The European Commission has a range of information gathering powers when investigating possible infringements of the EU competition rules, including written information requests, voluntary interviews of witnesses and unannounced inspections of premises or so called 'dawn raids'. In two current appeal cases before the EU courts, companies under investigation for competition law infringements are seeking to challenge the Commission's use of two of its most important information gathering powers.

Deutsche Bahn challenge to dawn raid powers

On 13 August 2011 details were published of appeals brought by Deutsche Bahn against Commission decisions authorising dawn raids at the company's premises. The dawn raids had taken place in March 2011 in the context of an investigation into alleged abuses of the company's dominant position. Deutsche Bahn claims that the EU's General Court should not only annul the decisions but that it should also order the Commission to return to the company all copies of documents taken during the dawn raids that took place under the authority of those decisions.  Deutsche Bahn advanced a number of arguments in support of its claims, including the following:

  • The Commission's failure to seek prior judicial approval for the dawn raids infringed the company's fundamental right to inviolability of its premises;
  • The Commission's failure to allow the company the opportunity to seek prior judicial review of the decision authorising the dawn raids infringed the company's fundamental right to an effective legal remedy;
  • The "disproportionately wide and non-specific subject-matter of the inspection" amounted to little more than a 'fishing expedition’ and, therefore, infringed the company's rights of defence; and
  • The Commission's raids were disproportionate, for example because much of the factual background surrounding the alleged infringements was widely known and undisputed. The question at the heart of the Commission's investigation (i.e. the extent to which a particular rebate system was objectively justified) would, Deutsche Bahn maintained, have been more appropriately addressed by means of a written request for information.

The Commission's ability to carry out a dawn raid without warning and without recourse to national courts is clearly set out in Regulation 1/2003 and, for that reason, a challenge on the basis of the first and second of the arguments above goes to the heart of the Commission's information gathering powers.

The Court's assessment of the extent to which the aims of the Commission's dawn raids were sufficiently focused will be of particular interest, particularly to companies making their own dawn raid preparations. It is generally accepted that the Commission is not entitled to carry out a dawn raid as a mere 'fishing expedition' but should, instead, target the inspection on the subject matter of its investigation. Applying this principle in the context of a dawn raid to questions such as which documents the Commission is entitled to inspect and which fall outside the scope of the investigation is often difficult and guidance from the Court may be welcome.

Cement companies' challenge to power to require the production of information

Also on 13 August 2011 details were published of a series of appeals brought by a number of cement companies against Commission decisions dating from March 2011 requiring the production of certain information in the context of an investigation into alleged anti-competitive agreements.

A number of arguments are common to the different appeals, including the following:

  • The Commission exceeded its powers to require the production of information, by:
    • transferring the investigatory role which is incumbent upon the Commission onto the companies by requiring them to process, analyse and evaluate the requested information before submission. In one case it was argued that this infringed the company's rights of defence;
    • requiring the production of information that was not necessary for the investigation, for example because it bore no relation to the alleged infringement under investigation;
  • The Commission failed to act proportionately, for example by:
    • requiring the production of an excessive volume of detailed information (in one case millions of items of data) within what was argued to be a very short timeframe;
    • requiring the production of information only in a specified format (which, in one case, was described as being "too cumbersome" for the company to be able to comply and, in another case, would have required the company to have incurred "exorbitant" cost and to have changed its IT system);
    • issuing a formal decision requiring the production of information rather than sending a simple written request, bearing in mind the willingness of the companies to cooperate and their proven track record of doing so.

Responding to information requests from a competition authority may be an onerous exercise, not least because of the significant penalties that can be imposed for providing incorrect or misleading information. The Commission sends requests for information not only to companies that are themselves under investigation, but also to other companies that, although not directly implicated in the infringing conduct, are nonetheless likely to hold relevant information. The burden the recipient of such a request should expect to bear in terms of the volume of information required and the extent of any necessary processing and analysis will vary greatly. Whilst a leniency applicant, for example, must be prepared to shoulder a heavy burden in this respect, in order to discharge its proactive duty of complete and continuous cooperation, companies in different circumstances may well object to the legal and IT costs and management time needed to respond to particularly onerous requests.

Quite where the line is to be drawn in respect of the burden that should be borne by a recipient of a formal decision requiring the production of information is not always easy to resolve and will often be a subject for pragmatic negotiation with the authorities. It is of course the case that the competition authorities themselves should have an interest in achieving the right balance, since the production of an unmanageable volume of material could be an unwelcome drain on the authorities' own resources. Therefore, the Court's assessment of the cement companies' arguments will be of practical interest to future recipients of such requests.