In March 2011, the European Commission (EC) inspected various premises of the undertaking, Deutsche Bahn (DB), in Germany on the ground that DB might have abused its dominant position by giving preferential rebates to its subsidiaries when supplying operators with electric traction.  Whilst carrying out the inspection, EU officials found documents pointing to another possible abuse sanctioned by Article 102 TFEU.  These documents indicated that DB might have applied discriminatory conditions in the railway transport sector or refused access to its terminals.  In order to legally gather evidence of this possible second infringement, the EC adopted a new inspection decision whilst its agents were still at DB’s premises.  After the first and second inspections ended, the EC adopted a third decision in July 2011, allowing it to return to DB’s premises to seek further evidence on a possible abuse in the railway transport markets.

DB contested the legality of the three inspection decisions and claimed that they violated its fundamental rights.  According to DB: (i) the EC should have obtained a judicial warrant in order to ensure that the inspection was subject to judicial control and (ii) the second and third inspections were based on information obtained illegally during the first inspection.

Fundamental Rights of Undertakings: Regulation 1/2003 Provides Sufficient Safeguards

DB argued inter alia that Article 20 of Regulation 1/2003 empowering the EC to carry the inspections runs afoul of the European Convention on Human Rights and the Charter of Fundamental Rights of the European Union. DB’s line of arguments gave the General Court (GC) the opportunity to analyze the extent to which Regulation 1/2003 safeguards the fundamental rights of undertakings.  The GC clarified that no prior court approved search warrant is mandatory for an inspection to be considered legal as long as a comprehensive judicial review is possible after the inspection.  In support of this ruling, the GC went through the five safeguards provided under Regulation 1/2003:

  • The EC has an obligation to state the reasons upon which an inspection decision is based and, in particular, the subject matter and purpose of the inspection.  In practice, the decision has to provide: a description of the suspected infringement - indicating what market(s) could be affected, the nature of the suspected restrictions of competition, in what way the undertaking is suspected to be involved, and what is being sought.
  • The EC must act within certain limits when carrying out inspections.  The EC must respect the right to privacy, Legal Professional Privilege (LPP), and the right against self-incrimination.  Furthermore, it must act within the confines of its own three-page “explanatory note” on inspections, which EC officials must abide by during inspections.
  • The suspected undertaking may exercise its fundamental rights during an inspection.  It may consult with its external counsel for a reasonable period of time, albeit a short one, to examine the inspection decision, prior to the EC copying documents, sealing places, or asking for oral explanations.  Additionally, the target of an inspection may demand that any alleged irregularity arising during the inspection be recorded in minutes.  Such a request is not tantamount to opposing the inspection.
  • The target of an inspection may seek an annulment of the inspection decision and may challenge any irregularity that may have occurred during the inspection. If the undertaking is successful in getting the decision annulled or proving that there was an irregularity in the way the EC officials acted while collecting the documents, the EC will be unable to use the document(s) in the infringement proceedings.
  • If, despite of the foregoing, the target decides to oppose the inspection, the EC must seek assistance from the national authorities.  As a result, the national authorities have the opportunity to ensure that the EC’s inspection decision is enforced in a manner that respects fundamental rights and the applicable national laws.

On this last point, the GC considers that the possibility for an undertaking to be fined up to 1% of its annual turnover for obstructing an inspection does not act as an absolute deterrent and de facto deprives the undertaking of its right to oppose the inspection.  In the GC’s view, it is only when a company obviously obstructs or abuses its right to oppose the inspection that a procedural fine may be imposed.

The GC does not explain further what an obvious obstruction or abusive opposition is in practice.  What amounts to an obvious obstruction depends on the particular circumstances of the case.  Likewise, the line between using and abusing the right to oppose an inspection may be thin.  Following the Energetický a průmyslový holding (EPH) case, diverting incoming emails from the accounts of key individuals may be classified as an “obvious” obstruction.  Likewise, the breaking of seals is probably another example of an “obvious” obstruction[1].

However, refusing to provide access to offices belonging to individuals whose activities are unrelated to the subject matter of the inspection decision may be less obvious.  The GC seems to call for the EC to possess at least some elements suggesting that the targeted offices contain information within the scope of the decision.  At the same time, it points out that no clear indications are necessary for EC officials to seek access to the offices.  Would the undertaking be legitimately entitled to ask what the EC basis is for seeking access to a particular office and, in the absence thereof, oppose the officials’ entry?  Would such a refusal be abusive?  Presumably, the EC could ask national authorities to assist to resolve the issue.  While obtaining such assistance, it is arguable that the EC would have to show the elements suggesting that the targeted office is of relevance to its investigation.  By way of comparison, in the Sanofi case, the undertaking refused to let EC officials examine and copy documents without a judicial warrant from the French authorities.  The warrant was subsequently produced, but the use of the undertaking’s right of opposition led the EC to open a formal investigation to determine whether a procedural fine was appropriate[2].  While the EC eventually dropped the charges against Sanofi[3], the GC’s ruling in DB is unlikely to prevent the EC from taking a similar approach in the future.

As a result, given the lack of any practical guidance, the GC’s judgment may be of little practical value to inspected companies.  The right to oppose the EC’s inspection remains a perilous exercise. 

Scope of inspection decisions and illegal targeted searches

Inspection decisions must contain the particulars of the suspected conduct and must, therefore, provide some explanation of the possible involvement of the targeted undertaking in the alleged infringement.  This obligation enables companies and their lawyers to assess the extent to which the evidence gathered by the EC is within the scope of the investigation.  Logically, documents outside that scope cannot be used by the EC in evidence and should not be collected in the first place. In that sense, the EC cannot use an inspection decision designed to gather evidence on a suspected infringement to actually focus on another distinct strand of conduct.  Understandably, however, the EC cannot turn a blind eye to potentially incriminating documents relating to a conduct discovered “on the spot.”

In the present case, DB argued that the EC conducted an illegally targeted search as it used the first inspection decision concerning the supply of electric traction in order to gather evidence of a potential infringement in the railway transport sector.  The GC dismissed that argument.  The GC confirmed that the EC was allowed to kill two birds with one stone and adopt a new inspection decision in order for its agents to legally gather documents pointing to an infringement not covered by the initial decision.  However, in order to arrive at that conclusion, the GC carefully assessed the circumstances under which those documents were uncovered. In particular, the GC noted that there was no evidence that the officials had specifically searched for documents unrelated to the initial inspection decision.  The documents at issue were uncovered while the officials were in the process of searching documentary evidence covered by the initial inspection decision.

Co-authored with Jean-François Guillardeau