Antitrust Alert: European Commission’s Broad Dawn Raid Powers Affirmed, but "Reasonable Grounds" for Suspecting an Infringement Required
The European Court of Justice (ECJ) has upheld the expansive geographic reach of a European Commission dawn raid decision in the electric cables cartel investigations. Nexans, one of ten companies being investigated, had argued that the geographic scope was overbroad and provided an insufficiently precise basis for justifying the Commission’s "dawn raid" of documents relating to electric cable projects located outside the EU territory.
This ruling follows a General Court prior ruling that was the first time that a court had annulled (albeit partially) a Commission decision authorizing a dawn raid. (See Jones Day Antitrust Alert, European General Court Halts Dawn Raid "Fishing Expeditions," December 2012.) The General Court then found that the Commission had not demonstrated it had reasonable grounds for ordering a dawn raid covering all electric cables.
The ECJ’s new judgment re-affirms the Commission’s considerable discretion in exercising its dawn raid powers, but its ruling should be considered against the backdrop of the General Court’s earlier findings, which placed the Commission under greater scrutiny in conducting dawn raids.
Two ECJ decisions
Following the 2009 dawn raids on Nexans and other power cable manufacturers, Nexans partially succeeded before the General Court in challenging the Commission’s overbroad search of product markets. The General Court found that the Commission should have limited its dawn raid to the high-voltage cable sector, as this was the only sector for which the Commission had "reasonable grounds" for suspecting an infringement.
However, the General Court rejected Nexans’ second objection that the geographical scope of the dawn raid was also over-expansive. The dawn raid decision had stated that the suspected anticompetitive activity would "probably have a global reach." Nexans appealed this finding before the ECJ, which dismissed Nexans’ appeal in its entirety, for two reasons:
EC may investigate facts outside EU. First, the ECJ rejected Nexans’ arguments concerning the vagueness of the geographic scope of the dawn raid. According to the ECJ, it sufficed that the Commission’s dawn raid decision had indicated that the suspected cartel was "probably [of] a global reach" and had raised its suspicions relating to "client attribution." The Commission was not required to provide more details on the type of conduct suspected outside of the EU, on the potential effect of such conduct on the EU market, or on the type of documents that the Commission was entitled to examine. The ECJ noted that the General Court had correctly determined that, in implementing EU competition rules, there was nothing to prevent the Commission from examining documents relating to markets outside of the EU in order to detect conduct liable to effect trade between Member States. Indeed, in view of the Commission’s stated suspicions of anticompetitive conduct of probable global reach, "even documents linked to projects located outside the common market were likely to provide relevant information on the suspected infringement."
EC entitled to investigate to confirm suspicions with investigation. Second, the ECJ found that the Commission needed only to indicate the facts it intended to investigate, but was not required to provide the raided companies with all information at its disposal concerning the suspected infringement, nor to make any precise legal analysis of such infringements. Thus, although the Commission must indicate as specifically as possible the evidence sought and the matters concerned by the investigation, it is not required to precisely define the relevant market in the dawn raid decision. This is particularly in view of the fact that, when conducting dawn raids, the investigation is still in its early stages, and thus the Commission necessarily lacks precise information to enable a specific legal assessment and must first verify the accuracy of its suspicions. The aim of the dawn raid is specifically to gather evidence relating to a suspected infringement.
The ECJ’s ruling, which endorses the Commission’s broad scope of discretion and investigation powers, may dampen hopes raised under the preceding General Court ruling that served to restrained Commission fishing expeditions. Nevertheless, the Commission cannot overlook the fact that the General Court held it accountable for providing "reasonable grounds" for inspecting product sectors, and it appears that the door may well be open for future challenges regarding proper geographic scope.
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