Investigations and dawn raids by the European Commission: a quick guide
A quick guide to the European Commission's powers to investigate breaches of EU competition law by a company and the practical issues for a company to consider when faced with such an investigation.
This is one of a series of quick guides, see Quick guides.
Why is it important to be aware of the Commissions' investigative powers?
There are heavy fines for non-compliance
The Commission may impose fines of up to 1% of a company's total turnover for the preceding business year for:
- Intentionally or negligently supplying incorrect or misleading information in response to an information request (whether following a simple request or a formal, binding Commission decision).
- Failing to provide information within the timescale set out in a decision.
- Refusing to submit to an inspection ordered by decision.
- Providing incomplete documents, providing incorrect or misleading answers to questions asked or breaking a seal affixed by the Commission (whether or not the inspection has been ordered by decision or under an authorisation (see below)).
Periodic penalties of up to 5% of average daily turnover can also be imposed for continued failure to:
Supply complete or correct information in response to an information request by decision.
Submit to an inspection ordered by decision.
What powers does the Commission have to conduct investigations?
The Commission can request information and enter and search business and domestic premises
To perform its role of enforcing Articles 101 and 102 of the Treaty on the Functioning of the European Union (the EU rules prohibiting restrictive agreements and abuse of dominance), the European Commission has the power to request information from all undertakings (whether or not they are themselves suspected of infringing the rules) and to carry out investigations at their premises. In particular, it has powers to ask (by written request) any person for any document or information (or categories of documents) that it considers relates to any matter relevant to its investigation. The Commission also has the power to interview any person who consents, for the purpose of collecting information. In addition, it has wide powers of inspection (to conduct dawn raids). For example, it can:
- Enter business premises (including vehicles) and domestic premises, if these are used by the business or documents relating to the business are kept there.
- Examine the company’s books and other business records.
- Take copies of, or extracts from, the books and business records.
- Seal any business premises and books or records during an investigation (normally for no more than 72 hours).
- Ask for oral explanations on-the-spot about facts and documents.
When can these powers be used?
The Commission can use its powers when "necessary"
To apply and enforce Articles 101 and 102, the Commission has the power to require production of all necessary information and to undertake all necessary inspections of companies. However, it may only inspect premises other than business premises if it has a reasonable suspicion that books or other records related to the business, which may be relevant to prove a serious violation of Article 101 or Article 102, are kept at those premises. In particular, the Commission uses its dawn raid powers in relation to suspected cartels (see Practice note, Cartels: EU law and practice (www.practicallaw.com/6-107-4520)).
How are the powers exercised?
The Commission may operate under formal decisions and conduct dawn raids without notice
The Commission may request information by a simple request or a formal decision. A formal decision (taken by the Commission as a whole) will set a fixed time limit and compliance is mandatory and subject to the imposition of fines. Similarly, a dawn raid of business premises may be conducted under an "authorisation" (issued without the approval of the full Commission) or under a formal decision. In the case of an authorisation, a firm may refuse voluntarily to submit to an investigation. However, any such refusal is likely to result in the adoption of a formal decision, so imposing a duty to co-operate on the firm. An inspection of non-business premises can only be conducted under a decision.
Commission officials conducting an investigation will usually be assisted by officials from the relevant national competition authorities. The Commission may ask these authorities to conduct the investigation on its behalf. Where a company refuses to comply with an inspection ordered by a decision, the member state must provide the necessary assistance to allow the Commission to obtain access to the premises, including obtaining a warrant.
Practical considerations for companies under investigation
Companies should put in place procedures for handling investigations. In particular, companies should:
- Check whether the inspection is being conducted under an authorisation or warrant. Examine and take copies of relevant documents in order to determine the scope of the investigation.
- Contact lawyers and ask the Commission officials to wait until they arrive. The Commission does not have to wait and will be unlikely to do so if one of the company’s in-house lawyers is available. Ensure that the Commission officials are accompanied at all times.
- Check any documents requested by the Commission to ensure they are within the scope of the investigation and to determine whether they are covered by legal privilege or are commercially confidential.
- Mark confidential documents as such and withhold privileged documents. Take a note of all files and documents examined by the Commission and retain copies of all documents copied or taken by the Commission. Take notes of any oral explanations given and of any areas of dispute with the Commission officials (for example, relating to legal privilege).
- After the dawn raid, hold follow-up meetings to decide what further steps should be taken, such as whether further explanations or documents should be provided to the Commission and potentially (if there appears to be evidence of infringement) whether a leniency application should be made.
Below is a selection of PLC's materials on EU investigations and dawn raids:
- Cartels: EU law and practice. (www.practicallaw.com/6-107-4520)
- EU Compliance programmes. (www.practicallaw.com/6-107-3714)
- EU Dawn Raids. (www.practicallaw.com/0-107-3712)
- EU Legal privilege. (www.practicallaw.com/5-102-1315)
- EU Procedure, negotiation and enforcement. (www.practicallaw.com/6-107-3709)
- Competition compliance manual. (www.practicallaw.com/4-101-2566)
- Precedent company guidelines for European Commission investigations. (www.practicallaw.com/6-101-2565)
PLC Legal Risk
For details of PLC's legal risk e-learning courses for business managers, see PLC Legal Risk (www.practicallaw.com/7-378-7480)