There you are on a quiet Tuesday morning at work when suddenly and without warning an army of antitrust authorities, sometimes accompanied by police and armed with a search warrant, barge into the company’s premises looking to seize, well, just about everything.
Scenarios like the one described above are increasingly becoming a new reality for companies as enforcement authorities around the world, sometimes in collaboration with one another, continue to carry out so-called “dawn raids” in their crackdown on antitrust violations.
Knowing what to expect in the event of a dawn raid and how to respond will help ensure not only that employees cooperate during an investigation, but also that the legal rights of the company remain protected. Just one misstep has the potential to throw any company into a tailspin disrupting the company’s day-to-day operations, not to mention damaging its reputation.
“Preparing internal guidelines and giving dawn raid training to employees is a matter of best practice,” says Kurt Haegman, a partner at law firm Baker and McKenzie and head of its Belgian competition law practice. “While you hope you’re never going to be a target of a dawn raid, it’s always best to be prepared for it.”
A robust antitrust compliance program should already include employee training on how to respond to a raid, especially pertaining to security guards and receptionists, who often are the inspectors’ first point of contact. Specifically, employees need to know who to alert the moment investigators arrive to ensure qualified staff and advisors can arrive on site as soon as possible, “because time is of the essence,” Haegman says. “Speed is of the essence.”
“The first thing you need to do is check the validity of the warrant,” says Simon Airey, a partner in the London office of law firm DLA Piper, who has defended companies in dozens of raids. Specifically, make sure it covers the particular company and premises; understand the scope and subject matter of the investigation (alleged violations, relevant products and services, departments, geographical scope); and identify the date on which the warrant ceases to have effect.
In many countries—such as the United States, the European Union, and the United Kingdom—antitrust authorities have no obligation to wait for legal counsel to arrive before starting their inspection. This is especially the case when the alleged anticompetitive conduct constitutes a criminal investigation, which can also result in the arrests of individuals.
“While you hope you’re never going to be a target of a dawn raid, it’s always best to be prepared for it.”
Kurt Haegman, Partner, Baker and McKenzie
It’s a good idea to have a laminated, one-page raid manual for front-desk staff and the security team to refer to, particularly in the absence of legal counsel. “Clear communication protocols are absolutely essential,” says Adam Collinson, a partner in the competition, EU, and regulatory group at Eversheds. “The idea is to demystify the process and make sure people are able to think clearly.”
Muzzil Qayyum Khairat, ethics and compliance officer at Technip in Malaysia, who developed dawn raid protocol for a former employer, says “the protocol helped not only the compliance unit and the employees,” but also the authorities appreciated that employees were informed about what to do, and not do, during a raid.
It’s also important to keep in mind simple courtesies. Offering coffee or “tea and a biscuit” is a simple, but important gesture of cooperation, says Airey.
Another way to proactively prepare for a raid is to establish a rapid response team comprised of a combination of people with the appropriate “skills, knowledge, and discipline,” Airey says. This team should include senior management, in-house legal or compliance representatives, and external counsel.
It’s also important that at least one person with IT knowledge is part of the response team to help stave off technical difficulties and avoid the need for authorities to remove computers or servers from the company’s premises. These days, competition authorities almost always will arrive on the scene with forensic experts, who will want to do imaging of entire servers, or search individual laptops, tablets, mobile devices, USB sticks, e-mail accounts, and more, antitrust experts say.
Some antitrust authorities have broader investigative powers than others; what might be a perfectly legal request from one antitrust agency may not be from another. The U.K. Serious Fraud Office, for example, has “Section 2 powers,” which give the SFO authority not only to require the production of documents, but also to ask people to answer substantive questions on the spot.
DAWN RAID CHECKLIST
Below is a checklist of how to prepare and respond to an antitrust dawn raid.
Ensure that employees, especially receptionists and security teams, are familiar with their role in the event of a dawn raid.
Develop a rapid response team with the appropriate skills, knowledge and discipline, including senior management, an IT expert, in-house legal or compliance representatives, and external counsel.
Provide employees with a laminated, one-page raid manual for front-desk staff and security teams to remind them what to do, and who to immediately call, during a raid.
During a raid
Reception staff should find an empty conference room that can be allocated to investigators, and a high-performance photocopier should be made available.
Ask the investigators if they will wait until external counsel arrive (investigators may agree to do so for a short time).
Ask to see the subpoena: Check that it applies to the company’s premises. Check to see if it is for a civil or criminal investigation. Check to see if the date of the subpoena is valid.
Check the identity of all the investigators.
Make copies of the subpoena and investigators’ IDs.
Warn staff not to destroy or conceal any documents, and not to disclose to anyone outside the company about the ongoing investigation.
Remind employees to act cooperative and not to break any seals.
Inform your PR team and consider what response needs to be given in the event the investigation is leaked to the media.
Source: Jaclyn Jaeger
Companies, together with legal counsel, have a difficult balance to strike between “keeping authorities within the scope of their powers but, by the same token, trying to maintain that relationship of respect,” says Collinson.
Another important role that internal and external counsel play is to shadow authorities during a raid, “going where they’re going, seeing what they’re seeing, and making sure we are looking over their shoulders ensuring the documents concerned fall within the scope and subject matter of the investigation,” Collinson adds.
At the end of each day, the legal team, together with the company, should discuss with the inspectors whether they have any objections to the documents they have gathered—for example, if the data extends beyond the scope of the investigation, or in cases where legal privilege applies, says Haegman. “You can have some very difficult discussions with the inspection team about documents you think they should and should not take,” he says.
It’s also important to understand how raids are conducted in various countries. For example, competition authorities in Europe do not respect privilege of in-house counsel.
“In-house counsel in companies that might have antitrust issues need to understand that you cannot claim privilege in Europe,” says Airey. “That’s often not understood in the United States.”
China does not recognize legal privilege at all. “So a degree of local and cultural knowledge is also important,” Airey says.
In other cases where a raid carries on for several days, authorities may seal off entire rooms and computer servers, “and it’s the responsibility of the company to ensure employees don’t break the seal,” Haegman adds. Antitrust authorities will consider any broken seal an obstruction of the investigation, resulting in significant fines and penalties.
Other forms of obstruction include hiding, concealing, or destroying documents, deleting e-mails, lying, or giving misleading information in response to questions in the course of an investigation.
In a similar vein, IT directors and IT teams should be trained on what to do and not to do during an investigation, so that they don’t do anything incriminating, intentional or not. For example, if an employee who has been intentionally locked out of his e-mail account requests a password reset and someone on the IT team assists with the request that amounts to an obstruction, as well.
Another important consideration for a company is whether it can apply for leniency by admitting participation in breach of competition law in return for a significant discount in any penalties that may be levied. “If a raid is already taking place, it doesn’t mean you can’t apply for leniency,” says Alan Davis, a partner with law firm Jones Day, who advises on U.K. and European competition matters.
“It’s an important strategic decision to make, and it has its pros and cons,” Davis adds, “but it’s something that the company on the day of a raid really needs to think seriously about in terms of whether that’s worthwhile doing.”