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Focus on Regulation

HCC’s investigations during the lockdown – procedural rights of businesses during a (lock)dawn raid: What to look out for!

Despite the strict confinement measures in Greece, the Hellenic Competition Commission (HCC) has initiated several investigations during the current lockdown. Not only has it sent requests for information to a large number of companies active in the healthcare products market, it has also conducted two dawn raids – one in the food sector and one in the press distribution market. Such unannounced inspections are known for their effectiveness in detecting secret cartels and other unlawful practices. However, due to their intrusive nature, businesses under investigation are normally protected by procedural safeguards guaranteeing the fairness of the process. Ensuring and respecting these rights might be far more challenging during a lockdown situation.

HCC’s actions during the lockdown: A busy period for the Greek enforcers

As mentioned in our previous post, Greek enforcers were among the first to take action against alleged anti-competitive practices following complaints of increased prices and shortages in the masks, gloves and broader healthcare products markets. HCC conducted a wide investigation into healthcare products, a sector immensely affected by the COVID-19 outbreak. HCC sent requests for information to more than 4056 market participants and received approximately 3300 replies.

Unlike the food sector which saw the first dawn raid by the HCC during (and directly linked to) the pandemic, the second inspection in the press sector had no direct link to the COVID-19 outbreak and had reportedly been planned for months. To this end, the HCC conducted an ex officio on-the-spot inspection at the premises of companies operating in the press distribution market. The Greek enforcers decided not to postpone the inspection despite social-distancing obligations in order that the progress of their pre-confinement work would not be impeded.

Dawn raids while tele-working? A risky business for the company’s procedural rights

Under the EU framework, during dawn raids officials have the power to enter any premises (including private domiciles), examine relevant books and records and take copies. When an inspection takes place at business’ premises, competition enforcers may also seal these premises, or part of them, and examine any books or records as well as interview any representative of staff on facts or documents relating to the subject-matter of the inspection.

Competition enforcers enjoy wide investigative powers and companies are expected actively to assist the work of the authorities. Non-compliance by the undertaking (e.g. providing incorrect, incomplete or misleading information) may lead to the imposition of severe fines. Similarly, procedural infringements by the authorities (e.g. not respecting the undertaking’s procedural rights), may lead to the annulment of the investigation process and decision. Thus, pursuing inspections under such exceptional circumstances of a complete lockdown is a challenge for both companies and authorities when it comes to satisfying their respective obligations – maybe slightly more so for the authorities.

Unannounced inspections when most people are working from home can, evidently, be very challenging. The absence of more senior employees who would be responsible for overviewing and assisting during a dawn raid, coupled with the difficulty of obtaining timely legal advice, can raise concerns as to the outcome of the inspection:

  • The risk of unintentionally providing incomplete information is more likely

Typically, employees present at companies’ premises during the lockdown are largely security staff – i.e. not part of the actual running of the business. In turn, such employees may not be in a position to understand the subject-matter of the investigation or be able adequately to address the specific questions of the authority. On this basis, there is the risk that they may provide incomplete or incorrect information. In such a case, it is not clear whether providing rectifications and amendments, as foreseen in the procedural Regulation, would constitute an effective counterbalance given the breadth of the potentially required rectifications.

  • Reconciling the duty of cooperation with confinement requirements will be difficult

Authorities should be expected to keep to a minimum any requests for staff working from home to be physically present. However, it may be crucial for the authority to speak to specific senior employees. In such a scenario, would an employee’s refusal to be physically present at the company’s premises due to the potential health risk amount to non-cooperation? Would (or should) there be a possibility for the employee to speak to the authority by video conference?

  • Concerns about the authorities embarking on ‘fishing expeditions’ are increased

Authorities are evidently bound by the subject-matter of the investigation as set out in the inspection authorization decision. However, it is not inconceivable that given the absence of senior, more knowledgeable employees, concerns regarding ‘fishing expeditions’ (as opposed to coincidental findings) may be raised.

Overall, observing procedural rights during dawn raids in this period presents significant challenges for both authorities and parties concerned. Companies should be aware and demand respect for their procedural rights as would be the case (or expected) during normal times. Not only the outcome of the investigation is at stake but also the companies’ reputation if it is, for example, reported that they provided misleading information.

Surviving a (lock)dawn raid – a high-level checklist:

  • Inform staff present at the business premises of the possibility of a dawn raid and briefly explain their obligations and powers of the authority.
  • Provide employees with the legal department email address to which they should send a copy of the inspection authorization decision immediately in the event of a dawn raid. At a second stage, they should also send a summary of inspection-day and copies of the documents the authority looked at, copied, etc.
  • If external lawyers cannot be present at the business’ premises due to COVID-19 restrictions, explore (together with the authority) the possibility of them being present via videoconference when company employees are being interviewed.
  • Do not invoke COVID-19 as a reason for not providing immediate access to laptops or documents of employees working from home, but rather be cooperative and try to find solutions together with the authority. Such solutions may include requesting employees working from home to have interviews via videoconference, send specific files over to the authority or even grant remote access to their laptops to the authority in order for it to perform the relevant searches. In the latter case, there could also be an arrangement for an external lawyer to “shadow” the process as is the case under normal circumstances.

For a version of this blog post in Greek, please click here.