Antitrust and competition enforcement authorities are increasingly 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 an 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.
Jones Day has prepared 10-point checklists for various jurisdictions that 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.
Due to space limitations, we provide below information on the U.S., the EU and Australia only. Additional checklists and information specific to raids and search warrants by country authorities in France, Germany, Italy, Spain and the UK are published in a longer version of this article that is posted on Jones Day’s website.
UNITED STATES
Here’s a 10-step checklist regarding how to respond when a company is presented with a U.S. government search warrant for either criminal or civil investigations.
Step 1. Contact outside counsel immediately. 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 agents 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. You want to know the purpose behind the search, the identity of the lead government agent, the names of other agents, the agency leading the investigation and 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 the search warrant. Analyze it, any supplemental subpoena or other materials you are given to determine the terms and scope of the government’s investigation, raise any defects in the warrant and negotiate, if possible, an alternative method of production that will ensure no evidence will be lost or destroyed.
Step 6. Communicate to all relevant internal players. Share the key information about the government’s investigation. 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. Document these interactions to memorialize the government’s search activities 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.
EUROPEAN UNION
Here’s a 10-step checklist on how to respond when officials of a competition authority (such as the European Commission) arrive at your premises.
Investigations at Business Premises
Step 1. Contact the manager, in-house counsel, and outside counsel immediately. 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 organizational chart for the business.
Step 2. Copy the documentation. Make 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 or 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. Determine if a judge is required. 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 check that it is valid, and covers the company and premises and to understand the scope and subject matter of the investigation (alleged infringements, relevant products or services, departments, geographical scope), the powers of the officials, and 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 to provide guidance on how to behave appropriately. In particular, instruct not to destroy documents or 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 a 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 outside 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 help desk 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 outside competition lawyer. This individual’s task is to shadow the officials and note everything (within reason) that 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. 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 make copies or extracts from relevant documents. Officials are not allowed to physically remove documents or electronic media from the company’s premises and cannot make copies of documents that are outside the scope of the investigation and/or legally privileged – advice from outside counsel qualified at a bar within the EU and internal documents prepared for the specific purpose of requesting advice from such outside counsel.
Step 7. Track and record all produced documents. Make 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 agrees to be interviewed. When 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 that 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 that no one reopens the room/cabinet, including cleaners or 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 a 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 and motor vehicles of a company’s directors, managers or employees) where they have a reasonable suspicion that evidence that would support their case is being kept.
The precautions and advice set out 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 follow this guidance:
Step 1. Contact outside counsel immediately. 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.
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 and criminal regimes.
Civil Investigations at Business Premises
Step 1. Contact outside counsel immediately. 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 a reasonable estimate of the length of the 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. Make 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. Check that it is valid and covers the company and premises; that you understand the scope and subject matter of the investigation (alleged infringements, relevant products/services, departments, geographical scope), the powers of the officials and which ACCC inspector is responsible for exercising the search warrant; 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 them not to destroy documents or leak news of the investigation (even to family members), and remind them 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 help desk 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 make copies or take possession of documents that are legally privileged, including legal advice from in-house counsel or from outside counsel.
Step 7. Track and record all seized or produced documents. Make a written note of which rooms the officials visit; what desks, cupboards, files and 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 that 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 that 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/ rooms to be sealed overnight if they are returning the next day. Then ensure that 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 or motor vehicles of a company’s directors, managers or employees) 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 follow this guidance:
Step 1. Contact outside counsel immediately. 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, make 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 not) 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 such issues 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 or 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 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, the officer is entitled to search the premises and seize material specified in the warrant.
Published November 4, 2016.
