Key trends in dawn raids

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In our Lawyers’ Top 5 section in the Business Law Magazine, we are presenting all the important and practice-oriented topics that are high on the agenda of leading [competition] lawyers in Germany and abroad. Since 2015, the core statement of this magazine has been: “From lawyers for companies”. In implementing this journalistic claim, it is helpful for all parties involved if external consultants actually know which questions move the client in-house. With Lawyers’ Top 5, we would like to contribute further to improving transparency in the German legal market in the future, on both the demand and the supply side, of companies, law firms, auditing firms and service providers. Lawyers’ Top 5 supplements the practice-oriented reporting introduced in the Business Law Magazine since its start. And because time is a factor (and of course, time is money), we have tried to make our reporting as succinct as possible.

(1) Resumption of raids

During the Covid-19 pandemic, social distancing rules and travel restrictions impeded competition authorities’ ability to conduct dawn raids to collect evidence of potential infringements of competition law. With the restrictions easing, competition authorities have a backlog of raids to carry out. Towards the end of 2021, the number of raids began to increase and, based on comments from authorities at both national and supranational level, we expect this trend to continue in 2022, with a significant increase in the number of raids anticipated in the short to medium term future.
It is therefore vital that companies are prepared for the possibility of a dawn raid. In particular, companies should ensure that they have a detailed raid procedure in place and that all relevant staff (including for example, Reception, Security, IT, Legal and Management) have been trained. They should also consider whether any existing procedures need to be amended to reflect changes to staff working patterns or how to access company premises, for example.

(2) Broad range of sectors under scrutiny

Recently, raids have been conducted in a wide variety of sectors including eyewear, pasta, cables, waste collection, military equipment and pharmaceuticals. There have also been warnings from competition authorities worldwide that the Covid-19 pandemic must not be used as a cover for any anti-competitive conduct. Most recently, a group of five competition authorities have formed the “Five Eyes” working group to identify, target and prevent anti-competitive conduct in global supply chains.

(3) New types of conduct under the magnifying glass

In a speech on 22 October 2021, Competition Commissioner Margrethe Vestager heralded a new era for cartel enforcement in the EU. She referred to three particular types of conduct which the European Commission is looking at: (i) buyer cartels, (ii) no-poach agreements and (iii) cartels which have a negative impact on the quality or sustainability of products.

Buyer cartels involve coordination of competitors’ purchase strategies. Noting that buyer cartels may not increase prices for consumers, Vestager commented that nevertheless these are not “victimless” crimes as they impact suppliers and mean the economy works less efficiently.

So-called no-poach agreements are cartels in which companies agree not to compete for each other’s employees. This restricts talent moving between companies and reduces companies’ incentives to provide competitive remuneration packages. No-poach agreements have been under scrutiny in the US for several years and in 2021 the US Department of Justice brought its first criminal prosecution of a no-poach agreement against three healthcare companies. While this has not been an area of focus in Europe to date, Vestager’s speech indicates that will change.

Unsurprisingly, sustainability is also on the European Commission’s radar. In her speech, Vestager noted that price is not always the determinative factor for consumers: sometimes what consumers want “is not so much a cheaper product but a better one” and, in particular, many consumers are interested in products which will not harm the environment. That “green antitrust” is not merely a buzz word but a serious enforcement trend is evidenced by the fact that in July 2021 the European Commission for the first time imposed significant fines (EUR 875.2 million) on German car manufacturers for the restriction of innovation competition – specifically for colluding to limit the development of emission cleaning technology for diesel passenger cars. Please see BLM issue 3 / September 2021, page 6 here. The recently published draft revised Horizontal Guidelines provide further guidance on when sustainability agreements will, and will not, infringe competition law.

(4) Increasing use of tech

Technology is playing an ever-more important role at each stage of a raid: (i) how companies can prepare for raids, (ii) how the authorities are conducting raids and (iii) follow-up to the raid by both competition authorities and companies’ advisers.
Tech can assist companies in preparing for dawn raids through concepts like the Raid Assist app by Ashurst (available on the Apple App Store and the Google Play Store), which enable companies to have a step-by-step guide on how to handle a raid at their fingertips during the raid. Companies can also use tech solutions to provide training remotely and ensure that consistent training can be delivered across multiple sites.
“A group of five competition authorities have formed the “Five Eyes” working group to identify, target and prevent anti-competitive conduct in global supply chains”
Competition authorities are becoming increasingly sophisticated in their approach to searching and reviewing electronic data. Typically, the inspection team will include forensic IT experts and/or the competition authority will bring hardware with them on which can run powerful review software. This also significantly increases the importance of the IT team during a raid. IT teams are expected to engage directly with inspectors to explain the IT systems, provide access, locate data and help inspectors navigate internal IT systems.
Additionally, both competition authorities and advisers are using e-discovery tools to efficiently review documents reviewed and/or collected during a dawn raid.

(5) Implications of hybrid working

To date, raids at domestic premises have been very rare. However, we expect to see an increase in the number of raids on domestic premises with the continuation of hybrid working models. To ensure that competition authorities are able to gather all relevant evidence, they will need to consider conducting raids at domestic premises and/or summoning employees to the office to handover electronic equipment. Where required, legislation has granted competition authorities new powers to ensure they are able to inspect all relevant premises: for example, in December 2021 the Italian competition authority was granted the power to conduct raids at domestic premises (previously it could only raid business premises).
To be able to search domestic premises, competition authorities need to demonstrate a reasonable suspicion that incriminating evidence is kept there. This threshold is easier to meet with significant numbers of employees still working remotely.
“Typically, the inspection team will include forensic IT experts and/or the competition authority will bring hardware with them on which can run powerful review software.”
Remote working is also likely to impact the types of data in which competition authorities are particularly interested. Hybrid working models have accelerated the shift to using electronic means of communications and we expect instant messaging data to be reviewed closely. ß

Editor`s note: For more information listen to the Podcast here. (tw)

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