Antitrust Alert: European General Court Halts Dawn Raid "Fishing Expeditions"
Following dawn raids on the premises of electric cable manufacturers, the European General Court has partially overturned two EU Commission inspection decisions, finding the scope of inspection to be overreaching in scope. This is the first time that a court has annulled (albeit partially) a Commission decision authorizing a dawn raid, which must specify the subject-matter and purpose of the inspection. The General Court set out that the Commission cannot proceed with a dawn raid unless it has reasonable grounds to believe that an infringement of EU competition law took place – with specific reference to the products or activities mentioned in the inspection decision.
These rulings reinforce the rights of defense of parties and place the Commission under greater scrutiny in conducting dawn raids. They also remind companies to carefully verify the subject-matter and purpose of a dawn raid decision and to pay close attention to all circumstances surrounding the dawn raid to determine to what extent the Commission has the power to conduct the inspection.
BackgroundIn pursuit of a broad investigation implicating some 20 power cable manufacturers, in 2009 the Commission initiated dawn raids at the headquarters of Nexans (France) and Prysmian (Italy). Nexans and Prysmian subsequently challenged the inspection decisions of the Commission on three grounds: (1) the broad scope of the product markets described in the authorization of the dawn raid, (2) the removal from company premises of copies of employee hard drives for review in Brussels, and (3) the Commission’s far-flung search for documents on other business lines, without reasonable grounds of suspicion. Two of these Commission decisions were upheld, one overturned:
(1) Broad scope of product markets concerned by the inspection decision – upheld by the Court. The General Court dismissed the argument that the inspection authorization had imprecisely set out the product and geographic scope of the markets to be covered by the investigation. The Court acknowledged that the subject-matter of the inspection was defined particularly broadly, as it could cover activities relating to very different sectors. Nevertheless, the Court found that the Commission had met its obligation to define the subject-matter of its investigation, which enabled the companies in question to assess the scope of their duty to cooperate during the inspection.
(2) Removal of copies of employee hard drives – upheld by the Court. During the course of the three-day inspection, the Commission made copies of computer hard-drives belonging to certain employees of the two companies. These were taken back to Brussels for review. Nexans and Prysmian asserted that the Commission should have examined such data at their premises and that the Commission should have only removed documents relevant to the investigation. In rejecting these claims as inadmissible, since the challenged facts can be reviewed only in an action against a final decision adopted by the Commission, the General Court noted that the applicants had essentially only taken issue with the Commission for reviewing the documents in Brussels and for keeping them until the time of such examination.
(3) Commission’s far-flung search for documents – overturned by the Court. While finding that the inspection decision had adequately set forth the investigation’s subject-matter, the General Court agreed with the claim that the Commission had conducted a "fishing expedition" during the dawn raid in the absence of reasonable grounds of suspicion of an infringement in all product markets covered by the inspection.
In overturning the overbroad search by the Commission’s investigators, the Court held that the Commission should have limited its inspection to the high voltage cable sector, which was the only sector for which the Commission had “reasonable grounds” for suspecting the two investigated companies of an infringement. As evidence that such reasonable grounds existed only in relation to high voltage cables, and not to low and medium voltage cables, the two companies pointed to the particular employees targeted for interviews during the dawn raid, the focused conduct of the inspectors during the dawn raid, the differences between the various products, and the content of a Commission press release following the inspection.
The General Court thereby annulled portions of the inspection decisions insofar as these concerned power cables other than high voltage cables. The Court found that, without such restraints being imposed on Commission investigators, the Commission could pursue any indication of an infringement of antitrust rules in any part of a company’s activities but then carry out an inspection of all the activities of that company. The General Court found that such approach would violate the fundamental right of protection of private activity.
The General Court did not define the consequences of its rulings on the Commission investigation, which remains ongoing. However, its decision does preclude the Commission from using information that was gathered during the inspections but falls outside the scope of the authorized investigation.
The General Court judgments can be found here:
- Nexans v. European Commission, Case T-135/09, 14 Nov 2012
- Prysmian v. European Commission, Case T-140/09, 14 Nov 2012 (in French)
For more information, please contact your principal Jones Day representative or either of the lawyers listed below.
Bernard E. Amory
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