More robust procedures can be expected in Commission investigations

By Federico Marini Balestra, Lucia Antonazzi

12-2020

In October 2020, the General Court of the European Union (GC) issued an important decision in the joined Casino cases which promises to ensure that competition investigations will be more robust and afford greater protection to companies‘ rights. Both the European Commission (EC) and companies can take much from the judgment in terms of strenthening their procedures and dawn raid processes. [T-249/17 ; T-254/17; T-255/17.] 

The GC partially annulled the EC inspection decisions adopted back in February 2017 ordering a number of French undertakings active in the distribution sector to submit to dawn-raid inspections. On the basis of these decisions, the Commission carried out dawn raids at the  companies’ premises and copied the data stored in the computer equipment located therein, aiming at verifying the obtained information related to information exchange between undertakings and associations of undertakings involved in the food and non-food distribution sector in France. 

The legal basis for the inspection warrants was Article 20(1) and (4) of Regulation No 1/2003 on the implementation of the rules on competition (“Regulation No 1/2003”), which governs the Commission’s investigative powers and the relative obligations of the undertakings subjected to investigations. 

The interested companies brought an action seeking the annulment of the inspection decisions, alleging:

  • the breach of said Article 20 of Regulation No 1/2003, claiming the infringement of the right to an effective remedy and of the principle of equality of arms and the rights of defence;
  • the infringement of the Commission’s obligation to state reasons for the inspection decisions; 
  • the infringement of their right to inviolability of the home. 

In addition, some of the companies also disputed the legality of seizing and copying employees’ and managers’ data and the Commission’s subsequent refusal to hand the data back.   

The General Court’s findings  

The GC upheld only one of the arguments governing the right to inviolability of the home. The other pleas-in-law were rejected or dismissed. 

Protection of employees’ personal data 

The GC rejected this plea. The GC confirmed that the companies have a general duty to ensure the proper management of personal data of the people they employ, and therefore the right of the inspected undertakings to claim protection of personal data on the basis of respecting personal lives of their employees and managers.  However, such a request should be addressed to the Commission in precise and clear terms, which the Court has found to be missing in the proceedings at stake.

"The General Court has provided helpful guidance to companies to manage dawn raids, and a helpful check on the Commission’s powers and more robust processes can be expected.“
Federico Marini Balestra, Partner

Fundamental procedural rights

In relation to the alleged violations of the right to an effective remedy, the GC first recalled previous case-law setting down the four conditions to be met to ensure the right to an effective remedy is respected. Namely, the requirement of effectiveness, the requirement of efficiency, the requirement of certainty and the requirement of a reasonable time. Consequently, it rejected this argument by stating that, during the inspection phase, the inspected undertakings have access to a toolbox of legal remedies (including actions for annulment, proceedings for interim relief, and actions to establish non-contractual liability) which makes the monitoring system of the modalities in which the inspection is carried out compliant with the four conditions mentioned above. 

In the same way, the GC rejected the plea alleging the infringement of the principle of equality of arms and of the rights of defence, by concluding that, with regards to the preliminary investigation phase, the EC should not be required to disclose “the evidence justifying the inspection of an undertaking suspected of anticompetitive practices”. To deny so would make the balance between ensuring the effectiveness of the procedure and preserving the rights to defence collapse. 

EC obligation to state reasons

As a general rule, the EC inspection decisions must clearly state the facts that the Commission is going to investigate. Therefore, this plea constituted a crucial point of the judgment, as it allowed the Court to clarify what exactly the EC is obliged to state in its inspection decisions. In particular, the GC underlined that the inspection decisions should include: a description of the suspected infringement, the potentially affected market, the sectors involved in the suspected infringement. However, the Commission does not need to include the following elements: the information it gathered on the suspected infringement, the legal qualification of the alleged anticompetitive behaviour, the precise delimitation of the identified market, the period of time during which the suspected infringement has been taken place. 

Type of evidence used by the EC 

One of the raised arguments, also put into question the type of evidence used by the EC to justify the inspection decision. With regards to this aspect, the GC underlined that the rules governing the Commission’s investigatory powers do not apply before an investigation is opened, i.e. when an inspection decision is issued. Thus, interviews carried out before an investigation is formally opened are capable of being relied upon as evidence even if they have not been recorded. Therefore, the Court rejected the applicant’s argument by which the type of evidence used was unlawful, as interviews had not been recorded. In the Court’s view, such a differentiation in gathering evidence is made necessary by reason of the dissuasive effects that a formal interview may have on witnesses at an early stage of the procedure. The GC also clarified that the interviews with suppliers are available to the EC counting from the date in which they took place and not from the moment in which they are reported, as claimed by the applicants. 

EC infringement of the right to inviolability of the home

In order to rule on this plea, the Court had to first ascertain whether the EC had sufficiently strong evidence to launch a dawn raid in the proceedings at stake. Based on the information requested and submitted by the Commission, the GC ruled that the EC had sufficiently strong evidence to suspect the existence of a concerted practice and to suspect exchange of information between the undertakings involved. 

However, the GC considered that the Commission did not not have sufficiently strong evidence to suspect exchange of information between the involved undertakings related to their future commercial practices.  

Therefore, the GC annulled the EC inspection decisions on this aspect and stressed that the relevant threshold to be considered in assessing the existence of strong evidence should be lower than the threshold allowing a finding of a concerted practice. 

Conclusions

The judgment is of interest not only with relation to the scope of the limits to and the extent of the EC powers when conducting inspections and carrying out dawn raids, but also with respect to the companies’ rights and the compliance tools expected to be put in place by the inspected undertakings. 

Whilst these ruling show deference to the Commission’s enforcement of competition law, at the same time, the judgments also underline the attention paid by the courts to counter arbitrary and disproportionate investigation activities. 

However, in order to preserve their rights companies should not only rely on judicial control. Undertakings need to be aware of the risks of infringing competition rules as well as their rights, in order to efficiently manage a dawn raid, to ensure full cooperation, whilst minimising disruption and protecting the company's legal position.

The GC stressed the companies’ duty to cooperate as a fundamental aspect of the preliminary inspection phase. Such a duty is certainly eased when companies have internal compliance toolboxes already up and running when receiving an inspection decision by the European Commission. The GC judgment can therefore be seen as an attempt to strike a clear balance between the Commission’s obligation to respect the companies rights, even during the preliminary phase of the investigation, and the undertakings’ obligations to comply with the inspections provisions. Preparedness seems therefore to be the key for companies to efficiently manage a Commission dawn raid.

For more information contact Federico Marini Balestra or Lucia Antonazzi

 

 
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