The Court of Justice of the European Union (General Court) handed down a judgment on 14th December 2012 in Nexans v Commission case concerning the power of the Commission to conduct dawn raids. The judgment confirmed that the Commission does not have the power to conduct “fishing expeditions” but has to specify the scope of its investigation so as to enable the undertaking concerned to limit its cooperation to those activities in respect of which the Commission has reasonable grounds for suspecting an infringement of the competition rules.
Legal basis for dawn raids
According to the Council Regulation 1/2003, the Commission is empowered to conduct on-site inspections of undertakings suspected of competition law violations and, as part of that authority, to inter alia enter any premises, examine the books and other records related to the business and take or obtain copies or extracts from such books or records (Article 20, paragraph 2 Regulation 1/2003). By virtue of Article 20, paragraph 4 of the Regulation, the Commission’s inspection decision shall specify, inter alia, “the subject matter and purpose of the inspection”.
Facts of the case
Exercising the above-mentioned powers, the Commission carried out in 2009 a dawn raid at the premises of Nexans in France on the suspicion that the company was party to a cartel engaged in concerted bidding, client allocation and illegal exchange of commercially sensitive information in relation to “the supply of electric cables and material associated with such supply, including, amongst others, high voltage underwater electric cables, and, in certain cases, high voltage underground electric cables”.
Nexans lodged an appeal to the General Court alleging that a number of its rights (the right of defense, the right to a fair trial, the privilege against self-incrimination, the presumption of innocence and the right to privacy) were breached by the definition of the product scope of inspection (“supply of electric cables and material associated with such supply”). This, according to Nexans, allowed the Commission to run a ‘fishing expedition’ into the entire Nexans’ business in spite of the fact that information in the possession of the Commission warranted an inquiry in the high voltage underwater cable sector only.
Reasoning of the Court
At the outset, the Court observed that the Commission’s obligation to specify the subject matter and the purpose of the investigation constitutes a fundamental guarantee against arbitrary or disproportionate intervention by public authorities into the private sphere of citizens, including corporate citizens. In a dawn raid context, this means that an inspection must be designed to “gather the necessary documentary evidence to check the actual existence and scope of a given factual and legal situation concerning which [the authority] already possesses certain information”. In other words, the Commission must have certain information prior to the inspection – it may not conduct an inspection based on an unsubstantiated suspicion of a potential infringement. The Court emphasized that, in order to protect the fundamental rights of undertakings, an inspection decision must at least state “essential characteristics of the suspected infringement” and “identify the sectors covered by the alleged infringement”, in order to enable the inspected undertaking to assess to what extent it is legally obliged to cooperate.
In the present case, the Court found that information the Commission possessed prior to the inspection warranted a query into the high-voltage underwater and underground cable sectors only and that, consequently, the Commission did not have reasonable grounds to extend the scope of the inspection decision to “all electric cables and all materials associated with those cables”. Accordingly, the Court annulled the inspection decision to the extent it went beyond “high voltage underwater and underground cables and the material associated with those other cables”. However, the legal consequence of such annulment remained unclear since the Court held that it did not have the power to issue a declaration explaining such consequences.
Nexans also challenged the legality of the Commission’s acts of copying certain computer files and taking them to its office for inspection, rather than inspecting them on the Nexans premises. The Court declared this challenge inadmissible, finding that the contested acts of the Commission did not constitute an actionable decision, but the measures implementing the inspection decision. Such implementing measures can be contested only in the context of a challenge to the final decision on the infringement or the decision imposing a procedural penalty for a failure to cooperate. The Court, however, noted that an undertaking can file an action in tort against the Commission if a Commission’s unlawful act has inflicted damage on it.
Dawn raids under Serbian law
The Serbian Law on Protection of Competition (“LPC”) gives the authority to the Serbian Commission for Protection of Competition to conduct on-site inspections, including unannounced ones (Article 52-53 of the LCP). However, unlike Article 20 of the Regulation 1/2003, the LPC does not regulate the mandatory content of the Commission’s decision on on-site inspection. Since the Serbian Commission is still to perform its first dawn raid, no case law exists on the scope of permissible inspection. The practice of Court of Justice of the European Union in this respect can be a useful guideline for the actions of the Serbian Commission.
