News Update Competition

18 February 2020

The ECJ confirmed on 30 January 2020 (C‑538/18 P and C‑539/18 P) the powers of the European Commission ("Commission") to conduct dawn raids. As held by the General Court earlier, decisions to conduct dawn raids must fulfil the requirements of necessity and proportionality and the duty to state reasons.

The Commission must have sufficient material grounds for suspecting that an undertaking has committed an infringement of the EU competition rules to meet the requirements of necessity and proportionality. In other words, the matter and purpose description in the decision to conduct the dawn raid must not go beyond the contours of the possible infringement that can be reasonably suspected to exist on the basis of the available indications.

In respect of the duty to state reasons, the matter and purpose description in the decision must be sufficiently precise and contain all the elements that allow the undertaking concerned to appreciate the extent of its obligation to cooperate and to safeguard the undertaking's right of defence.

Dawn raid at premises of the Czech national railway company

The case relates to a dawn raid conducted by the Commission at the premises of the Czech national railway company České dráhy a.s. The dawn raid came after the Czech national competition authority ("CNCA") – who was already investigating the company – supplied information to the Commission about a possible infringement of the prohibition on abusing a dominant position through predatory pricing. České dráhy a.s. sought annulment by the ECJ of the earlier judgment of the General Court that only partly annulled the dawn raid decision by the Commission.

The ECJ however rejected the appeal and confirmed that the General Court was correct in only partially annulling the Commission's decision because only part of the decision went beyond what could reasonably be suspected. In addition, the ECJ provided guidance on the Commission's powers to conduct dawn raids after receiving information from a national competition authority ("NCA").

1. No obligation to assess possible exculpatory indications for necessity and proportionality
   If an NCA's file contains sufficient indications of a breach, the Commission is not required to also assess all indications pointing in the opposite direction. In other words, the Commission has no obligation to also assess exculpatory evidence if there are sufficient indications of a breach. According to the ECJ, the dawn raid merely serves to confirm any suspicions. The undertaking concerned can put forward any exculpatory evidence during this process.
   
   
2. Information from an NCA does not result in a heavier burden to state reasons
   The fact that the Commission has obtained information about a possible infringement of national competition law from an NCA does not result in a heavier burden to state reasons for conducting a dawn raid in the context of enforcing EU competition law.

Low threshold for dawn raids based on information from an NCA

In conclusion, the Commission has a wide margin of appreciation for exercising its power to conduct dawn raids, regardless of whether its decision is based on information obtained from an NCA. Arguably, the ECJ's judgment confirms the relevance of the cooperation between NCAs and the Commission in the context of the European Competition Network (ECN). Undertakings that are investigated by NCAs should be aware that the threshold for the Commission to start its own investigation based on information obtained by an NCA, in parallel or in place of the NCA's investigation, is very low.