers, tablets, mobile phones and USB keys2.
Pursuant to Article 20 (4) Regulation 1/2003, undertakings are required to submit to an inspection.
Facts and Procedure
The inspected companies and applicants in the case at hand – Deutsche Bahn AG and affiliates ("DB") – brought action seeking the annulment of three Commission decisions ordering separate inspections of DB. During the first inspection pertaining to an alleged abuse of dominance in March 2011, the Commission found documents which in its view might prove an additional but separate abuse. As a result, a second and third inspection were ordered and carried out in March and July 2011.
DB appealed these inspection decisions on the following basis: (i) infringement of the fundamental right of inviolability of the company’s premises due to a lack of prior judicial authorisation of the Commission’s inspections; (ii) infringement of the fundamental right to effective legal remedies; (iii) infringement of defence rights due to the fact that the second and third inspections were based on information obtained during the first inspection; (iv) infringement of defence rights due to a disproportionally wide and non-specific subject matter of the inspection; and (v) infringement of the proportionality principle.
Judgment of the General Court
The General Court dismissed all of the five pleas brought by the applicants against the Commission decisions.
Prior judicial authorisation not required
The General Court examined whether inspection decisions are in accordance with the fundamental rights and in particular if inspections under Article 20(4) Regulation 1/2003 might require prior authorisation by a Court at either a national or an EU level. The General Court held that the mere lack of such a prior judicial authorisation will not necessarily result in the unlawfulness of an inspection. With reference to the case law of the European Court of Human Rights, the General Court pointed out that the absence of prior judicial authorisation is counterbalanced by "adequate guarantees" which constitute a sufficiently strict framework for the Commission’s investigation powers. The Court regrouped these minimum guarantees into five categories:
- Statement of reasons for ordering the inspection: the Commission must clearly indicate the subject matter and purpose of the inspection, the suspicions or allegations that justify the inspection (as also mentioned in the recent Nexans judgment3), and the targeted sector. In addition, it must be stated that the inspection decision may be appealed. It is, however, not necessary for the Commission to provide a precise legal qualification of the suspected infringement at this early stage of the investigation, to disclose all available information to the inspected companies, to define precisely the relevant market or to specify the exact time period within which the suspected infringement would have happened.
- The Commission must respect certain limits while carrying out an investigation: the Commission must provide detailed explanations about the method of carrying out the inspection at its very beginning. The inspected company may receive legal assistance during the inspection and cannot be compelled to provide self-incriminating answers. As for the documents that may be collected by the Commission, those having a non-professional nature are excluded from the scope of the inspection, and the company can also retain any documents that are covered by the client-attorney privilege.
- Inability to carry out investigations by force: the Commission may not obtain access to premises or furniture by force, nor compel the company staff to give them such access, nor carry out the searches without the permission of the management of the undertaking. However, the Commission can increase fines for undue delays or obstruction of the inspection.
- Additional controls at national level: in case the inspected company chooses to oppose to the inspection, the Commission is obliged to seek the assistance of the competent national authorities. In most cases, the Commission organizes this assistance well in advance, which triggers the application of national control mechanisms, such as judicial authorizations to verify that if the inspection is neither arbitrary nor excessive.
- Subsequent judicial review: ex-post judicial review may be initiated by the companies targeted by an inspection. In this respect, the Court specifically underscores that such a judicial review, which concerns both legal and factual aspects of inspections, is of paramount importance to compensate for the lack of prior judicial control. In this respect, the General Court held that the EU system provides for sufficient safeguards given that an action for annulment pursuant to Article 263 TFEU can be brought against inspection decisions, in which case the Court will assess both the factual and legal aspects of the case.
Coincidental findings may be used to launch further inspections
With regard to the legality of the Commission practice to use information obtained during a first inspection in order to motivate further inspection decisions, the General Court stated that information obtained in the course of an inspection must not be used for purposes other than those indicated in the decision under which the inspection is carried out. Violating this principle would constitute a serious infringement to the company’s rights of defence.
The General Court, however, confirmed its interpretation of this principle in the event that coincidental findings point to another possible infringement of competition law, 4considering that this principle does not bar the Commission from initiating a new inspection in order to verify or supplement information coincidentally found while investigating another suspected infringement. According to the General Court, as long as these documents were legally obtained and used in the framework laid out by the decision authorizing the Commission’s subsequent inspection, the company’s rights of defence are not violated.
Other practical developments
The General Court also noted that the Commission is entitled to carry out extensive searches in offices or files, even where there is no obvious indication that information concerning the investigation could be located there, as long as certain elements suggest this possibility.
The inspected companies claimed that there have to be particularly serious reasons for the Commission to order successive inspections. The judges, however, considered that the decision to order inspections may be justified by reasons such as the seriousness of the infringement, or the emergency of a situation, but also from the need for an appropriate inquiry with regard to the special features of the case. As a result, the Commission may legitimately consider that additional inspections are necessary, even if it already holds evidence from previous inspections.
Likewise, the General Court held that it is not an infringement of the proportionality principle if the Commission carries out inspections although the relevant information was partly available,e.g., on the Internet. The General Court confirmed that it is for the Commission to decide whether certain information is necessary for an investigation into a possible infringement of the competition rules. Furthermore, even if there is already evidence of the existence of an infringement, the Commission may well take the view that it is necessary to collect further information.
Practical significance of this judgment
This judgment confirms previous decisions in relation to the scope of the Commission’s inspection powers in competition cases5, acknowledging that past decisions predated the most recent judgments of the European Court of Human Rights stressing the importance of prior judicial review in investigations of a criminal nature.
But it is noteworthy that the assessment of all legal and factual aspects brought forward by the applicants was particularly detailed and covered elements such as the relevance of offices inspected or keywords used by the Commission during the inspection, which are generally set aside as not relating to the legality of the inspection decision.
This sheds light on one of the most significant weaknesses in the EU antitrust procedures: While the judicial review of the legality of inspection decisions is available immediately after the inspection, as illustrated by the present case, the judicial review of the implementation of such decisions (offices inspected, documents copied, electronic data seized, etc.) is generally only available years later, when a final decision on the substance of the case is rendered, and such reviews rarely produce satisfactory results for the companies.
Companies are thus well-advised to make themselves familiar with the inspection powers of the Commission, and of national competition authorities, in order to be prepared when faced with an inspection.