Worldwide: Dawn Raids And Preparing For Surprise Government Competition Law Investigations: Jones Day Guide To Best Practices

As global antitrust enforcers increasingly focus on detecting and punishing cartel behavior, companies must remain vigilant in protecting against overreach during government investigations that precede prosecutorial operations. So-called "dawn raids," which are unannounced on-site investigations by antitrust agencies seeking information on potentially criminal behavior, have become routine in many jurisdictions around the globe. Recent remarks by antitrust officials have touted the increased coordination among different antitrust agencies to conduct investigations. Dawn raids have resulted in the collection of evidence used to support large fines and jail sentences. In this high-risk regulatory environment, preparation is paramount.

Background

While dawn raid laws and procedures vary across jurisdictions, the underlying objectives remain the same. An antitrust agency that has reason to suspect a company is engaged in activity that violates antitrust or competition law will use a dawn raid to collect evidence that supports its case. Antitrust agencies typically use dawn raids to target illegal collusion, including agreements between competitors on pricing or allocation of territories.

Typically a search warrant is obtained in advance of a dawn raid. Armed with a warrant, antitrust officials will appear on a company's premises, sometimes accompanied by police officers. They will search computers, servers, and paper files for information relevant to the investigation. Employees may be questioned. Antitrust officials typically are authorized to copy or carry away any potentially relevant materials identified during the investigation. Antitrust officials may also seal materials or even a portion of the business' premises for subsequent inspection. A dawn raid can last from one day to several days depending on the jurisdiction, the scope of the investigation, the availability of information, and a company's readiness to comply.

Recent Investigative Activity

Antitrust enforcers increasingly rely on dawn raids and worldwide coordination among enforcement agencies. Evidence obtained from dawn raids can lead to hefty fines and criminal penalties.

The U.S. Department of Justice has asserted that "enforcement agencies can and should do more to coordinate" dawn raids and other aspects of antitrust investigations in an "increasingly complicated and crowded investigative environment."

In November 2015, the European Commission and the Austrian competition authority carried out a dawn raid on rail passenger operator OBB to investigate alleged anticompetitive practices aimed at excluding competing rail passenger transport operators from the market. The raid reportedly involved over 60 European Commission and Austrian competition authority officials on-site at OBB headquarters. The antitrust authorities inspected documents, electronic equipment, and even employee mobile phones.

Last year, China's National Development and Reform Commission fined Qualcomm over 6 billion yuan (US $975 million) for antitrust and intellectual property law violations substantiated by evidence collected during dawn raids of Qualcomm's China headquarters and its Shanghai office.

Implications

A company must be prepared before, during, and after a dawn raid. Not only is the unanticipated arrival of antitrust officials particularly disruptive to a company's operations, it exposes a company to potentially significant legal liability and public relations fallout. While a company is obligated to comply with a properly authorized dawn raid, it also must be alert for overreach by antitrust officials. A company may have immediate or subsequent recourse if the antitrust authorities attempt to obtain out-of-scope or privileged materials. (We discussed this in a recent alert on dawn raids in France.) For these reasons, it is paramount that a company be prepared to comply with a dawn raid to protect both its short-term interest in expeditiously cooperating with a dawn raid and its long-term ability to protect its legal interests.

Jones Day has compiled guidance on dawn raid best practices. This guide is organized by jurisdiction, to guide in complying in the event of such an investigation. This publication reflects insights from multiple representations in this area, and in addition any company that may be subject to competition law investigation should have experienced counsel help it prepare for a dawn raid, ensure a dawn raid is circumscribed as much as possible, and assess the best course of action for any prosecutorial activity that follows.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Matt Evans
Paula W. Render
Marguerite Lavedan
 
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