Does the tyre industry need to secure against pricing-related dawn raids?

The cost-of-living crisis is pushing the European Commission into action. Having faced accusations of being on the backfoot since the pandemic, it is now increasing the number of dawn raids and antitrust investigations. The ultimate intention is to prevent consumers facing higher costs than necessary from businesses.

To date, the tyre industry has avoided close scrutiny from the authorities, but this may not be the case for long. Last year, the number of dawn raids across industries hit pre-pandemic highs with 64 conducted across the continent. Meanwhile, the wider automotive sector has experienced four unannounced raids since 2021, from a combination of the EU, UK, Romanian and Polish competition authorities. Those in the tyre industry should therefore begin making preparations now to prevent paying the price in the future.

Preparing for a new dawn

Obstructing dawn raids comes with the risk of high fines and reputational damage. In preparation, businesses should be prioritising relevant training, and implementing formalised procedures. This extends to those with existing dawn raid procedures. Continual updates are essential to accommodate the changes from the authorities, in response to post-pandemic hybrid working models. With more work-related materials created or stored at home, authorities are increasingly looking into IT, including private devices used for work. Furthermore, there is the very real possibility of searching domestic premises, with the removal of material under warrant.

Officials have the right to seize and search documents stored on the cloud, recover deleted files, and inspect any electronic devices. That being said, the powers of the competition authorities to conduct dawn raids are not without limits.

It is imperative that businesses ensure employees know their rights, including the right to privacy, the right not to self-incriminate, and privilege. Failure to exercise these rights can lead to broader search and seizure than was judicially authorised.

Employees working in customer-facing roles, senior management, and selected members of the IT department should be at the head of the queue for training. They should know how to assert their rights of defence during a raid, especially their privacy rights with respect to private documents and photos which have been stored on work or personal devices.

Judicial protections

Companies do also have greater protections against overzealous investigations. Courts have been attentive to due process and procedural rights of companies targeted by raids. The Portuguese Constitutional Court annulled a dawn raid carried out by the Portuguese Competition Authority in 2017 due to its failure to receive authorisation from a criminal judge before taking action. Meanwhile, the Turkish Constitutional Court recently reaffirmed that the Turkish Competition Authority cannot conduct on-site inspections without a judicial system.

Further, in the cable manufacturer Nexans’ case, the EU General Court annulled a significant part of the entry decision on the basis that the European Commission did not have reasonable grounds for ordering a dawn raid concerning certain parts of its investigation. Nexans successfully argued that the need for protection against arbitrary or disproportionate intervention by public authorities in the sphere of private activities constitutes a general principle of EU law.

It is imperative that businesses ensure employees know their rights, including the right to privacy, the right not to self-incriminate, and privilege – Michael Engel, partner, White & Case LLP

However, the strongest example of judicial protection comes from the European Court of Justice. In March of this year, it made clear authorities will need to scrutinise their processes to ensure any success with their dawn raids. Its decision to annul the inspection decisions of the European Commission in the French supermarkets case has provided significant protection to businesses. Now, any breach of a company’s rights during an inspection may be immediately challenged before the European General Court. This could include a violation of the right to privacy or of the protection against self-incrimination.

Despite these reassuring cases, businesses should not see the judiciary as their first wall of defence. They must remain ready to protect themselves, at any given moment. Now is the time to ensure adequate procedures are in place, with employees across the organisation well briefed as to the very real possibilities of a raid and the potential implications of such.

Any views expressed in this publication are strictly those of the author – Michael Engel, partner, White & Case – and should not be attributed in any way to White & Case LLP