In our previous newsflashes regarding upcoming amendments to the Competition Law (“Law”), we have already reviewed the topic of powers of officials from the Competition Council (“Council”) within the scope of case investigation; the plan is to significantly expand their powers, allowing the Council to require information from credit institutions and electronic communications operators. Although the amendments to the Law have not yet come into force, there is still an issue regarding limits on Council officials’ powers during investigations; this issue had existed for several years but again became topical when the Council decided to find an administrative violation and to impose a penalty for failure to provide information during a visit by Council officials.

The Council imposed a fine of EUR 3,000 on a wholesaler because the company representatives indirectly refused to provide information requested by Council officials1. In this case, Council officials arrived at the company to investigate a supervision case which in essence focuses on assessment of the market situation and conditions that are topical and important for the relevant market, but not as part of an investigation of a competition violation committed by a particular market participant.

During the visit, Council officials asked for access to e-mail correspondence in relation to distribution of detergents to the main retail chains in Latvia. The correspondence was located in the computers of company employees. The company representatives indicated that in a supervision case Council officials were not entitled to all the information in the e-mails. In the Council’s opinion this amounted to a rejection of their officials’ request for information. However, the company representatives indicated that during an inspection in a market supervision case for officials to ask for access to all electronic mail in the computers was not a proportionate measure but on the contrary was unwarranted. In these situations officials must define and detail sufficiently clearly the limits of the information that they wish to find out during the inspection. The company representatives did not actually refuse to give the information requested by Council officials during their visit, but they did ask officials to specify the information requested by referring to the principle of proportionality in assessing the reasonableness of limiting a private party’s rights in the context of a benefit (potentially) obtained by the public.

Therefore two basic questions follow from the situation described, namely:

  1. Does the amount of the information provided have to be proportionate to the nature of the case under investigation – in other words, are Council officials entitled to request and receive an equal amount of information while investigating a violation and during research in the scope of a supervision case?
  2. What degree of detail of description (specification) should be provided by Council officials regarding information requested so that company representatives would be obligated to provide this information?

According to Council practice2 and conclusions from decisions establishing administrative violations, the Council considers that its officials’ powers are sufficiently broad and that in essence when Council officials arrive to carry out an investigation, company representatives must maximally cooperate by providing not only information requested by Council officials but also other information that in the opinion of company representatives might relate to the particular case.

In parallel to this Council position, the Law determines limits on the scope of information that Council officials may request. In particular, the Council can claim information needed to perform given tasks. Although this rule is not clear enough and has not been widely studied especially in the context of limiting the powers of Council officials in Latvia, it is undeniably clear that a direct link must exist between information requested and the case under investigation. Moreover, whether requesting a particular amount of information is justified by the nature of the case under investigation should be assessed, that is, whether the information is requested within the scope of a supervision case or a violation case. It is equally important to assess the importance of the information requested for investigating the particular case.

Likewise this situation has also prompted discussion in relation to the reasonableness of applying procedural norms. In the particular case, the Council punished a company for failure to provide information, as well as for failure to fulfil lawful requests by Council officials, although the failure to fulfil lawful requests was in fact non-provision of information. Thus the Council punished the company for one and the same action under two sections of the Latvian Administrative Violation Code (“LAVC”); in general this contradicts the principles of administrative violation proceedings.

In addition, to hold a person administratively liable, all legal components of the administrative violation must be detected in the person’s activities, and only after that does the institution have grounds to apply an administrative penalty. If a single component of the violation is missing, there are no grounds to hold the person administratively liable3. In administrative cases in competition law, the presumption of innocence applies. This means that the Council has to prove a violation; moreover, any doubts about guilt that cannot be eliminated must be assessed in favour of the offender.

Unfortunately, these aspects did not earn sufficient attention when the Council decided to find an administrative violation and impose a penalty.

It is absolutely clear that the present practice must change. This and many other issues related to limits on the powers of Council officials while investigating violations and supervision cases will remain topical and always worth discussion. So if Council officials arrive at your company to carry out an investigation in the form of an inspection or visit, it is important to carefully consider the limits of activities allowed, and in particular to assess the possible risks of procedural violations.