The Slovenian Competition Protection Agency ("Agency") has lately increasingly been using unannounced investigations or so-called "dawn raids" in order to secure evidence of potential competition law breaches. This is why the answer to how undertakings should react to such inspections is becoming an ever more important topic.
Whereas the Slovenian Prevention of Restriction of Competition Act ("Competition Act") is rather short on the respective topic, the Agency (encouraged by a recent decision from Slovenia's Supreme Court) has shown in its public announcements that it intends to take a rather broad interpretation of undertakings' general duty to cooperate. The question is how far the Agency may and will actually go.
Legislative framework for the scope of the investigation
Agency officials may enter the premises at the registered corporate seat of the undertaking subject to an investigation and any other premises in which the respective undertaking or other authorised undertakings carry out activities and business operations from which a violation of competition law might have arisen. Access to all premises related to business may be requested and all data carriers inspected with the only exemption being attorney-client privileged correspondence and employees' private correspondence.
It must also be noted that at the moment, an investigation decision issued only by the Agency suffices as the basis on which officials of the Slovenian Competition Protection Agency are entitled to both carry out investigations and to enter the business premises . The latter is anticipated to change as the Constitutional Court has decided that such a regime goes against basic constitutional principles, and the requirement for an ex ante court order, when the privacy of dwellings and/or communications is being impaired, should apply to legal persons subject to Agency investigation. Amendment to the Competition Act in this respect is already in Parliament.
Agency’s investigative powers and undertakings’ duty to cooperate
The Agency officials may, inter alia, exercise the following investigative powers:
- enter and inspect premises, land, and means of transport at the registered office of the undertaking and at other locations,
- examine books, contracts, papers, business correspondence, business records, and other information relating to the business of the undertaking, irrespective of the medium on which they are stored,
- take or obtain in any form copies of or extracts from relevant documentation, as well as originals for the time necessary in case copying should not be possible (however, any seizure is limited to 20 days),
- seal any business premises and business books and other documentation for the period and to the extent necessary for the inspection,
- ask any representative or staff member of the undertaking to give an oral or written explanation of facts or documents relating to the subject matter and purpose of the inspection and record it,
- perform other actions in line with the purpose of the inspection.
The Competition Act allows for a conclusion that the undertakings subject to investigation have a rather general duty to cooperate by establishing that they "must allow authorized persons to access premises and business books and other documentation".
The Agency has a possibility to impose a penalty in the maximum amount of 1 % of the implicated undertaking's annual turnover in case the undertaking obstructs an authorized person in exercising its powers.
Agency’s decisional practice and recent case-law
The Agency has shown that it will be very strict when it comes to exercising its powers and has so far issued two penalty decisions for obstructions of its investigations.
The first undertaking to feel this stance was Produkcija Pro Plus, d.o.o., which in late 2011 received a penalty in the amount of 0.2 % of its annual turnover. The Agency took the position that the undertaking failed to cooperate by not allowing Agency officials to enter its premises (immediately) upon their arrival.
The Supreme Court has in its recent decision (adopted in December 2013) upheld the Agency's decision and stressed that the implicated undertakings have a duty to cooperate to at least a minimal extent, which by way of example covers opening the doors and showing where the respective documentation can be found.
The second case arose more recently, namely when the Agency fined Geoplin d.o.o. for obstructing an investigation carried out in July 2013. In its press release from December 2013, the Agency stressed that "the undertaking’s passive stance in the search of documentation and mere enabling of access to requested premises and documentation will represent a refusal to cooperate and hence investigation obstruction." The fine imposed also amounted to 0.2 % of the firm’s implicated annual turnover.
Has the Agency's interpretation of cooperation duty gone too far?
While there can be no doubt that undertakings should not try to obstruct the Agency's investigation, the reasoning provided by the Agency nevertheless seems too far-reaching.
It should be recalled that the wording of the Competition Act requires undertakings to "allow authorized persons to access premises and business books" and that the Supreme Court argued that this obligation should cover a minimal duty to cooperate. However, these two positions were interpreted by the Agency in its December 2013 press release in the sense that undertakings have "an active duty to cooperate" and should "actively help in the search for documentation".
Within the EU competition law framework, it is established practice that undertakings must not take a solely passive stance, but rather should assist the European Commission in their search for documents by e.g. providing passwords for access to computers, online databases and the like and giving the information requested by the European Commission officials.
In contrast, the Agency's wording implies that the employees of the implicated undertaking should take on an active role in the search for documents, a role that does not seem to be limited to providing assistance at the Agency's request. However, it goes without saying that the initiative should always come from the Agency and should be concrete enough for the undertaking to be able to provide the respective information and/or document that is being sought. In any other case, it seems at least doubtful that the Agency's interpretation adequately reflects the fact that the implicated undertaking, though under the obligation to provide assistance, should still enjoy its constitutional privilege against self-incrimination.
As mentioned above, the Agency's rather controversial view has so far only been communicated in a press release (though one officially published on its website) and does not represent a policy document. However, this view nonetheless indicates how the Agency will or is ready to use its prerogatives, which is why the further decisional practice and case-law on the subject will make for an interesting read.