Unannounced Inspections by the ACM: Do’s & Don’ts during Dawn Raids

Bas Braeken & Jade Versteeg & Lara Elzas & Timo Hieselaar & Demi van den Berg & Berend Verweij / 25 Oct 2021

Due to Covid-19 restrictions, the Netherlands Authority for Consumers and Markets Consumer and Market Authority (“ACM“) has not carried out unannounced inspections (also called ‘Dawn Raids’) for a while. Given that most restrictions have been phased out, the ACM has announced that it will start again to conduct Dawn Raids in the near future.

In the Netherlands both the ACM and the European Commission (“Commission“) are allowed to carry out Dawn Raids for alleged infringements of competition law. These authorities are competent to use this power when there is a concrete indication of anti-competitive agreements or behaviour. Such indications may arise from (anonymous) tips from competitors and (former) employees, and as a result of an official investigation or a market study (see for example our blog about the Commission’s market study into the Internet of Things).

If the ACM knocks on your company’s door in order to execute a Dawn Raid, the ACM’s inspection will proceed (roughly) along the following lines:

  • Entry and opening interview
  • Analogue research
  • Digital research
  • Interview and/or administrative interview

This blog discusses what can be expected and indicates the limits of the investigative powers of the ACM.

Entry and opening interview

During a Dawn Raid, pursuant to article 5:15 of the Dutch General Administrative Law Act (“Awb“) (in Dutch: Algemene Wet Bestuursrecht), officials of the ACM are authorized to enter business premises and open vehicles without prior announcement. They may also enter private homes under article 50 of the Dutch Competition Act (“Mw“) (in Dutch: Mededingingswet). Please note that in order to enter a private residence they need prior authorisation from the supervisory judge.

At the beginning of the Dawn Raid the ACM will ask for a specific person or a person with a specific job description. They will conduct an opening interview with this person. The ACM will usually also ask for an IT person to join the opening interview to map out the IT infrastructure.

During the opening interview the ACM will identify itself on the basis of article 5:12 of the Awb and hand over the search warrant which describes the purpose and object of the Dawn Raid. The ACM must point out to the company that it has a right to legal assistance and will often be willing to wait for a maximum of half an hour for their arrival.

The ACM will clearly state, at the start of a Dawn Raid, that employees must cooperate with the investigation on the basis of article 5:20 of the Awb and that they may not destroy evidence. The duty to cooperate means that employees must not obstruct the ACM and must provide access when so requested. A fine of EUR 900,000 (also for natural persons) or 1% of the group turnover may be imposed for non-cooperation pursuant to article 12m of the ACM’s Establishment Act. In the event of a difference of opinion about the scope of the duty to cooperate, it is advisable to cooperate under protest and to have a note made in the report. This avoids the risk of a fine but gives the company the opportunity for judicial review (e.g. interim injunction proceedings or an appeal against a sanction decision).

Relevance of search warrant

The search warrant determines the limits of the ACM’s investigative powers. Under article 5:17 of the Awb the ACM may request access to all files that fall within the scope of the warrant. The ACM is not allowed to view or copy any files that fall outside the scope of the search warrant. Such files may include e-mails and other correspondence, WhatsApp messages, agendas, memos, minutes of meetings, photographic material, expense claims, and travel tickets. Contact with lawyers – ‘privileged’ communication – is excluded and may not be viewed or copied.

The search warrant that the ACM is obliged to provide must state the purpose and object of the investigation at the time of the Dawn Raid. However, pursuant to the Nexans judgment of June 2014 of the Court of Justice of the European Union (“ECJ“), the statement of purpose and object does not have to contain, and certainly not in the initial phase, a precise definition of the market concerned or a precise legal qualification of the alleged illegal acts. A judgment of the district court of The Hague in preliminary relief proceedings of October 2018 also shows that the ACM has a certain amount of discretion for the formulation of its purpose. What is important is that the definition of the purpose allows the company to determine the scope of its duty to cooperate and its rights of defence.

The question whether something falls within or outside the scope of the investigation task often leads to considerable discussions between the (lawyers of the) company and the ACM, as was the case in a recent dispute at the District Court of The Hague of June 2021. A number of companies brought preliminary relief proceedings because the ACM had considerably expanded the scope of its investigation in response to information found during a Dawn Raid. Initially, the assignment focused on procurement. However, during the Dawn Raid officials also copied files relating to other departments. When the officials at the ACM’s offices took a quick look at these files they came to the conclusion that not only the purchasing department but also the sales department had probably violated competition law. The ACM extended its investigation on the basis of this information.

The central question was whether the ACM was allowed to use this information that it acquired during a Dawn Raid to expand the scope of its investigation. The District Court ruled that on the basis of the Deutsche Bahn judgment of the ECJ, competition authorities are allowed to briefly inspect information in order to verify whether it falls within the scope of the investigation. The competition authority does not have a duty to ignore information that it happened to become aware of during this brief inspection. Accordingly, the District Court of The Hague ruled that the ACM was allowed to use the information that it acquired during its Dawn Raid even though the information clearly fell outside of the scope of the search warrant.

Analogue research

Officials can and may request access to physical files located in locked rooms, cabinets or drawers. In principle, employees must grant access to physical files as long as the ACM acts within the limits of scope of the search warrant.

The limits of the power to conduct analogue investigations were discussed in the so-called wastebasket case. The case concerned officials of the Dutch Financial Markets Authority (“AFM“), who like the ACM are allowed to conduct Dawn Raids. During a Dawn Raid the AFM had independently and randomly taken files from cabinets, opened drawers and searched through wastebaskets and paper bins. According to the Trade and Industry Appeals Tribunal (“CBb“) these actions were unlawful.

The CBb considered the actions of the officials of the AFM unlawful because they qualified as “fishing”. Officials of the AFM and ACM are not allowed to do this; they may only “look around” and subsequently must request access to documents. If, after requesting access, a discussion arises about the relevance of certain files, the officials may only inspect them briefly for verification purposes. Ultimately the CBb’s ruling on the unlawfulness in the wastebasket case made very little difference in practice; the fine imposed on the AFM was upheld because sufficient lawful evidence had been found. In general the case law on this topic shows that claimants are seldom able to prove that officials are guilty of “searching”.

Digital research

In contemporary practice most of the investigation during a Dawn Raid will be focused on digital files. The ACM is authorised to copy digital files from mobile phones, laptops, PCs and other data carriers. In order to manage digital investigations the ACM has published a Digital Working Method in 2014. This describes how the ACM proceeds when collecting and processing digital data taken during a Dawn Raid. In its Working Method, the ACM deviates from the Commission’s practice.

Mobile phones

Pursuant to article 5:17 of the Awb the ACM is permitted to inspect mobile phones if it has sufficient indications that the mobile phone is used for business purposes. The inspection of mobile phones will often take place on site in the presence of the employee that owns or usually uses the phone. The ACM must be able to establish briefly whether, for example, WhatsApp messages are business-related. On the basis of the proportionality requirement, the ACM should stop inspection if the chat is (partly) private. Any disagreement will be referred to the ACM’s confidentiality officer. The limits of the ACM’s authority with respect to the safeguarding and investigation of mobile data regularly leads to legal disputes.

In an anonymised summary proceeding of November 2017, a company argued that the ACM was not allowed to inspect mobile data, because it also included private data of the employee. However, the District Court of The Hague found that the phone contained a lot of relevant data and the ACM could not separate business and private data on the spot. The ACM was therefore allowed to copy all data including any private data. The District Court more over ruled that the ACM had provided sufficient safeguards in order to prevent it from obtaining access to private data in its Digital Working Method.

Deleting data from mobile phones after the ACM has pointed out to the company its duty to cooperate can lead to substantial fines. Recently, the ACM imposed a fine of EUR 1.84 million for deleting WhatsApp chats during a Dawn Raid.

Other digital files

During a Dawn Raid the ACM may seize many digital files for further investigation. These are often millions of individual files such as e-mails, minutes and contracts which the ACM can take with it by making integral copies of (several) complete computers. The files taken by the ACM are referred to as the ‘Safeguarded Dataset’.

Subsequently, the ACM will use search terms to filter out irrelevant documents from the Safeguarded Dataset to arrive at an ‘Within the scope Dataset’. An anonymised judgment of March 2019 of the Court of Appeal of The Hague shows that the ACM has discretion when it comes to choosing the search terms it uses in order to filter its datasets. Pursuant to article 1 of the Digital Working Method files may be considered within the scope of an investigation if the nature or content of the data can reasonably be deemed to fall within the purpose and object of the investigation. The search questions must therefore be sufficiently specific to be able to state that the hits are reasonably within the purpose and object of the investigation.

Finally, a specially designated official will filter out of the ‘Within the Scope Dataset’ all privileged files and private communications to create the ‘Investigation Dataset’. The investigating officials of the ACM then use this dataset to build a file against the company in question. In a judgement of September 2020 the interim relief judge of the Rotterdam District Court ruled that a company is entitled to inspect the Investigation Dataset that the ACM has compiled.

Interrogation or administrative interview – right to remain silent

Pursuant to article 5:16 of the Awb, the ACM also has the power to obtain information from employees in the course of an investigation. The duty of cooperation requires employees to answer questions unless they themselves are personally suspected of violating competition law. Before an interrogation begins, the interviewing official must inform the employee of his or her right to remain silent. If the employee is a suspect he or she is no longer obliged to answer questions with which he or she could (possibly) incriminate him or herself or the company (pursuant to article 5:10 of the Awb).

Seal

Dawn Raids often last longer than one day. To prevent evidence from being tampered with during the night officials of the ACM will seal rooms or closets as they see fit. Sealing can also be a solution to a discussion about the relevance or privileged status of certain material. That way a discussion can be postponed to be conducted in the presence of a lawyer.

The ACM can impose a very high penalty if a seal is broken almost regardless of whether the company can do anything about it. Therefore the risk of a seal being broken rests almost entirely with the company in question. The exception that confirms the rule in this respect is the National Association of General Practitioners case. In this case, the National Association of General Practitioners (“LHV“) was fined €51,000 for breach of seal. LHV shared its office with several companies and had taken precautions in order to prevent a seal from being broken. Nonetheless a night time security guard broke the seal during his normal rounds. The CBb annulled the fine imposed on LHV because it had taken all necessary precautions and did not directly employ the guard who had broken the seal.

After the Dawn Raid

Towards the end of the dawn raid, the ACM and/or the Commission will draw up an inventory of all the (digital) documents they have taken or copied. Companies are advised to draw up an inventory themselves in which they can compare to the inventory of the investigators and on which they can record any particularities that occurred during the Dawn Raid.

Checklist in case of Dawn Raid

  • Appoint a Dawn Raid specialist within your company, and make sure they have the contact details of a trusted competition lawyer in advance.
  • Please also read our preparatory documents (in Dutch) for a Dawn Raid, including:
    • separate instructions for receptionist,
    • separate instructions for staff who accompany ACM personnel during Dawn Raids, and
    • a detailed legal framework for Dawn Raids of the ACM.
  • Create a ‘legal privilege’ folder where all (e-mail) correspondence with lawyers is stored.
  • In the event of a Dawn Raid, send the ACM to an empty conference room.
  • Formally object to the Dawn Raid without breaching your duty to cooperate and ask for proof of your objection.
  • Make copies of all documents copied by the ACM during the Dawn Raid.
  • Always make a note of whether, when and who is considered personally suspect by the ACM. The ACM will not directly state that an employee is a suspect so this must be derived from the fact that an employee is informed of his or her right to remain silent.
  • Take a picture of any seal and hire a security guard to protect the seal.
  • When the ACM is leaving, ask for a copy of their inventory.

Is the ACM currently performing a Dawn Raid at your premises? Would you like more information about the do’s and don’ts during a Dawn Raid? Or are you interested in a compliance training course in which employees are prepared for a Dawn Raid? The Dawn Raid team at Bureau Brandeis has extensive experience with raids of the ACM. Please feel free to contact Bas Braeken, Jade Versteeg, Lara Elzas, Timo Hieselaar, Demi van den Berg and/or Berend Verweij.

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