The CJEU annuls the European Commission’s inspections of several companies in the distribution secto

On March 9, 2023, the Court of Justice of the European Union (“CJEU”) issued three judgments annulling in their entirety the European Commission’s decisions ordering dawn raids of several French companies active in the distribution sector based on potential anticompetitive conducts.

The CJEU has ruled that the Commission is required to record any actions aimed at collecting information on the subject matter of an investigation. This should ensure that the inspected companies can access the evidence justifying the dawn raids in order to exercise and protect their rights of defense, even if this evidence was obtained prior to the initiation of formal proceedings.

The CJEU judgments are available here: C-682/20 (Les Mousquetaires and ITM Entreprises/Commission), C-690/20 (Casino, Guichard-Perrachon and Achats Marchandises Casino/Commission) and C-693/20 (Intermarché Casino Achats/Commission).

Background

In February 2017, the Commission carried out dawn raids in the headquarters of Les Mousquetaires, ITM Enterprises, Casino, Guichard-Perranchon, Achats Marchandises Casino and Intermarché Casino Achats (“inspected companies”) on suspicion of an exchange of commercially sensitive information and an anticompetitive joint purchasing agreement in the daily goods distribution sector. The Commission ordered the dawn raids based on information that it had previously obtained through interviews with several suppliers of the inspected companies.

Proceedings before the General Court

The inspected companies brought an action before the General Court (“GC”) seeking to annul the Commission’s decisions ordering the dawn raids. Among other things, they argued that the Commission had failed to keep records of the interviews with their suppliers that were used to order the raids. Thus, by preventing access to the evidence justifying the dawn raids, the Commission would have infringed the principle of equality of arms and their rights of defense.

In its judgements of October 5, 2020 (available here: Casino, Guichard-Perrachon and AMC/Commission (T-249-17), Intermarché Casino Achats/Commission (T-254/17) and Les Mousquetaires and ITM Enterprises/Commission (T-255/17)), the GC upheld other grounds of appeal but dismissed the one based on the principle of equality of arms. The GC ruled that the obligation to record interviews such as those preceding the dawn raids does not apply at the preliminary investigation stage but only in the context of a formal investigation—not initiated at the time of the dawn raids. Otherwise, the Commission would be unduly restricted in its ability to collect the evidence necessary to open a formal investigation. Consequently, this would also delay the dawn raids and discourage the interviewees from cooperating with the investigation.

Proceedings before the CJEU

In their appeal before the CJEU, the inspected companies claimed that the obligation to record the interviews should not depend on when they are conducted (before or after the opening of a formal investigation), but on their purpose.

The CJEU upheld the position of the inspected companies and ruled that the Commission must record any interview aimed at collecting information relating to an investigation, regardless of whether it takes place before or after the formal opening.

The CJEU departed from the GC’s reasoning, according to which the collection of the content of interviews may jeopardize or delay the dawn raids. The CJEU recalled that the Commission is entirely free to decide how to record the existence and content of interviews or meetings, whether in writing or by any other recording system that allows access to their content. Furthermore, such an obligation should not have a dissuasive effect on the participation of the interviewees since there are methods to protect their identity.

The CJEU found that the evidence obtained from the unrecorded interviews was inadmissible and, therefore, cannot be taken into account in that proceeding. Insofar as it can no longer rely on the evidence that justified the dawn raids, the Commission has already announced the closure of the investigation against the French companies, as there were not any other sufficiently strong indications of anticompetitive conducts.

CJEU backing of the rights of defense of the parties under investigation

These rulings of the CJEU focus again on the obligations and limits the Commission must observe in its investigations. In particular, when it gathers information on potential competition infringements to justify dawn raids at the premises of the inspected companies as an exception to the inviolability of the home.

In a similar sense, on June 15, 2022, the GC annulled the Commission’s decision sanctioning Qualcomm for abuse of dominant position (case T-235/18, as we commented in a previous post). In a procedure full of irregularities, the Commission had failed to inform the investigated company of the existence and content of the meetings and conversations held with its competitors and customers—which had served as a basis for the investigation and subsequent sanction (of which the Commission had not even drawn up minutes and, in some cases, did not even have notes). Therefore, the GC found that Qualcomm’s rights of defense had been violated since it had been deprived of information that could have been decisive in the course of the proceedings and against which it had been unable to defend itself.

The conclusion of these rulings is clear: the companies under investigation should be able to fully exercise their rights of defense, and therefore they must have access to the evidence obtained by the Commission regarding their alleged involvement in anticompetitive conducts. To this end, the Commission must keep a record of any action it has taken to gather information on the subject matter of an investigation and make it available to the concerned companies.

The recent annulments of the Commission’s actions confirm the strengthening of the formal requirements imposed on the Commission—and, by extension, on the national competition authorities. They also reinforce the trend in EU and domestic case law annulling competition authorities’ actions for violation of the rights of defense of the parties under investigation. All this demonstrates the need and importance of having specialized advice and experience in sanctioning proceedings—but also in the framework of dawn raids by competition authorities.