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.
The Commission may impose fines of up to 1% of a company's total turnover for the preceding business year for:
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.
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:
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)).
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.
Companies should put in place procedures for handling investigations. In particular, companies should:
Below is a selection of PLC's materials on EU investigations and dawn raids:
For details of PLC's legal risk e-learning courses for business managers, see PLC Legal Risk (www.practicallaw.com/7-378-7480)