Comparative Guides

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4. Results: Answers
Cartels
4.
Investigations – step by step
4.1
What initial steps do the enforcement authorities take to commence a cartel investigation?
European Union

Answer ... Once a case has been opened (see question 3.1), the Commission will carry out an initial assessment. During this phase, the Commission will assess whether the case “merits further investigation” and provisionally define the focus of the case, in particular with respect to the relevant parties, markets and conduct (see the Commission Notice on Best Practices for the Conduct of Proceedings Concerning Articles 101 and 102 EUTFEU). During this assessment, it may make use of investigatory powers, including issuing requests for information. At this stage, the Commission may make use of the ECN framework and reallocate the case to a NCA.

If the Commission does not discard the case at this stage and considers it worth further investigation and the scope properly defined, it will open formal proceedings under Article 11(6) of Regulation 1/2003 and allocate resources to the case.

Before the opening of proceedings is announced publicly (see question 3.8), the undertakings will be informed in advance in order to allow them to prepare their own PR communications.

At the same time as the opening of proceedings, the Commission will normally adopt a statement of objections to inform the undertakings concerned of the objections raised against them when opening the proceedings and provide them with the opportunity to respond to all of the Commission’s allegations.

For more information about this answer please contact: Geert Goeteyn from Shearman & Sterling LLP
4.2
Are dawn raids commonly conducted in your jurisdiction? If so, what are the pre-conditions for conducting a dawn raid? When, where and by whom are they conducted? Do the enforcement authorities have the power to search private as well as company premises?
European Union

Answer ... Dawn raids are commonly carried out under the EU competition regime as a means to obtain evidence in relation to secretive cartels.

Commission’s officials (and officials of the relevant NCA) are empowered to conduct inspections of undertakings and associations of undertakings, including by entering their premises, examining all relevant information found at the companies’ premises, copying relevant information and sealing premises, books or other sources of information to the extent necessary.

Other premises – for example, the private homes of directors – may also be inspected if there is reasonable suspicion that documents related to the inspection and business are kept at those premises, provided that a decision ordering such inspection is authorised by the national judicial authority of the member state in question. The Commission may also inspect private devices used for professional reasons when found on the premises (see the Commission Explanatory Note on the Conduct of Dawn Raids).

Dawn raids are carried out under either a written authorisation or a decision of the Commission. Either of these must specify the subject matter and purpose of the inspection. Written authorisations must also specify the fines provided for if production of records is incomplete or where answers to questions asked are misleading. Decisions must also specify the fines and periodic penalty payments if incomplete or misleading information is provided, as well the right to have the decision reviewed by the CJEU.

Inspections can take place during the initial assessment phase (see question 4.1 and the Commission Notice on Best Practices for the Conduct of Proceedings Concerning Articles 101 and 102 TFEU), as well as once proceedings have been opened.

For more information about this answer please contact: Geert Goeteyn from Shearman & Sterling LLP
4.3
What powers do officers have during the dawn raid? Are there any limitations on these powers?
European Union

Answer ... Commission’s officials, authorised accompanying persons and officials of the NCA of the member state in whose territory the inspection is to be conducted are expressly empowered by Regulation 1/2003 to:

  • enter any premises and means of transport of the undertaking;
  • examine all relevant information and records related to the business (e.g., electronic information on servers, computers, phones, CD-ROMs, USBs);
  • obtain copies or extracts from these records;
  • seal premises and records during and as necessary for the inspection; and
  • ask any representative or member of staff for explanations of facts or documents relating to the inspection, and record the explanations given.

The Commission is required to outline clearly the subject matter and purpose of its investigation and its dawn raids. The EU courts have also held that the Commission may not engage in ‘fishing expeditions’ - that is, search for information relating to alleged anti-competitive behaviour that falls outside the scope of its investigation.

In particular, the General Court’s judgments in Prysmian and Nexans in relation to the Power cables cartel make clear that the Commission must identify the sectors covered by the alleged infringement with “a degree of precision”, and must have reasonable grounds to suspect an infringement (Nexans). In this case it was found that the Commission did not have reasonable grounds to adopt an inspection decision relating to infringements with respect to all types of electric cables, but did have reasonable grounds to adopt an inspection decision in relation to high-voltage submarine and underground electric cables.

For more information about this answer please contact: Geert Goeteyn from Shearman & Sterling LLP
4.4
What are the rights and obligations of the target company and any individuals targeted during a dawn raid?
European Union

Answer ... Undertakings can consult external legal counsel during a dawn raid. However, Commission’s officials are not obliged to await the arrival of legal counsel before commencing their inspection. The EU Courts have upheld a fine increase by the Commission as a penalty for an undertaking refusing to submit to an inspection until the arrival of its counsel (see the Bitumen cartel case). In practice, officials may wait for a short period of time for legal counsel and may attach conditions to any such delay (e.g., sealing the offices).

For dawn raids carried out under written authorisation, the undertaking is not obliged to allow the Commission’s officials to conduct their investigations. However, it is fairly straightforward for the Commission to issue a formal decision, pursuant to which the undertaking is obliged to allow the investigation to proceed.

Undertakings are subject to an obligation to actively cooperate with the inspection. This extends to requiring employees to assist the officials in their inspection, including by offering explanations of facts or documents where requested and IT assistance.

Regulation 1/2003 empowers the Commission to impose fines of up to 1% of group annual turnover if an undertaking:

  • produces information or records in an incomplete form or refuses to submit to inspections ordered by a Commission decision;
  • gives a misleading or incorrect answer to a question relating to the dawn raid; or
  • breaks the seals placed on documents or premises by inspectors.

For more information about this answer please contact: Geert Goeteyn from Shearman & Sterling LLP
4.5
What evidence can be seized during a dawn raid? Do the enforcement authorities have the power to interview witnesses and take statements during a dawn raid?
European Union

Answer ... Officials can carry out a search for, and take hard and electronic copies of, evidence directly and indirectly relevant to their investigation during an inspection other than legally privileged documents (see the General Court’s judgment in Èeské dráhy). The Commission must have at least “information and evidence providing reasonable grounds for suspecting an infringement” to support the stated scope and subject matter of the inspection – see also question 4.3. The undertaking should ensure that it keeps a copy and a record of all of the documents copied by the Commission’s officials.

The Commission’s officials may ask any representatives or members of staff for explanations of any facts or documents relevant to the inspection. The officials may record the explanations given in any form.

In addition, the Commission may interview any representative or employee of the undertaking who consents to be interviewed for the purpose of collecting information relating to the subject matter of an investigation (see Regulation 1/2003). This interview may take place during the dawn raid or afterwards at the Commission’s offices.

For more information about this answer please contact: Geert Goeteyn from Shearman & Sterling LLP
4.6
How can a company best prepare itself for dawn raids? What best practices should it follow in the event of a dawn raid?
European Union

Answer ... Companies should ensure that all members of staff are properly briefed on the procedures to follow in the event of the dawn raid and ensure that all legally privileged communications with external counsel are clearly marked as such. Undertakings are not required to hand over legally privileged documents, but they may need to convince the Commission’s officials that any such documents fall within one of the categories of legally privileged documents (e.g, by showing the officials certain parts of the document).

In the event of a dawn raid, a company’s members of staff should immediately check all documentation provided by officials, send copies to their external counsel and consult with external counsel to ensure that they understand the legal basis and the scope of the inspection. The Commission’s officials need not await the arrival of the undertaking’s lawyers before commencing their investigations of the premises.

Officials should be given space (e.g., a meeting room or office) to conduct their inspection and should be accompanied by members of staff – ideally legal counsel – at all times, although the inspection should not be obstructed. The company should take a record of everything done by officials during the inspection (e.g., offices searched, computers checked), and ensure that IT members of staff can assist the officials with accessing the undertaking’s IT systems.

For more information about this answer please contact: Geert Goeteyn from Shearman & Sterling LLP
4.7
What are the next steps in the cartel investigation following a dawn raid? What timeframe do these typically follow?
European Union

Answer ... It may take the Commission a number of months or a year to fully review the documents it has obtained from the dawn raid. The Commission will create a file with the documents that it believes are relevant for its investigation (as well as including other evidence, such as leniency statements). Once the statement of objections has been issued, the undertakings will have the right to request access to the Commission’s file.

If the Commission’s case “merits further investigation” on the basis of information and evidence collected through its investigatory powers, it will officially open proceedings and issue the alleged cartelists with a statement of objections in writing (see question 4.1). A statement of objections sets out the allegations made by the Commission against the undertakings (e.g., the facts of the cartel and how they infringed Article 101 TFEU). The Commission will provide the undertakings with at least four weeks to respond in writing to the statement of objections. The undertakings may then also request an oral hearing with the Commission.

Following this phase of the investigation, the Commission will either close the case if it considers that its initial objections turn out to be unsubstantiated or proceed towards adopting a decision finding an infringement. If it proceeds towards adopting a decision, a draft decision is usually prepared for the College of Commissioners following consultation with an Advisory Committee on Restrictive Practices.

The Commission’s investigation of a cartel, from discovering an alleged infringement to adopting a final decision, will usually take a number of years.

For more information about this answer please contact: Geert Goeteyn from Shearman & Sterling LLP
4.8
What factors will the enforcement authorities consider in assessing whether cartel activity has taken place?
European Union

Answer ... The Commission will carefully examine and assess the evidence for the existence of agreements between undertakings, decisions by associations of undertakings or concerted practices. In the context of agreements, the Commission will generally look for evidence of a “meeting of the minds” or “concurrence of wills” - the form of the agreement or contact between the undertakings is irrelevant. Concerted practices do not require an actual agreement or decision to collude – it is sufficient that there is direct or indirect contact between competitors that knowingly substitutes competition for practical cooperation between themselves and that may influence their market conduct. Exchange of commercially sensitive information between competitors may be used in order to facilitate a cartel’s conduct, but it may also infringe Article 101 in its own right.

The Commission will also consider whether the behaviour in question has an anticompetitive object or restrictive effects on competition. Restrictions by object are those that, by their very nature, have the potential to restrict competition. In considering whether restrictive effects are present or likely, the Commission will examine, among others, the effect or likely effect on price, output, product quality, product variety or innovation.

Evidentiary factors that may indicate that cartel behaviour has occurred in a market include:

  • prices being increased by competitors at the same time;
  • output/volumes decreasing in a particular market without any objective justification and where there are indications of coordination; and
  • the level of cross-border trade of certain goods/services being lower than what could be expected given the nature of the market.

For more information about this answer please contact: Geert Goeteyn from Shearman & Sterling LLP
4.9
In case of a finding of cartel activity, can the company seek to negotiate a settlement, plea bargain or similar resolution? If so, what is the process for doing so?
European Union

Answer ... A settlement procedure has been available since July 2008, when Regulation 622/2008 regarding settlement procedures in cartel cases entered into force. Approximately half of the decisions adopted in cartel cases have been concluded under settlement. Settling undertakings are rewarded with a 10% reduction in the fine.

After the Commission has opened proceedings, it may set a period of at least two weeks in which the undertaking can confirm that it is prepared to enter into settlement discussions. This is at the Commission’s discretion: it may not consider all cases to be suitable for settlement, depending on factors including the “probability of reaching a common understanding” (see the Commission Notice on Settlement Procedures).

Settlement discussions will proceed at a pace determined at the Commission’s discretion. The Commission will also decide the timing of the limited access to its file, which should allow the undertaking to be informed of the essential elements of the Commission’s case and allow it to make an informed decision on whether to settle. Either the undertaking or the Commission can cease settlement discussions at any stage - this reverts the procedure to the standard infringement proceedings.

The undertaking must then submit a settlement submission that acknowledges its infringement of Article 101 TFEU and indicates the maximum fine foreseen and acceptable to it. If the undertaking agrees with the statement of objections issued by the Commission, it must confirm that it reflects the settlement submission and that it wishes to proceed to the adoption of a settlement decision.

For more information about this answer please contact: Geert Goeteyn from Shearman & Sterling LLP
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Cartels