Background for outsourcing dawn raids

Dawn raids (or "inspections") have long stood as a cornerstone in the arsenal of competition authorities worldwide to uncover competition law infringements and to ensure effective competition. However, their efficacy comes at an important cost — a significant drain on resources for competition authorities. 

The intricate planning, coordination, and execution of a raid can tie up valuable resources of competition authorities. From obtaining warrants to mobilising teams, overseeing data collection, and analysing large amounts of information, the process requires substantial time investment. Compounded with the fact that they often lead to inadvertent gathering of irrelevant data, there has been increasing demand for alternative and more efficient approaches.

As a strategic solution, regulators frequently turn to “outsourcing of dawn raids” to optimize their operations and allocate resources judiciously. This is aimed at balancing investigative rigor with operational pragmatism to enforce competition laws effectively. 

Outsourcing of dawn raids 

By outsourcing dawn raids, much of the burden is shifted from the competition authorities to the companies under investigation – with an obvious adverse effect on businesses. 

The primary way to do so is to send Requests for Information (RFIs) to companies under investigation. 

This is a less resource-intensive method for authorities to gather evidence in competition investigations. RFIs streamline the process by precisely delineating required information, often sparing regulators from logistical complexities. From the viewpoint of the authorities, by promoting transparency and cooperation, RFIs facilitate efficient resolution and enhance regulatory effectiveness.

From the perspective of the authority, there are also disadvantages to relying on RFIs, including:

• Limited access to real-time or on-site evidence, potentially compromising the investigation's depth.
• A risk of information being withheld or altered.
• Diminished deterrence effect on companies – the fear of an unannounced raid and interview of key personal is often an incentive for competition compliance.
• Longer investigations due to the time inevitably needed to respond to detailed RFIs.

Recent experiences from local jurisdictions

The EU

In the EU, the European Commission regularly conducts dawn raids and sends out requests for information. Like the CMA, the European Commission uses requests for information to supplement its investigatory powers. It may in certain cases choose only to send an RFI to undertakings suspected of infringement - this approach would be more likely in cases of suspected unilateral conduct which is more likely to be documented than for example cartels and concerted practices. 

The United Kingdom

The UK Competition and Markets Authority (“CMA”) has consistently relied on RFIs sent under section 26 of the Competition Act 1998 (section 26 Notices) as a strategic tool in its enforcement arsenal, sometimes sending them to one or more companies under investigation at the same time as carrying out inspections at the premises of others, in order to maximise the scope of its investigation. Section 26 Notices essentially require companies to gather evidence on behalf of the regulator.

By issuing section 26 Notices, the CMA leverages the resources and expertise of the companies under investigation to facilitate the collection of relevant evidence. In other words, companies are requested to 'dawn raid' themselves. Instead of deploying its own enforcement teams for on-site inspections, the CMA puts the onus on companies to gather evidence, often placing a significant financial and time burden on them.

Overall, they reflect the CMA’s need to balance robust investigation against considerations of efficiency and resource optimisation – particularly important in view of its increased workload following Brexit and the rise of parallel investigations. 

Australia

Unlike some competition authorities, the Australian Competition and Consumer Commission (“ACCC”) rarely employs dawn raids. Instead, it heavily relies on its extensive statutory information gathering powers. These powers allow the ACCC to compel document production, summon witnesses, and acquire relevant information efficiently, without resorting to intrusive dawn raids. 

This approach underscores the ACCC's emphasis on procedural fairness and cooperation in its enforcement efforts, striking a balance between investigative rigor and minimal disruption to businesses and individuals. While the ACCC retains the ability to conduct dawn raids in exceptional circumstances, its preference for utilising statutory powers reflects a pragmatic and targeted approach to competition enforcement.

Future outlook for dawn raids

As competition authorities seek to streamline investigative processes and optimise resource allocation, outsourcing is likely to remain an important strategic tool. However, authorities are unlikely to abandon on-site inspections to any great extent, because of their effectiveness at limiting the risk of evidence being withheld.  On-site inspections also undoubtedly have a deterrent factor that competition authorities are unlikely to wish to lose. 

Technological innovations in data analytics and digital forensics offer opportunities for more efficient and targeted data collection and analysis, enhancing the effectiveness of dawn raids. See our article on forensic considerations during investigations for further detail on this. This could ultimately limit the need for outsourcing in the future.

In summary, we believe that the future of outsourced dawn raids will be characterised by a balance between leveraging technological advancements and maintaining transparency and accountability in competition law enforcement efforts.

For more information, please contact Morten Nissen, Alexander Brøchner or Nanna Sofie Krabbe. 

This article is part of a special edition on Investigations of our monthly newsletter Competitive Edge.

READ MORE ARTICLES ON INVESTIGATIONS HERE

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