Articles

This article originally appeared in Bristows' Aerospace Focus.

Competition authorities, if they suspect an infringement of the competition rules, may carry out unannounced inspections of company premises, otherwise known as "dawn raids".

Dawn raids are increasingly common and often result in the imposition of large fines.  Recent investigations by the EC Commission (the 'Commission') in the EU include raids in the industrial, electronics, construction, energy, and pharma sectors.  It is clear that no sector can escape the authorities' attention.  Further, President Obama's public endorsement of a tightening of anti-trust policy and enforcement in the US, and the continued interest of the Commission in Europe in specific areas such as the inter-play between competition and IP, gives even more reason for businesses to ensure they are well prepared to deal with an unannounced visit from the authorities.

Powers of the competition authorities

The competition authorities have a range of investigative powers.  They are authorised to enter company premises (and in certain circumstances directors' domestic premises); examine and take copies of company documents; seal business premises; and ask any member of staff for explanations of documents and facts covered by the inspection.  Care must be taken that officials do not exceed their granted powers and to ensure protection of the company's interests and legal rights. 

Handling Dawn raids

Dawn raids can be intimidating.  Companies need to be prepared to deal with them effectively in an often stressful environment.  Dawn raid training and the provision of internal procedures and guidelines will help protect against mistakes during a dawn raid.  Some of the key issues are outlined below.

• Arrival of the inspectors: Officials will arrive at the company's premises with a written authority stating the purpose of the investigation.  This must be passed to the Legal Department immediately, to check the validity of the authorisation and the precise scope of the inspection.  The officials should not be allowed to proceed with the investigation until this has been done.  External lawyers should also be contacted immediately if the in-house team feels that it may need assistance.  This will often be the case, as inspections can consist of ten or more officials.  An internal email should be sent informing staff that an investigation is taking place and that no documents / electronic files are to be destroyed and any document retention policy is to be suspended until informed otherwise. 
  
• Conduct of the investigation: A member of staff (preferably a legal advisor) should be assigned to stay with each official for the duration of the investigation.  They must ensure the officials are only permitted to review material relevant to the scope of the investigation and do not exceed their remit.  Effective cooperation is very important.  Companies face procedural fines if they are deemed to have refused to submit to an investigation without proper grounds or to have supplied incorrect or misleading information.  A full and complete record should be kept of the investigation.  A copy of any documents copied by the officials should also be taken for the company's record and review.  The officials will also prepare a 'list of documents seized' and this should be carefully checked, and a copy kept.
  
• Privilege in competition investigations:  Rules on whether documents or files are privileged in competition investigations in the UK depends on whether the Commission or a UK competition authority (in most instances the Office of Fair Trading ('OFT')) is undertaking the inspection.  If the OFT is the primary investigator, the English law rules on legal professional privilege apply; if it is the Commission, the EC rules on privilege in Commission investigations apply.  Companies should ensure that they do not disclose communications with lawyers or reporting on legal advice as these could be privileged.  If a dispute arises with the officials (as in our experience can often occur) about communications with lawyers or other correspondence with a legal context, a legal advisor should be called at once to help deal with the situation.  If this is not immediately possible, the disputed document should be set aside for later discussion and resolution.  A follow up letter can also be used to clarify the company's position.
  
• After the inspection: As soon as possible after the investigation, the company should review the conduct of the inspection and decide if any further steps need to be taken.  These could include sending a written explanation to the investigators of any points raised or answers given during the investigation; and reviewing the position relating to any confidential or privileged documents.