The fundamental importance of gathering sufficient evidence to carry out competition dawn raids

This month, the European Court of Justice (the Court) handed down an important ruling in relation to the requirements of the European Commission’s (the Commission) evidence base in the context of competition inspections¹. Specifically, in the French supermarkets case, the Court ruled that statements taken by the Commission from third parties which are used as evidence for its decision(s) to search companies, must be properly recorded, including statements taken prior to the formal opening of any case.

Deeper dive

Article 20 of Regulation N°1/2003² enables the Commission to inspect undertakings when it suspects potential infringements of competition rules might have occurred. These unannounced inspections (called "dawn raids") have grown longer and more complex and are now carried out with the use of very sophisticated tools including forensic IT technology and the involvement of data experts. As such, inspections are a very powerful weapon for the Commission to uncover evidence, but put at risk a number of rights of companies and individuals such as the right to privacy.

In 2017, the Commission, raided the premises of various supermarkets based on two suspicions that:

1. they might have shared sensitive and confidential business information in relation to discounts negotiated with suppliers; and
2. they might also have exchanged sensitive and confidential business information in relation to future downstream commercial strategies.

Even though several of the companies inspected lodged appeals against these inspection decisions, in 2019 the Commission conducted further inspections based on the information gained during the first raids. Only after these additional raids was an investigation formally opened and further requests for information were sent based on the information gathered during the inspections to date.

In 2020, in the first instance, the General Court of the EU partially annulled the 2017 inspection decision on the ground that the Commission lacked the evidence required to suspect any anticompetitive behaviour relating to unlawfully exchanging information on future downstream commercial strategies (second suspicion)³. Nevertheless, the General Court decided that the Commission did have sufficient evidence to search the supermarkets in relation to potentially illegal collusion on discount policies (first suspicion). Moreover, the General Court stated that the Commission was not required to record the interviews which triggered the dawn raids.

The supermarkets appealed this ruling and in March 2023, the Court, following the opinion of the Advocate General in the case, set aside the judgment of the General Court in relation to the first suspicion and annulled in their entirety the Commission's decisions authorising the raids, since the Commission had not met its obligations to properly record the interviews.

Key points to take away

Given the recent upsurge in dawn raids post pandemic and the ever-increasing burden they place on inspected undertakings, this judgment is very timely. Key points to take away include:

• To order an inspection, the Commission must have sufficiently serious grounds for suspecting an infringement by the undertakings concerned and must limit its inspection decision to the factual and legal situation about which it already possesses a certain level of information;
• Interviews conducted by the Commission to gather information that it will use as clues or grounds to order an inspection and not necessarily as evidence of infringements must be properly recorded;
• Whilst exactly what proper recording looks like will depend on the circumstances of each case (and indeed, the Court seems to accept that sometimes, it might be appropriate for audio recordings of interviews to suffice in order to protect the identity of the witnesses), but as a bare minimum, the names of the relevant officials must be noted, along with date, time, place and signatures confirming accuracy of content. Purely internal notes are not good enough;
• A clear acknowledgement by the Court that dawn raids are inherently intrusive. Whilst respecting a degree of pragmatism, it is evidently willing to step in to ensure proper procedures are followed and rights protected.  In particular, the General Court extended the right to immediately appeal against any Commission decision rejecting a request for protection of personal data of members of its staff; and
• The two judgments establish a high review standard in controlling the authenticity and the substance of the elements gathered by the Commission to justify its inspection decisions.

This case marks only the second time in the EU antitrust history that inspection decisions have been annulled in their entirety and it is the first time such a decision has been taken on the ground that the evidence relied on to order such inspections was insufficient.

The Antitrust team at Mayer Brown can assist with all aspects of competition inspections and resulting liaison with competition authorities around the world. For an in-depth analysis of the legal and practical aspects of competition inspections under EU law, please see this practical guide published with Concurrences by Nathalie Jalabert-Doury, a partner in the Paris and Brussels offices who is widely recognised as a leading expert in this field and who assisted one of the parties in this case.