One of the most controversial powers of competition authorities, which the Spanish Commission on Markets and Competition (“CNMC”) in particular practices, is the carrying out of surprise inspections. “Dawn raids” have been particularly controversial in Spain, with several inspections challenged before the courts in recent years.
Although the powers (and limitations) of the investigators and the rights of the investigated party are already provided for by law, the CNMC – perhaps motivated by the growing body of case law in this area (which does not always support the CNMC’s actions) – has published an ‘information note’ which explains all of the most important characteristics of these procedures (the”Note”).
According to the CNMC, the Note aims to both increase legal certainty for companies and ensure that inspections are conducted with the lowest possible cost to all concerned. It is intended to provide greater transparency on the activities of the CNMC, by describing the basic procedural rules for dawn raids at company premises and at the homes of relevant individuals.
Process of a dawn raid in Spain
The CNMC’s exercise of its powers of inspection requires the prior consent of the company concerned or a judicial warrant. When the CNMC inspectors arrive at the company headquarters, they will identify themselves and notify the company of the inspection order or the judicial warrant. The order or = warrant will contain the basis of the case against the company, which the Competition Directorate intends to verify through the investigation.
In this respect, the order or warrant must properly set out the object and purpose of the inspection. In the event that the CNMC takes documents outside the scope provided for, such seizure of documentation will be illegal. It is therefore essential that the company reviews the scope and ensures the inspection stays within it.
Risks of non-compliance
Companies must permit these inspections and are obliged not to obstruct their progress. Failure to comply could result in companies being fined up to 1% of their total annual turnover. Businesses should be aware of the possibility that such infringement may also be considered as an aggravating factor in any eventual disciplinary procedure that may result from what was found in the investigation. Additionally, if the inspection was covered by a court order, the company could be guilty of the crime of disobedience.
In particular, the Note emphasises that the investigated company’s staff must cooperate with the inspectors by:
- ensuring the investigators’ access to information and devices which require verification (e.g. passwords);
- answering questions for the purpose of the investigation; and
- identifying documentation that may affect the staff’s privacy and/or right to defence, or which is subject to confidentiality.
The CNMC lists the most common behaviours that will constitute obstruction of the inspection and states that such conduct may be taken as an indication of the existence of the unlawful conduct under investigation.
The Note also describes the actions and protocols that will be carried out once the inspection has been completed. It sets out how documents and information copied or collected by the CNMC will be treated. In particular, the Note clarifies that all the information collected during the inspection will be declared ‘precautionary confidential’. Should this information be incorporated into disciplinary proceedings, it shall be notified to the company which may request confidentiality of the documents or data as necessary.
Implications for business
The Note seeks to clarify the principles that govern the inspection activity of the CNMC. However, the Note has no binding effect, meaning that companies subject to a dawn raid cannot assume that its principles will be followed beyond what is expressly provided for in the applicable law. In addition, there are important aspects that are not sufficiently covered, such as legal privilege (which will only apply to documents containing legal advice from external lawyers, but not from in-house counsel) and the scope of the right against self-incrimination.
Although the Note can serve as a basic guide for companies, it should not be construed as a complete or exhaustive guide to competition dawn raids in Spain.