Austria: New Perspective On Dawn Raids And Leniency Following Criminal Legislation Amendments

The entry into force in Romania on 1 February 2014 of the new criminal codes implementing laws - i.e. Law no. 187/2012 and Law no. 255/2013, respectively - brought important changes to certain non-criminal laws such as Competition Law no. 21/1996 republished, as further amended and supplemented ("Competition Law"). Two of these amendments concern the requirement of a court warrant for dawn raids and the immunity / reduction of prison sentences for those individuals who, under certain conditions, blows the whistle on Competition Law infringements.

Court warrant for dawn raids at business premises

Prior to the amendments brought by Law 255/2013, Romania's Competition Council was able to conduct dawn raids at the premises of undertakings without a court warrant, but rather based only on an internal order issued by the President of the Competition Council. The judicial approval was (and still is) necessary for conducting inspections at the private premises (e.g. homes, vehicles) of the managers, directors, and employees of the undertakings under investigation. As of 1 February 2014, along with the order from the President of the Competition Council a court warrant is also necessary for conducting (unannounced) inspections at business premises.

This amendment to the Competition Law follows a broader European trend in dawn raids, with the competition legislation in several EU Member States requiring judicial approval (e.g. Austria, Germany, France, Hungary, Latvia, Poland, Sweden), while in some other Members States a court warrant is required in the event there is opposition to the inspection (e.g. Spain). At the level of the European Commission, a judicial warrant is also not required to conduct a dawn raid.

In Romania, the necessary court warrant is granted by the Bucharest Court of Appeals, based on a justified request of the Competition Council. Undertakings may appeal the judicial decision granting the inspection at the country's High Court of Cassation and Justice without this procedure suspending the unfolding of the inspection.

The warrant should include clear references to the scope of the inspection and the premises that would be subject to this procedure. The undertakings concerned should check in detail the content of the warrant and challenge (during the procedure or even afterwards) any deviation from it.

Irrespective of the unfolding of the investigation, the concerned undertaking should make use of the possibility to appeal the court decision authorizing the inspection, given the benefits of the annulment of the authorization. However, there is a rather short timeframe for this judicial remedy: 48 hours from the communication of the court warrant to the representatives of the inspected undertaking by the inspectors.

It has yet to be seen how this amendment will affect the Competition Council's activity concerning the dawn raids, given the fact that a judicial authority will now review the basis for conducting the inspection. One could expect the number of dawn raids to diminish. However, considering the fact that unannounced inspections are the primary tool it uses in gathering evidence for its investigations, Romania's competition authority will remain motivated to obtain court warrants and, in this respect, it is expected to provide sound justifications for its requests. Also, given the Competition Council's close cooperation with judges and the track record in other cases in which private premises were raided (on the basis of court authorizations), it is likely that the number of dawn raids will not decrease significantly. An additional argument for this is provided by the experience in other European countries (e.g. Austria) in which competition authorities are continuing to embark on a high number of dawn raids even if judicial warrants are required.

Immunity / reduction of prison sentence in respect to article 60 of Competition Law

Article 60 of Competition Law provides the sanctioning by prison and / or fines for individuals who intentionally conceive or organize practices that infringe article 5(1) [1] (correspondent of 101(1) TFEU) of the Competition Law and which are not covered by article 5(2) (101(3) TFEU).

The amendment provided by Law 187/2012 brings three sets of changes to Article 60:

Firstly, the Competition Law now expressly defines those individuals targeted by a possible criminal sentence: the manager, the legal representative, or any other individual who is exerting, by any means, a management position in an undertaking and who conceives or organizes, intentionally, one of the practices prohibited by Article 5(1) of Competition Law. The new amendment brings a focused application of the law, reducing its applicability to a smaller set of individuals[2].

Secondly, the maximum possible prison sentence for competition infringements was extended to 5 years (compared to a maximum of 3 years in the previous form).

Thirdly, the arguably most important amendment refers to the possibility that an individual who is targeted by Article 60 and who blows the whistle on an infringement of art. 5(1) of the Competition Law can benefit from immunity from sanctioning. However, in order to benefit from immunity, the concerned individual must (i) inform the prosecution authorities on his or her participation in the infringement, (ii) at the time of the signalling by the interested individual, the criminal proceedings must not already have been started, and (iii) the individual's cooperative action must lead to the identification and sanctioning of other participating individuals. If the criminal proceedings have already started, the interested individual may still benefit from a reduction to half of the initial sanction, provided that the other conditions are met.

This amendment is meant to encourage decision makers from each undertaking to apply for leniency, an approach scarcely pursued in (to date, the Competition Council has applied its leniency procedure in just one case, despite the fact that the leniency procedure has been heavily promoted since 2009). In the previous form of the law, an individual in charge of an undertaking blowing the whistle on an infringing practice would obtain immunity or reduction of fine under the leniency programme for the undertaking, but the criminal liability would still continue to exist, therefore being a significant disincentive in applying for leniency.

Together with the Competition Law's newly modified provision, an increase of collaboration, at an administrative level, between the Competition Council and the prosecuting authorities that, at least in theory, should facilitate the application of article 60 is also expected. Nevertheless, one should keep in mind that there has been no conviction decision for an individual participating in an infringement in relation to article 5(1) of Competition Law to date.

Also, due care should be exercised with the issue of criminal liability considering that the success of the leniency application will not automatically lead to immunity provided by Article 60 (and vice-versa).

Conclusion

The recent amendments to the competition rules in Romania bring a new perspective to dawn raids and leniency applications, on the one hand making better judicial control possible and, on the other, supporting an increased appetite for bringing to light serious Competition Law infringements.


[1] Bid-rigging infringements are not covered by article 60, thus constituting an exception.

[2] Prior to the amendment, article 60 targeted "any individual who intentionally and decisively participates in conceiving, organizing or achieving..." which in theory could refer to any individual, irrespective of their position within the organization.

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