Person raiding office documents

Competition Dawn Raids: What NOT to do

A new European Commission decision highlights the non-compliance risks in relation to competition ‘dawn raids’.

The Competition and Markets Authority (“CMA”) (and the concurrent regulators: Ofcom, Ofgem, ORR, Ofwat, CAA, FCA, PSR and NIAUR) have powers to conduct ‘dawn raids’ where they have a reasonable suspicion that a competition law infringement has been carried out. They tend to use these powers in relation to suspected cartels, but they are also available in relation to other infringements including abuse of dominance investigations.

A recent UK High Court case confirmed that the CMA can carry out a raid at a person’s home on the same basis as at their business premises. The CMA at your family’s front door (or the door to your home office

In the latest European Commission case, International Flavours & Fragrances (“IFF”) has been fined €15.9m for a senior employee deleting WhatsApp messages during a dawn raid. The Commission’s forensic IT specialists detected that the employee had deleted messages with a competitor and were able to recover the messages. The fine would have been significantly greater but for IFF’s immediate cooperation with the Commission, admitting the deletion on the spot and helping the Commission restore the data to its fullest ability on the same day.

This is similar to the UK case where a senior Fender employee had claimed that certain notebooks had been disposed of when in actual fact they had asked a junior Fender employee to store them off-site. This resulted in a fine of £25,000 (just below the maximum of £30,000 at the time). Note that the CMA’s powers to impose financial penalties have recently been significantly increased by the Digital Markets Competition and Consumers Act 2024 to bring them more into line with European levels of fines.

Failing to cooperate with dawn raids can lead to significant penalties. For example, E.On (€38m) and Suez (€8m) have previously been fined for breaching seals during an inspection and Czech energy company Energetický a průmyslový holding was fined €2.5m for accessing a blocked email account and diverting incoming emails during an inspection.

Similarly, obstructing dawn raids has been considered an aggravating factor in the seriousness of an infringement and has led to increases in fines for companies at the end of an investigation. For example, Bischof + Klein’s fine for participation in the industrial bags cartel was increased by 10% because an employee deleted a document during an inspection and KWS’s fine for participation in the bitumen cartel was similarly increased by 10% for refusing entry to an office of a KWS Director during a dawn raid.  Furthermore, Sony’s fine in the professional videotapes cartel case was increased by 30% as a result of a junior employee shredding documents from a file labelled “Competitors Pricing” and Sony refusing to answer oral questions which were aimed at obtaining explanations concerning the documents found at the premises.

While the UK rules are slightly different from those applied at EU level, the basic principles are the same. In particular, businesses are required to cooperate fully with investigators on-site despite the business disruption and anxiety caused by the dawn raid.  It is also clear that businesses will be held responsible for the actions of their employees, even ‘rogue employees’ acting in breach of business policies. It should be noted that individual can commit criminal offences in destroying documents or providing false or misleading information to the CMA leading to up to two years imprisonment and/or a fine.

The best advice is always to ensure good communication with the investigating team and to engage internal and external legal support as quickly as possible to ensure the process runs smoothly and does not have greater negative implications than it needs to, in terms of business disruption and ultimately, potential financial penalties.

At Michelmores we have experience assisting clients during dawn raids and in training client teams – from reception/security teams to senior management – on how to manage a dawn raid if it happens and having the right processes in place. Please contact Noel Beale or your usual Michelmores contact if you have any queries or would like an further information.