Dawn raids: recent cases clarify rights of defence during competition raids

Written on 11 Jul 2017

On May 4, 2017, the French Cour de Cassation (Supreme Court) found that Samsung Electronic’s rights of defence were breached when the French Competition Authority (the FCA) conducted raids against the company in 2013.

Samsung’s appeal was one of three lodged in relation to an antitrust investigation by the French Competition Authority in the electronic appliances sector. Darty and Electrolux also lodged similar appeals, however, in contrast to the Samsung case, the courts, found that the FCA had properly exercised its rights during the dawn raids.

The Darty and Electrolux cases follow in the footsteps of a recent European Court of Human Rights decision, relating to the seizure of electronic data.

Samsung: failure to allow employees to contact lawyers

When FCA investigators arrived at Samsung’s premises, they indicated to the occupants that no communication with outside individuals was possible, including to their lawyers, until all the offices were sealed.

The judges of the Cour de Cassation[1], overruling the Court of Appeal judgment, found that it was clear from Article L.450-3 of the Commercial Code that in proceedings relating to infringement of competition law, the rights of the defence can be exercised by the occupier of the premises as soon as the concerned company is notified of the order authorising visiting and seizure operations. If this right is obstructed by the administrative authority, the visiting and seizure operations are vitiated, without the company subject to the measures having to prove a grievance.

The court therefore found that Samsung’s rights of defence were breached, and cancelled the authorised visit and seizure procedures.

Darty and Electrolux: validity of search and seizure orders

In two other judgments on the same day, the Court handed wins to the FCA.

In the Darty[2] and Electrolux[3] cases, both companies sought to obtain the annulment of the search and seizure orders authorising the FCA to conduct search and seizure operations on their premises. The companies alleged that the authorisations were too general and indeterminate to be valid.

The Court of Cassation reminded the parties that the judge who authorises inspection and seizure operations on the basis of Article L. 450-4 of the Commercial Code is required only to ensure that the elements produced by the administration have the appearance of lawfulness and are sufficient to justify the intrusive measures of search and seizure.

The Advocate General recalled that the first instance judge is not the judge on the merits. Rather, the judge must make a decision on the appearance of lawfulness,  and will take a holistic view of the body of evidence available as to whether this threshold is met.

In both cases, the Cour de Cassation held that the first instance judge had, based on an analysis of the information provided by the administration, correctly characterised the existence of presumptions of anti-competitive practices, which justified the measures employed.

ECHR: seizures of electronic data

The European Court of Human Rights has recently ruled on the issue of “massive and undifferentiated” seizures of electronic data. Relying on Articles 6§1 and 8 of the European Convention of Human Rights, the applicant complained, among other things, that the alleged infringement occurred during the visiting and seizure operations. The applicant argued that the conduct of the investigating authority breached legal advice privilege, due to the research carried out by the investigators in the computers of the company’s legal department.

In its judgment dated March 21, 2017[4], the ECHR held that the massive and undifferentiated seizure of electronic messaging in this case constituted an interference provided for by law (Art. L.450-4 of the Commercial code). The seizure was pursuing a legitimate aim and was, in the circumstances, necessary and proportionate. For example, the company under investigation had applied to the French courts in this matter, resulting in the irregular seizure of three files being cancelled, in order to protect privilege.

The judge therefore validated the global seizure of electronic data by concluding that the mere fact that a mailbox contains, in part only, elements within the scope of the judicial authorisation “is sufficient to validate the seizure in its entirety“, as long as an effective ex post verification procedure is implemented.

What are the lessons to be draw from these decisions concerning the FCA’s dawn raids?

Companies being investigated are entitled, upon notification of the order authorizing visiting and seizure operations, to be assisted by their lawyer from the very beginning of the operations.

Although it seems more and more difficult to obtain an annulment of competition dawn raid operations, the assistance of a lawyer during and after the dawn raid can be essential for protecting the companies rights, notably by ensuring that such dawn raid have been authorized on legitimate grounds and that the dawn raid operations were carried out without breaching the company’s rights of defence.

Therefore, when a dawn raid occurs: keep calm and call your lawyer!

[1] Cour de cassation, Criminal Chamber, May 4th 2017, n°16-81071

[2] Cour de cassation, Criminal Chamber, May 4th 2017, n°16-81060

[3] Cour de cassation, Criminal Chamber, May 4th 2017, n°16-81063

[4] ECHR, Janssen Cilag S.A.S. c. France, March 17 2017, n°33931/12