Around 10 am on 4 August 2014, an anti-monopoly inspection team of the NDRC carried out a dawn raid at the representative office of Benz in Shanghai. Several senior executives of Benz were inquired and computers in the office were examined. The interview and investigation lasted for a whole day. As of 9 pm on that day, several managerial personnel, including general manager of Beijing Mercedes-Benz Sales and Service Co., LTD., director of sales and after-sales were still detained in Shanghai office. This is the second dawn raid inspection carried out by the antimonopoly regulatory authorities within one week, following the inspection on Microsoft.
The inspection on Benz once again underscores the significance of formulating a coping management strategy for companies in respect of antimonopoly crisis. As a pre-made emergency management system, crisis management strategies shall at least include the following aspects:
- Conduct a thorough internal audit on anti-trust compliance, and rectify the issues discovered during the inspection without delay;
- Formulate antimonopoly compliance manual, so as to ensure the compliance of business operations in the future;
- Formulate an internal guidelines to prevent monopoly risks and respond to the dawn raid of government authorities;
- Organize an internal training on how to respond to the dawn raid of government authorities;
- Conduct an internal rehearsal in cooperation with the dawn raid of government authorities.
To conduct an internal audit for antimonopoly compliance and formulate an antimonopoly manual are the fundamental steps to make sure the compliance of anti-trust. Only when the policies adopted by companies complies with the Anti-Monopoly Law can they know fairly what to do and how to argue strongly on just grounds in response to the investigation of regulatory authorities. While formulating internal guidelines and proceeding trainings and rehearsals in response to investigations are procedural issues, which are meant to facilitate companies to stay calm and cope with the inspections orderly.
Companies and their employees shall be aware that they have the obligation to corporate with regulatory authorities when they are in the face of antimonopoly investigation. Article 42 of the Anti-Monopoly Law explicitly stipulated: “operators under investigation, interested parties, and other relevant entities or individuals shall cooperate with the anti-monopoly law enforcement authorities as they perform their duties, and shall not refuse or impede the investigation”. In accordance with this article, companies bear the obligation of cooperating with the investigation of regulatory authorities. In the meanwhile, it is further specifies in the Article 52 of the Anti-Monopoly Law: “where, during a lawful investigation by the anti-monopoly law enforcement authorities, actions are taken that are obstructive to the investigation, including the refusal to provide information or materials, the submission of fraudulent information or materials, or the concealment, destruction, or diverting of relevant evidence, the anti-monopoly law enforcement authorities shall order rectification, and may impose a fine of no more than CNY20,000 on individuals or CNY200,000 on entities; where the case is serious, fines of between CNY20,000 and CNY100,000 may be imposed on individuals, or fines of between CNY200,000 and 1 million may be imposed on entities; where the circumstance constitute a crime, criminal liability shall be investigated and the offenders prosecuted pursuant to law”. That is to say, companies or their employees may assume corresponding legal liabilities without exception should they refuse and obstruct investigation. Therefore, employees of the company, from top management to security personnel, shall not obstruct investigators from their inspection activities as long as the investigators produce the warrant for investigation. Besides, when under investigation, employees of company shall communicate with investigators in a friendly way and refrain from unnecessary conflict with them.
Companies under investigation shall also need to realize that there are boundaries in respect of investigative power for regulatory authorities. Article 39 of the Anti-Monopoly empowers regulatory authorities with broad investigative power, including: (a) Investigating the Operator⊙s place of business and other relevant locations; (b) Conducting interrogations of the Operator, interested parties, and other relevant entities and individuals, requiring that they provide explanations; (c) Consulting and making copies of certificates, agreements, accounts, correspondence, computer data, and other documents belonging to the Operator, interested parties, and other relevant entities and individuals; (d) Seizing or freezing relevant evidence; and (e) Checking the Operator⊙s banking account. However, these powers of investigation also have their own boundaries. In accordance with our practice and experiences in dealing with governmental investigations, it is of great significance to learn how to exploit these boundaries. In case regulatory authorities require a company to provide information that belongs to its parent company abroad, or detain a company’s server, or duplicate all the contents stored in servers at home or abroad, or require senior executive to provide password to the management system of the parent company abroad, companies must exploit relating laws and experiences to make proper responses, because those request(s) may not have sufficient legal ground.
Employees shall only bear the obligation to answer questions relating to facts when they are inquired by enforcement authorities. Article 7 of the Regulations on Procedures for Administrative Enforcement of Anti-Price Monopoly issued by the National Development and Reform Committee provides: “in case of interview or telephone inquiry, an inquiry record of the investigation shall be prepared”. Accordingly, regulatory authorities will definitely prepare an inquiry record of the investigation when making oral inquiry. Based on the past experiences, investigators may often ask employees of a company to define the nature of the company’s behavior in a legal perspective. On this occasion, employees shall understand that they do not bear the obligation to answer legal issues which are the concern of lawyers. As to how to cooperate with investigators in providing truthful information, preliminary trainings are badly needed apart from the issues mentioned above.
Companies under investigation shall take full advantage of the rights to present statements and explanations that are endowed upon them by law. Article 11 of the Regulations on Procedures for Administrative Enforcement of Anti-Price Monopoly issued by the National Development and Reform Committee provides:”the investigated operators and any interested parties are entitled to present their opinions. The competent price department of the government shall verify the facts, reasons and evidence put forward by the investigated operators and such interested parties”. Companies shall make the best of the rights (the same rights are also endowed upon companies confronted with the investigation of the State Administrations for Industry and Commerce) and prepare to present their statements and explanations. The statements and explanations is not meant to be a letter of confession, while it should be an accurate reflection of the facts, which shall also include such key contents as legal arguments with the attempt to protect the legitimate interests of the company. Since the focus of investigatory authorities tends to be the illegal conducts of a company, while the draft of statements is a perfect chance of self-defense in explaining the case overall, thus, companies must pay more attention to the importance of preparing statements and explanations. For instance, in the case of abusing market dominance, rule of reason approach is applied in Chinese laws, and therefore, companies must keep close contact with professional lawyers specialized in anti-trust investigations and clarify the various rationalities of companies’ behaviors.
The antitrust investigations of Chinese government has illustrated that competition policy has become an important means of market supervision for Chinese government, in which dawn raid inspection of government is likely to become regular. Accordingly, companies shall plan ahead, formulate anti-trust compliance manuals and work out strategies on crisis management with the cooperation of professional lawyers as soon as possible, so that they may make pre-arranged planning beforehand, stay orderliness in the course and draft a proper summary afterwards.