Antitrust and competition enforcement authorities increasingly
are undertaking unannounced searches of premises to obtain evidence
of possible competition law violations. Most commonly, these
searches are being conducted at business premises, and therefore
business managers need to know how to respond. Private residences,
vessels, and motor vehicles also may be searched.
Failure to comply with the law when a search is conducted can lead
to fines and even jail sentences for obstructing justice. The
authorities' investigation of the international automobile
parts cartel began in early 2010 with a series of raids on the
Detroit offices of several auto parts companies. In 2012, an
executive of one of these companies was sentenced to a year in
prison—not for price-fixing, but for obstructing justice by
destroying emails and other documents after learning of the raids.
Even in jurisdictions where competition violations do not carry
criminal liability, missteps during a dawn raid may increase the
authorities' suspicions and lead them to suspect wrongdoing
where they might otherwise have determined through their search
that no infraction had occurred.
On the other hand, failure to exercise one's rights can lead to
the loss of privilege and to a broader search and seizure than was
authorized. In 2003, the European Commission carried out dawn raids
on the United Kingdom premises of AkzoNobel Chemicals Ltd. and
Akcros Chemicals Ltd. The Commission seized a number of documents
that the companies claimed were privileged. The European Court of
Justice eventually sided with the Commission. But the rules of
privilege vary across the EU Member States, so the procedures for
protecting potentially privileged documents must be carefully
followed to avoid an unnecessary waiver.
To be better prepared, 10-point checklists for various
jurisdictions are provided below. These may be helpful to prepare
employees for the eventuality of a search. But when the authorities
come knocking, it is time to call in experienced legal counsel.
AUSTRALIA
Here's a 10-step checklist on how to respond when officials
from the Australian Competition and Consumer Commission
("ACCC") carry out a dawn raid at your premises under the
civil regime and criminal regimes.
Civil Investigations at Business Premises
Step 1. Contact outside counsel immediately and ask that
the search be delayed until outside counsel arrives on
site—note that the ACCC is not required to do so,
although it usually will, particularly if you are able to give them
a reasonable estimate of how long they need to wait and assurances
that there is no risk of evidence being destroyed, such as by
asking staff to close their desks and computers and turn off any
shredder. Escort the officials to a private meeting room and offer
them an organizational chart and floor plan of the business.
Identify locations where privileged material may be located, such
as the legal department.
Step 2. Copy the ACCC's documentation. Take a
copy of the officials' identification (identification cards are
issued by the Chairman of the ACCC) and check the documentation
authorizing the investigation (authorization or a warrant). Make a
copy of each of those documents and email them to your outside
counsel.
Step 3. Review the search warrant to (i) check
that it is valid; (ii) check that it covers the company and
premises; (iii) understand the scope and subject matter of the
investigation (alleged infringements, relevant products/services,
departments, geographical scope); (iv) understand the powers of the
officials; (v) understand which ACCC inspector is responsible for
exercising the search warrant; and (vii) identify the date, which
is noted on the warrant, on which the warrant ceases to have
effect.
Step 4. Provide instructions to employees. Issue
an internal announcement to inform staff that there is an official
inspection and provide guidance on how to behave appropriately (in
particular, instruct not to destroy documents, not to leak news of
the investigation (even to family members), and remind of the duty
to cooperate). There are a number of criminal offenses that may be
committed through failure to cooperate, and fines also may be
applied.
Step 5. Organize staffing. Arrange for the
internal team to have access to a separate meeting room from the
ACCC officials. Arrange for members of the IT team to be available
as their input will be needed; if IT support is outsourced, contact
a senior person at the provider who can bypass the usual
time-consuming protocols and helpdesk processes. Organize
"shadowers" to follow each official at all times and
brief them on the scope of the investigation and limits to the
power of the officials to ensure that officials do not exceed their
powers.
Step 6. Follow each official at all times.
Inspectors have the power to take possession of original documents.
However, officials cannot take copies or take possession of
documents that are legally privileged, including legal advice from
in-house counsel or from external counsel.
Step 7. Track and record all seized or produced
documents. Take a written note of which rooms the
officials visit; what desks, cupboards, files, computers they
inspect; and whom they interview. Make a copy of all documents
seized.
Step 8. Provide support to employees questioned on
documents or interviewed by officials on questions relevant to the
investigation. Officials may request oral explanations of
documents that are within the scope of the investigation—make
sure the information provided is complete and accurate but that the
answers are concise and no additional information is volunteered.
Make sure that legal counsel is present for questions and that the
questions are recorded. If this is not possible, ensure that a
contemporaneous note be made so that the interviewee is given a
chance to check, and confirm the accuracy of the transcript. A
person may not decline to answer a question on the basis
that the answer may incriminate or expose that person to
penalty.
Step 9. Before the officials leave, confirm you have
followed these procedures. Make sure you have a copy of
the documents as well as the officials' list of documents. Ask
officials for their contact details and organize a point of contact
at the company for future communications. Ask officials if they
intend to come back and if so, at what time and whether they want
cabinets or rooms to be sealed overnight if they are coming back
the next day. Then ensure no one reopens the room/cabinet,
including cleaners and security; only the officials may break a
seal. Ask if officials intend to issue a press release.
Step 10. After the officials have left, record and
review. Conduct debriefings with employees, conduct a
post-investigation review, and determine next steps, including any
potential leniency application and whether an internal
investigation should be conducted. Organize internal and external
communications strategy.
Civil Investigations at Domestic Premises
The ACCC officials may also enter and search domestic premises
(e.g., homes of a company's directors, managers, or employees,
as well as vessels or motor vehicles) where they have reasonable
grounds to believe that evidence of a contravention is at the
premises.
The precautions and advice set out above for a search of the
company's premises should also be observed where inspections
are conducted at domestic premises, as evidence obtained there can
be used in the same manner as any evidence obtained from the
company's offices. In particular, it is essential to:
Step 1. Contact outside counsel immediately
and ask that the search be delayed until outside counsel
arrives on site.
Step 2. Check the warrant.
Step 3. Be cooperative and do not obstruct the
investigation. Identify rooms, such as a home office where
the evidence in the warrant is likely to be found. Ensure that
counsel is there at all times. The officials will have the same
powers (enter and search, take copies and take possession of
documents) and limitations (legal privilege) as for a search
warrant at business premises.
Step 4. Track and record all seized or produced
documents.
Step 5. After the officials have left, record and
review.
Criminal Investigations
The ACCC also has the power to search any premises (business and
non-businesses) when it is conducting an investigation into a
criminal cartel. A criminal raid will be very different from a
civil raid. It is likely to be much more aggressive as there is a
much greater risk of obstruction allegations. The crucial
difference is that individuals may be arrested and taken to a
police station for questioning. In such case, the police will also
be involved as only they have powers of arrest. On a practical
note, this may mean that one or more key individuals with evidence
cannot be accessed by the company during the criminal dawn raid,
which will affect the company's ability to consider issues such
as whether a leniency application is appropriate.
The inspectors will need a warrant and will have similar powers as
when acting with a warrant under the civil regime—in
particular, to enter and search premises—to require persons
to answer questions, provide information, or produce documents. As
such, the precautions and advice set out above for civil
investigations should also be observed for inspections carried out
under the criminal regime. However, additional precautions should
be borne in mind and in particular whether separate legal
representation may be required for certain individuals
interviewed.
Search Warrants and the Right to Privacy
- ACCC officers are not permitted to search premises unless they are issued a search warrant that authorizes them to enter and search those particular premises.
- An ACCC officer who asks to search somewhere other than a business premises without a warrant must state that consent may be refused, and it is permissible to refuse such request to enter premises without a warrant.
- There are no privacy protections preventing the ACCC from searching private premises. If an ACCC officer does produce a search warrant that authorizes entry into a private vehicle, vessel, storage unit, house, or other non-business premises, he is entitled to search the premises and seize material specified in the warrant.
EUROPEAN UNION
Here's a 10-step checklist on how to respond when officials
of a competition authority (European Commission or national
competition authority of an EU Member State) arrive at a
company's premises.
Investigations at Business Premises
Step 1. Contact the manager, in-house counsel, and outside
counsel immediately and ask that the search be delayed until at
least one arrives on site—note that the officials
are not required to do so, although they usually will. In the case
of an inspection by the European Commission, the officials of the
Commission may be assisted by officials of the relevant EU national
competition authority. This does not mean, however, that national
rules and procedures apply. Escort the officials to a private
meeting room and offer them an organigram for the business.
Step 2. Copy the documentation. Take a copy of the
officials' personal identification (staff cards) and check the
documentation authorizing the investigation (authorization or
search warrant). Make a copy of each of those documents and
email/fax them to your in-house or outside counsel. Also hand a
copy to the manager or in-house counsel (whoever arrives
first).
Step 3. Depending on national legislation, a search warrant
delivered by a judge may be required to carry out an on-the-spot
inspection, in addition to a document from the competition
authority itself describing the scope and purpose of the
inspection. Review the authorization or warrant to: (i) check that
it is valid; (ii) check that it covers the company and premises;
(iii) understand the scope/subject matter of the investigation
(alleged infringements, relevant products/services, departments,
geographical scope); (iv) understand the powers of the officials;
and (v) understand if the investigation is carried out by the
European Commission or an EU national competition authority.
Step 4. Provide instructions to employees. Issue
an internal announcement to inform staff that there is an official
inspection and provide guidance on how to behave appropriately (in
particular, instruct not to destroy documents, not to leak news of
the investigation (even to family members), and remind of the duty
to cooperate). Company personnel should not hinder the inspection
in any way, except for the exercise of legitimate rights. The
competition authority could fine the company for obstruction of the
investigation. In case of doubt, any issue should be escalated to
the Coordination Team (see Step 5).
Step 5. Organize staffing. A Coordination Team
should be set up to coordinate the company's response to the
inspection, composed of at least one member of senior management, a
member of the legal department (if any), and an external
competition lawyer (if the assistance of outside counsel was
requested). Arrange for the Coordination Team to have access to a
separate meeting room from the officials. Arrange for members of
the IT team to be available as their input will be needed; if IT
support is outsourced, contact a senior person at the provider who
can bypass the usual time-consuming protocols and helpdesk
processes. Organize "shadowers" to follow each official
at all times and brief them on the scope of the investigation and
limits to the power of the officials to ensure that officials do
not exceed their powers. A "shadower" is either a company
employee (ideally belonging to the company's legal department
or at least having received special training for this purpose) or
an external competition lawyer. This individual's task is to
"shadow" the officials and note everything (within
reason) the officials do and say, making sure that duplicate copies
are made of all the documents or electronic files copied by the
officials, that the officials respect the scope and purpose as
designated in the authorization of the inspection, and that they do
not read any documents or electronic files protected by
professional legal privilege.
Step 6. Follow each inspector at all times
to ensure that officials do not exceed their
powers. Officials have the power to require the production
of documents related to the subject matter of the investigation as
defined in the authorizing documents and to take copies or extracts
from relevant documents. Officials are not allowed to physically
remove documents or electronic media from the company's
premises and cannot take copies of documents that are (i) outside
the scope of the investigation and/or (ii) legally
privileged—advice from external counsel qualified at a bar
within the EU and internal documents prepared for the specific
purpose of requesting advice from such external counsel.
Step 7. Track and record all produced documents.
Take a written note of which rooms the officials visit; what desks,
cupboards, files, and computers they inspect; and to whom they
speak. Make a copy of all documents copied.
Step 8. Answer questions to the best of your
ability. The officials may also request oral explanations
on the spot about facts or documents related to the subject matter
of the investigation. Refusal to answer such questions, or
providing incorrect or incomplete answers, puts the company at risk
of fines for obstruction of the investigation. Company employees
are therefore required to answer such questions to the best of
their abilities. However, when asked such questions, company
employees should keep their answers short and factual and not
volunteer any information for which they have not been explicitly
asked. They should not speculate or answer questions that are
outside their area of competence.
The officials may also conduct interviews with employees to ask
more wide-ranging questions about the subject matter of the
investigation. Employees are not required to accept to be
interviewed and have a right to assistance by counsel if they do.
In such a situation, the Coordination Team should be consulted
immediately, before the employee accepts to be interviewed. Where
the answer to a question asked by an official is considered to be
self-incriminating, the employee cannot be compelled to reply. If
the officials make an audio or video recording of the interview,
they should provide a copy of such recording to the company.
Step 9. Before the officials leave, confirm the
position. Make sure you have a copy of the documents as
well as the officials' list of documents and records of any
interviews or oral explanations. Ask officials for their contact
details and organize a point of contact at the company for future
communications. Ask officials if they intend to come back and, if
so, at what time and whether they want cabinets/rooms to be sealed
overnight if they are coming back the next day. Ensure no one
reopens the room/cabinet, including cleaners/security; only the
officials may break a seal. Ask if officials intend to issue a
press release.
Step 10. After the officials have left, record and
review. Conduct debriefings with employees, conduct
post-investigation review, and determine next-step strategy,
including potential leniency application and whether an internal
investigation should be conducted. Organize internal and external
communications strategy.
Investigations at Domestic Premises
Officials, acting on behalf of the European Commission or another
EU national competition authority, also have the power to enter and
search domestic premises (e.g., homes of a company's directors,
managers, or employees, as well as motor vehicles) where they have
a reasonable suspicion that evidence that would support their case
is being kept there.
The precautions and advice set out above for a search of the
company's premises should also be observed where inspections
are conducted at domestic premises, as evidence obtained there can
be used in the same manner as any evidence obtained from the
company's offices. In particular, it is essential to:
Step 1. Contact outside counsel immediately and ask that
the search be delayed until outside counsel arrives on
site.
Step 2. Check the warrant. Wherever the Authority
wishes to enter domestic premises in relation to a competition
investigation, a warrant from a national judge is required.
Step 3. Cooperate but ensure that the officials do not
exceed their powers. Ensure that counsel is there at all
times. The officials will have the same powers (enter and search,
make copies and take possession of documents) and limitations
(documents within scope of the investigation, legal privilege, and
self-incrimination) as for a raid at business premises.
Step 4. Track and record all produced
documents.
Step 5. After the officials have left, record and
review.
UNITED KINGDOM
Here's a 10-step checklist on how to respond when officials
from the UK Competition Markets Authority ("CMA") carry
out a dawn raid at your premises under the civil regime and
criminal regimes.
Civil Investigations at Business Premises
Step 1. Contact outside counsel immediately and ask that
the search be delayed until outside counsel arrives on
site—note that they are not required to do so,
although they usually will. Escort the officials to a private
meeting room and offer them an organigram of the business.
Step 2. Copy the documentation. Take a copy of the
officials' personal identification (staff cards) and check the
documentation authorizing the investigation (authorization or a
warrant). Make a copy of each of those documents and email/fax them
to your outside counsel.
Step 3. Review the authorization or warrant to:
(i) check that it is valid; (ii) check that it covers the company
and premises; (iii) understand the scope/subject matter of the
investigation (alleged infringements, relevant products/services,
departments, geographical scope); (iv) understand the powers of the
officials (in a civil or criminal investigation, officials will
need a warrant to enter domestic premises or to "seize and
sift" documents); and (v) understand if the investigation is
carried out by the CMA on its own or acting on behalf of the
European Commission/another EU national competition authority. In
the two latter cases, the CMA officials will be accompanied by
officials from the European Commission or the relevant EU national
competition authority.
Step 4. Provide instructions to employees. Issue
an internal announcement to inform staff that there is an official
inspection and provide guidance on how to behave appropriately (in
particular, instruct not to destroy documents, not to leak news of
the investigation (even to family members), and remind of the duty
to cooperate). There are a number of criminal offenses that may be
committed through failure to cooperate, and civil sanctions (fines)
may also be applied.
Step 5. Organize staffing. Arrange for the
internal team to have access to a separate meeting room from the
CMA officials. Arrange for members of the IT team to be available
as their input will be needed—if IT support is outsourced,
contact a senior person at the provider who can bypass the usual,
time consuming, protocols and helpdesk processes. Organize
"shadowers" to follow each official at all times and
brief them on the scope of the investigation and limits to the
power of the officials to ensure that officials do not exceed their
powers.
Step 6. Follow each official at all times
to ensure that officials do not exceed their
powers. Officials have the power to require the production
of documents relevant to the investigation and to take copies or
extracts from relevant documents. Where officials act under UK law
and have a warrant, they can also, under certain conditions, take
possession of the original documents ("seize and sift").
However, officials cannot make copies/take possession of documents
that are (i) outside the scope of the investigation and (ii)
legally privileged—unlike in EU investigations, advice from
in-house counsel or from external counsel qualified at a bar
outside the EU is privileged.
Step 7. Track and record all seized or produced
documents. Take a written note of which rooms the
officials visit; what desks, cupboards, files, and computers they
inspect; and to whom they speak. Make a copy of all documents
seized.
Step 8. Provide support to employees questioned on
documents or interviewed by officials on questions
relevant to the investigation. Officials may request oral
explanations of documents that are within the scope of the
investigation—make sure the information provided is complete
and accurate but that the answers are kept concise and no
additional information is volunteered. Upon giving written formal
notice, CMA officials acting under UK law can also require any
individual who has a connection with a business covered by the
investigation to answer questions on any matter relevant to the
investigation. Make sure that legal counsel is present for the
interviews and that the interviews are recorded; if this is not
possible, ensure that a contemporaneous note be made so that the
interviewee is given a chance to check and confirm the accuracy of
the transcript. Presence of legal counsel is essential to ensure
that the employee is not required to answer questions if the
answers might be self-incriminating.
Step 9. Before the officials leave, confirm the
position. Make sure you have a copy of the documents as
well as the officials' list of documents. Ask officials for
their contact details and organize a point of contact at the
company for future communications. Ask officials if they intend to
come back and, if so, at what time and whether they want
cabinets/rooms to be sealed overnight if they are coming back the
next day. Ensure no one reopens the room/cabinet, including
cleaners/security; only the officials may break a seal. Ask if
officials intend to issue a press release.
Step 10. After the officials have left, record and
review. Conduct debriefings with employees, conduct post
investigation review, and determine next-step strategy, including
potential leniency application and whether an internal
investigation should be conducted. Organize internal and external
communications strategy.
Civil Investigations at Domestic Premises
CMA officials, acting on their own or on behalf of the European
Commission or another EU national competition authority, also have
the power to enter and search domestic premises (e.g., homes of a
company's directors, managers, or employees, as well as motor
vehicles) where they have a reasonable suspicion that evidence that
would support their case is being kept there.
The precautions and advice set out above for a search of the
company's premises should also be observed where inspections
are conducted at domestic premises, as evidence obtained there can
be used in the same manner as any evidence obtained from the
company's offices. In particular, it is essential to:
Step 1. Contact outside counsel immediately and ask that
the search be delayed until outside counsel arrives on
site.
Step 2. Check the warrant. Wherever the CMA wishes
to enter domestic premises in relation to a competition
investigation, a warrant is required.
Step 3. Cooperate but ensure that the officials do not
exceed their powers. Ensure that counsel is there at all
times. The CMA officials will have the same powers (enter and
search, make copies and take possession of documents) and
limitations (documents within scope of the investigation, legal
privilege, and self-incrimination) as for a raid at business
premises, with some exceptions Notably, they will not be able to
seal the premises or books and records and cannot use their
"seize and sift" powers (whereby the entire hard disk of
the computer system, any mobile phone, or other electronic device
can be seized if it is not practicable to search and separate out
relevant items on the premises).
Step 4. Track and record all seized or produced
documents.
Step 5. After the officials have left, record and
review.
Criminal Investigations
In the UK, the CMA also has the power to search any premises
(business and non-businesses) when it is conducting an
investigation into a criminal cartel. A criminal raid will be very
different from a civil raid, and it is likely to be much more
aggressive as there is a much greater risk of obstruction
allegations. The main crucial difference is that individuals may be
arrested and taken to the police station for questioning. In such
case, the police will also be involved as only they have powers of
arrest. On a practical note, this may mean that one or more key
individuals with evidence cannot be accessed by the company during
the criminal dawn raid, which will affect the company's ability
to consider issues such as whether a leniency application is
appropriate.
The CMA officials will need a warrant and will have similar powers
as when acting with a warrant under the civil regime, and in
particular to enter and search premises, to require persons to
answer questions, provide information, or produce documents. As
such, the precautions and advice set out above for civil
investigations should also be observed for inspections carried out
under the criminal regime. However, additional precautions should
be borne in mind and in particular whether separate legal
representation may be required for certain individuals
interviewed.
UNITED STATES
Here's a 10-step checklist regarding how to respond when a
company is presented with a U.S. government search
warrant—either criminal or civil investigations.
Step 1. Contact outside counsel immediately and request
that the search be delayed until outside counsel arrives on
site. When the government has a valid warrant, it has no
obligation to wait for counsel's arrival, but they may agree.
All interactions with the government should proceed through, or
with the advice of, outside counsel. Any statements that employees
make to the government may be attributed to the company.
Step 2. Gather basic information on (i) the
purpose behind the search, (ii) the identity of the lead government
agent, (iii) the names of other agents, (iv) the agency leading the
investigation, and (v) the lead prosecutor.
Step 3. Provide instructions to employees.
Instruct all nonessential employees to leave the premises, but
admonish departing employees not to take any materials out of the
office or destroy or delete any paper or electronic files while the
search is being executed. Instruct all employees regarding their
rights, including the right not to speak with government agents and
the right to consult with company counsel prior to or during any
interview.
Step 4. Connect outside counsel with the lead
agent. Your outside criminal counsel should be conducting,
or advising on, all communications with the government.
Step 5. Obtain and analyze the search warrant and any
supplemental subpoena. Analyze any materials you are given
to: (i) determine the terms and scope of the government's
investigation, (ii) raise any defects in the warrant, and (iii)
negotiate, if possible, an alternative method of production that
will ensure no evidence will be lost or destroyed.
Step 6. Communicate key information about the
government's investigation to all relevant internal
players. Then, organize a unified, company-wide effort to
address the investigation and prepare a coordinated public
response. Work with outside counsel and/or a public relations firm
to formulate a crisis management plan.
Step 7. Identify and protect any privileged, confidential,
or trade secret materials that the agents have reviewed and
seized. Inform agents of such materials and request that
such documents be segregated and kept under seal until privilege
disputes are resolved. Request the establishment of a separate
"taint team" to review the protected materials.
Step 8. Track and inventory all seized or produced
records. If possible, make copies of any materials that
are necessary for ongoing business operations before the agents
take them. If agents insist on taking documents critical for
business operations, outside counsel should try to negotiate a
speedy return of such materials.
Step 9. Conduct debriefings with employees and memorialize
the government's search activities. Document these
interactions under the attorney–client privilege and
work-product doctrine, as well as actions and statements made by
agents during the search. Determine whether an internal
investigation should be conducted and whether it should be by
outside counsel.
Step 10. Notify employees of document preservation
obligations. Determine your company's status in the
government's investigation. If your company appears to be the
subject or target of the investigation, draft and distribute a
document preservation notice internally.
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.