What to do when investigators arrive unannounced
Dawn raids – unannounced visits from competition authorities – get their name from the inspectors’ habit of turning up at the beginning of the business day, when companies are likely to be least prepared for the unexpected.
The European Commission has for many years had the power to carry out such raids as part of its investigations into alleged breaches of EU competition law. EU inspectors may be accompanied by inspectors from the UK Competition and Markets Authority (formerly the Office of Fair Trading)
The Competition and Markets Authority has extensive powers to investigate potential breaches of UK competition law and also to investigate on its own behalf breaches of EU competition law. These powers are similar (but not identical) to those of the European Commission and include the power to conduct dawn raids. The Competition and Markets Authority can enter and search premises, using force if necessary, to obtain evidence of unlawful agreements or conduct. Additionally, the European Commission or another national competition authority may request the Competition and Markets Authority to carry out a dawn raid on its behalf.
The UK Competition Act 1998 outlaws agreements and practices which significantly harm competition in the UK. The Act gives the UK competition authorities wide-ranging investigative powers and the ability to impose heavy fines upon UK businesses.
The Act is closely modelled on EU competition law, namely articles 81 and 82 of the EC Treaty. It outlaws two new prohibitions:
- agreements which affect UK trade and restrict competition within the UK
- abuse of market dominance if it affects UK trade
Heavy fines for non-compliance
The Commission may impose fines of up to 1% of a company's total turnover for the preceding business year for:
- Intentionally or negligently supplying incorrect or misleading information in response to an information request (whether following a simple request or a formal, binding Commission decision).
- Failing to provide information within the timescale set out in a decision.
- Refusing to submit to an inspection ordered by decision.
- Providing incomplete documents, providing incorrect or misleading answers to questions asked or breaking a seal affixed by the Commission (whether or not the inspection has been ordered by decision or under an authorisation).
Periodic penalties of up to 5% of average daily turnover can also be imposed for continued failure to:
- Supply complete or correct information in response to an information request by decision.
- Submit to an inspection ordered by decision.
Responding to a Competition Authority Dawn Raid
1. Stay calm
Don't panic, even if the investigating officers are creating a sense of drama and confusion. Take a few moments to gather the following information which you will need to give to your lawyers...
- type of investigation (e.g. by authorisation or warrant);
- nature and scope of the alleged breach;
- number and names of the investigating officers.
2. Ask officers to wait
Tell the investigating officers you would like to contact your lawyers and would like them to wait until they arrive. However, they are unlikely to wait long and the investigation will not in any way be invalidated by the absence of a lawyer physically on site. You are , however, entitled to legal advice so they cannot stop you from speaking to your lawyer by phone.
You must assure the officers that the company's business records will remain untouched during any waiting time, otherwise the company and the individual will be criminally liable. Let the officers move around the business premises as they wish.
3. Privileged material
If the officers refuse to wait for your lawyer to arrive, collect and hold on to any privileged material. Allocate shadows to each investigating officer who can take notes of everything that is said and done.
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