With UK businesses embracing hybrid working patterns, a typicalweek for many staff now sees them combining remote working andworking from an office location.
But, with competition authorities returning to conduct dawnraids, have your business's dawn raid policies been adapted toaddress the "new normal" of hybrid working? If they have,would staff know what to do in the event of a dawn raid?
Investigations into suspected infringements of UK competitionlaw can result in significant financial penalties for businesses,as well as director disqualifications, and even criminal sanctionsfor individuals. Therefore, if a dawn raid takes place, it iscritical that businesses are able to respond quickly andeffectively.
Our competition lawyers Samuel Beighton and Bernardine Adkinsconsider the Competition and Market Authority's powers ofinvestigation, and outline key issues for businesses to have inmind when refreshing their "pre-COVID-19" dawn raidpolicies to reflect the "new normal" of hybridworking.
David Lowe: Hi, everybody and welcometo our ThinkHouse Webinar this morning on dawn raids. I'm DavidLowe, I'm one of the organisers of ThinkHouse, our in-houselawyer community, and today's session comes very much from theThinkHouse anti-trust update that we did in September where wetouched briefly on dawn raids and particularly dawn raids in thenew era of emerging from Covid, and we were overwhelmed byquestions and it made us realise that there was appetite foreveryone to revisit dawn raids. So that is exactly what we'redoing today. I'm very pleased to be joined by Bernadine Adkinsand Sam Beighton who are both anti-trust partners in our anti-trustteam and who have just recently won Competition Team of the Yearunder the Legal Business Awards, so I am truly surrounded byexperts here today.
So today we're going to be talking about dawn raids and thisis the kind of territory we're going to cover. You know, backto basics - what is a dawn raid? Can you have a lawyer present?What powers does the Competition and Markets Authority (CMA) have,what limits, what about self-incrimination? What happens ifsomebody raids you today, the CMA raids you today and somebodyhides the evidence? And then also how has the world changed? Theworld has changed but how has that impacted dawn raids and CMAinvestigations? Now to get the juices flowing and get you engaged,we're going to open with a quick pop quiz to help you thinkabout dawn raids, and I'm conscious that you're not goingto have a warning when a dawn raid is about to happen. These arequestions you might have to answer in real time as we are doingtoday. So we have a couple of scenarios and I am going to read thefirst one and a quiz will come up. So the first one I want you tothink about is, the CMA is conducting a dawn raid at thecompany's offices today! Which of the following items which areon or in your desk could the CMA officers review? Could they lookat your laptop, your work laptop, your work mobile, your worknotepads? What about your personal mobile which you've used fora work WhatsApp group? What about that personal diary that you havehard copy, on a personal phone maybe which you don't use forwork? What do you think? Are you obliged to provide all or any ofthose to that?
A second question is, an officer in your company, a CMA officer,sees an appointment in your calendar that you'll offer a roundof golf - that's a red flag, isn't it, for a dodgy cartelmeeting? The appointment was meant for a member of the sales teamwho has recently left the company and it was sent to you bymistake. Can you explain this to the officer who asked if the salesmember went to the meeting? You know that they did, but as thequestion relates to a former employee, can you refuse to answer onthis basis?
And the final scenario here today is, towards the end of the daythe CMA have been in the offices doing the dawn raid all day, acolleague finds a stack of files in a box and you know the filesbelong to that ex sales team member, you know the one that went offfor a round of golf. In that box there's a number of highlyconfidential documents that shouldn't be made public and theCMA officers believe the files are relevant to the investigationand want to make copies. Can you as the in-house lawyer quicklycheck the files, take out these highly confidential documentsbefore the CMA makes copies?
So let's just see how we're getting on with thepolling... yeah, so I think general consensus is work laptop, workmobile, work notepads definitely can be taken. Some debate aboutwhether your personal mobile and personal diary can be taken,especially the diary which has no work content. We've got thequestion about can you refuse to answer the CMA about the personplaying golf, whether he actually went - most of you think no, butthere's some would go yes you could refuse that. And then onthe files to be shredded, can you remove any confidentialinformation, most people think you can't but some people thinkyou can. So, you know, there is some debate there and you willlearn today what is the actual answers to all of those questions,and I'm going to share those results to you all.
So turning on then to our first area, back basics - Sam,Bernadine, what is a dawn raid? When do these take place?
Sam Beighton: Thanks, David, I'llpick this up. So 'dawn raid' sounds incredibly dramatic andof course it is but the dawn part is actually somewhat misleadingbecause dawn raids, as you'll be aware, they normally takeplace shortly after the start of the working day, so usuallybetween say nine and ten on a working day. As for the raid part,the raid is the CMA entering premises to exercises its statutoryinformation gathering powers and in this context the CMA is able toenter both premises and as we will see it can also enter domesticpremises. In terms of the information gathering powers that arebeing exercised, the reason for this is because the CMA has alreadyopened an investigation, so as Bernadine will explain in moredetail, whereas for the company this is the first stage, this isthe start of something new, for the CMA this is the next phase of aprocess that's already started. So they are there because theyhave a reason to be there in their minds and in terms of theinvestigation and thinking about CMA investigations, we arethinking about either a civil investigation or a criminalinvestigation and I will explore those in a little bit more detailnow.
So in relation to a civil investigation, what we see here iswhere the CMA has reasonable grounds for suspecting an infringementof UK competition law, it may decide to exercise its powers inrelation to dawn raids to preserve and obtain evidence of thatsuspected infringement. Now for some types of infringement the CMAwon't use a dawn raid, it will use different informationgathering powers. However, if the CMA is looking is looking atthings that are clandestine, secretive, particularly cartelsbetween competitors, then you would expect the CMA to be coming inand using those powers under dawn raid provisions to preserve andobtain what may be limited evidence in the circumstances. Now thecontext of a civil investigation, is the businesses they'retrying to investigate, it is not the individuals. That said though,there are still implications for individuals arising from civilinvestigations. We've listed some of the risks here forbusinesses - obviously fines, you'll be well aware of those,claims for damages but also individuals now increasingly face therisk of being disqualified from acting as directors and that can befor a period of up to 15 years. We will be focusing today upon theCMA but I think it is worth just flagging at this stage that othersector authorities can conduct dawn raids in relation to civilinvestigations, so Ofgem for example, Financial Conduct Authority,Civil Aviation Authority, to name but a few. So there are thoseconcurrent powers that sector authorities have but we just havetime today focussing upon CMA.
Looking then in relation to criminal investigations, so both theCMA and the Serious Fraud Office can investigate individuals inrelation to the Criminal Cartel Offence. Now subject to certainlimited exceptions, an offence is committed in this context if atleast two individuals agree that at least two competing businesses,i.e. businesses at the same level of supply chain, will engage inprohibited cartel arrangements. Those would be the hardcore cartelactivities, so price-fixing, market engineering, bid rigging,limiting output. So that is the cartel offence, both CMA and SFAcan investigate. For individuals this is a high price to pay, thereis the risk of up to five years' imprisonment and/or anunlimited fine and also the application of the Proceeds of CrimeAct. So if somebody is found guilty under the cartel offence theirpersonal assets may also be confiscated. However, so far criminalprosecutions have been comparatively rare. So since 2003 there havebeen three cases that resulted in five convictions. All of thosewere guilty pleas. In 2015 just around the corner from here atSouthwark Crown Court we had the first completed criminal trial.Both individuals who stood trial were actually acquitted, they werefound not guilty, walked free from Court. For the CMA this was seenas a loss and following that loss there was a general reluctance topursue criminal prosecutions. Instead the CMA shifted its focus todirect disqualifications to emphasise personal liability.
So does that mean a cartel offence is back on the shelf withdust gathering upon that? I'm afraid that's not the casebecause we've seen a memorandum of understanding entered intoby the CMA and the Serious Fraud Office in 2020 outlining thepossibility of greater co-operation which suggests a re-engagementwith pursuing criminal cartel investigations. So we don't havethe time unfortunately in today's session to cover all of thecriminal investigations but I think it is worth flagging that wherethere is a civil investigation it cannot be ruled out thatcouldn't then become a gateway for a criminal investigationalthough there may still be standalone criminal investigations thatwe see emerging in the future. But as I said before this for theCMA is another stage in the process. However, for the company it isthe start of something new and I'll hand over to Bernadine todiscuss those points.
Bernardine Adkins: Thank you, Sam.Again I think it's important to be aware, and this I think doescolour how one should manage a dawn raid, the discrepancy asbetween the CMA and a company and so it bears onto franklyinequality of arms. So on the one hand, at the start of a dawn raidthe CMA will have a whole host of information, either they'vehad a complaint or more likely a leniency application, awhistleblower, it may go so far as for example in the GalvanisedSteel Watertanks case, actually they already would have had videoevidence of a cartel meeting. Or alternatively, and we'relikely to see this is the case, own intelligence. The CMA has itsown intelligence unit now, it will be looking at figures and saying'we don't like what's happening in this particularmarket, there seems to be... prices are going up very much in thesame sort of way, something suspicious is going on here.' Andthose people are making... we're seeing fewer leniencyapplications as people are concerned about damages. The CMA isplacing more reliance upon own intelligence.
And so the CMA will have spent many, many weeks sifting throughevidence. It will have obtained a warrant from the High Court incertain circumstances which is a high burden to traverse. Theywould have briefed the staff - there can be quite a few staff. Theywill be all pumped up with adrenaline, excited to get moving. Theywill have spent the night before at a Premier Inn, be all ready togo over two days and have hired a van, be there early in themorning. They will have instructed external IT consultants to usethe forensic software to mirror laptops and telephones. And incontrast the poor business, which will have a very, very differentset of preparedness, and it will be a whole spectrum, from on theone hand you have some businesses which will have lovely beautifulinternal policies and procedures, in an ideal world there'll beclear simple instructions and staff will know exactly what to do.On the alternative there actually could be a very, very complexmanual and staff quite frankly simply don't have the time toreview those procedures.
The other side of the spectrum is some people have absolutelyhave nothing in place and life being as it is often the very peoplethat you are relying upon to manage it may not be there that day.Plus we've seen that the CMA tends to look at Companies Housein terms of who they name on the warrant authorisation and oftenthe person named in Companies House simply often isn't at theoffice and so the people who would be there to manage it are simplynot named or asked for and the receptionist, it might be a tempreception that day, it may happen that day. And so there can bequite a bit of chaos, certainly in the initial start of a dawn raidwith that discrepancy as between the CMA, as I said, pumped up,tooled up, ready to move straight away because it's therebecause it thinks something quite serious and illegal has takenplace, it has evidence and it wants to get moving, whereas thebusiness often is in a state of complete confusion.
David: So OK, so at least the dawn raid is notat dawn, but you've explained how they've got lots ofpowers, that they might be civil and they might be criminal andwe'll be worrying and wondering about that, and I think,Bernadine, you made that really good point that they're alltooled up. But I'm just thinking about the in-house lawyerslistening this, I mean, surely the business has the right to say,'hang on, we need to get our lawyers here, please wait at thedoor, we'll sort out our lawyers and get ourselves ready forthis' - surely?
Bernardine: No, frankly, there is no right fora lawyer to be present during a dawn raid and yes you can requestunder the CMA rules, you say yes you can request. In principle theCMA may wait a reasonable time and it may ask for certainundertakings, so for example to prevent destruction of evidence.But quite frankly that's a textbook answer. The reality is theyare unlikely to wait, simply because the reason they have opted fora dawn raid and to dedicate those scarce resources to having 12people or so out of the office for two to three days is becausethey suspect that there is a danger of destruction of evidence andso they will not sit chastely in reception while you're waitingto get hold of an external lawyer or get the in-house lawyer on thepremises. So in practice businesses need to move very fast. Do nottry to delay things by giving a health and safety lecture forexample. See if you can agree a delay. Expect though people arevery unlikely to get a delay. What we tend to find works well inpractice as in-house Counsel, first of all know beforehand how yourIT works. Is your IT mirrored and basically is it recordedovernight, so are you able to reassure the CMA essentially, puttingto crudely, you've secured the crime scene. Are you able tosay, reassure them, 'I've spoken to IT. We've got apicture of what has happened as of midnight last night, that hasnow been preserved. Please can you give me an hour while we getexternal Counsel on site?' So that is something you can try anddo is give concrete of how you actually have secured the scene andusually once they know that they have got a secured scene they tendto try relax because otherwise they are very, very keen to get youevicted because in their mind, somebody is standing over a shreddershredding documents.
David: Our next question is about the domesticsituation just to flag we are going to cover business premisesfirst and then we will get to domestic premises because they arereally important, but we wanted to set a baseline first before wegot to that so turning to what powers the CMA has are they like thePolice? Can they just sort of crash and burn so to speak?
Sam: OK so focusing as you said on businesspremises and thinking about CMA investigations so what the CMA cando in terms of entering business premises, in my experience what wehave found is that typically it depends on the size and the layoutetc. You are normally looking at least two to three days in termsof dawn raids. That is a typical duration so these things are notquick things, it is not like lightning striking. This does takesome time so they are sometime so are at some time in your office,be prepared to be hosting them. The powers that they have will varydepending upon what is being used to conduct the dawn raid so maybeconducted under a warrant or it may be conducted underauthorisation from the CMA itself. These are quite importantdistinctions and for a business being investigated It is criticalto know what you are dealing with because as you will see thepowers differ between the two so just starting off with a warrantwhich is the most far reaching in terms of powers available toinvestigating officers so under a warrant it is possible for theofficers to use reasonable force to enter if necessary, not againstthe person but against the premises for want of a better expressionso you can use reasonable force to enter. I am not aware of thathappening on anything you have worked on or previous cases but itjust has a power and the most important power in this briefing noteis its ability to actively search the premises so the officers canturn up, they can start going through filing cabinets, they canstart going through laptops and can actively search the premises.They can also require individuals to give explanations of relevantdocuments and also to state where relevant documents may be foundand obviously for the CMA coming into an office that is reallyimportant that they can ask people because otherwise they will behere for much longer than two or three days, if they will have togo through everything by themselves. Can ask where X is and thenthat person is required to go and show them where that item may befound. In addition they can conduct compulsory interviews and wewill touch upon this a bit later on where individuals and in thecontext of compulsory interview are required to answer thequestions put to them by the CMA. They are also able to readdocuments for later review to determine their relevance so seizeand sift powers and this may come about where the investigatingoffices have reasonable grounds to believe that perhaps a box ofdocuments is relevant to the investigation. They do not have timeat that stage, it is not reasonably practical at that stage, toactually go through that box on the premises and work out what isand what is not relevant so under seize and sift powers they couldtake that whole box of original documentation with them and do thatreview process in detail off the site.
They are also able to copy relevant documents, take extracts andremove relevant documents to preserve them and in addition they canuse whether means as reasonably necessary to interference withrelevant documentation and we commonly see this where as Imentioned a dawn raid of business premises may go on for two tothree days. It is not unusual for the CMA every time it leaves atthe end of day 1 or day 2 to seal parts of the premises it has notyet got on to looking at to ensure that whatever is in those parts,perhaps it is a filing cabinet, perhaps it's the archive room,is not then subject to interference in that intervening overnightperiod. And finally, the CMA is able to require the bookingsinformation that is stored electronically is made available in aform that can be readily removed so not taking original copies buteffectively taking copies of whatever may be on electronic devicesagain to get a review of those documents that have been storedelectronically to determine their relevance after the actual dawnraid itself.
So that is under a warrant and just moving on them to thinkabout an authorisation. What I am trying to do here is to make ithopefully kind of user friendly in terms of ease of reading by juststriking out things that drop out when we start using authorisationso under an organisation the key aspect is its ability to activelysearch. That means the individuals are instead required to producerelevant documentation so rather than officers themselves going andsearching, they can ask individuals can you, not show them where itis, go and get it for me, bring it to me and then you turn pagesfor me, let's go through this documentation so have thatpower.
Seize and sift falls away under authorisations, they do not havethat power under an authorisation to gather up originals and totake them off the premises in that way so maybe it is the keypowers that do fall out however the officers still have a lot ofpowers available under an authorisation just to pick up so they canstill conduct compulsory interviews, they can still seal thepremises and again really importantly they can still requireelectronic copies are made for documentation stored electronicallyand just to give a recent example of a case in which we saw therelevance of electronic documents/electronic devices.
Roofing Materials which is an investigation into a suspectedinfringement with competitors and gauging anti-competitorpractices. What we saw there was a director using their personalmobile is initiate and maintain contact with competitors andactually began doing this after a competition compliance course. Imean who says you learn nothing on these things - the clear takeaway was switch to personal mobiles (laughter). So on the back ofthat the officers requested the director's personal mobileduring the dawn raid. Once they have that they then forensicallyanalyse so that includes deleted text messages so things thatpeople may think they have lost. What we have learnt over the yearsis it is very difficult to destroy things electronically, it isvery, very hard to do so is put through forensic analysis, variousthings we have covered and the evidence obtained contributes to afinding of infringement. Now the company itself was fined just over£8 million for that infringement but as I mentioned beforewith individual liability the individual is then disqualified fromacting as a director for six and a half years on the back of thatinfringement.
David: So Sam just going back to the poll weasked at the beginning, the golf club appointment in the diary of aprevious employee but I think what I am hearing is if they ask youa question and you know the answer you must answer it.
Sam: Yes, a question of fact, you should answerthat question. It is a factual statement that you areconfirming.
David: And actually kind of question and say ifyou are a shadower so the person shadowing the CMA team and you areasked by the CMA team where a certain document is held but yougenuinely do not know would that be accepted?
Sam: I actually think if you do not know youdon't know. You can't answer what you don't know, so ifyou do not know I think it is perfectly valid to say I do not knowperhaps the reason I am not usually in this team or on this floorfor the first time. I am here shadowing but this person perhaps mayknow if you want to cooperate in that way so be seen to cooperatemy sense is if they are looking for the documents, they will findthem, and if you do not know where they are you could certainly saythat.
David: Yes so they could ask who will know andthey get a next question. And if you know, you need to answer.Understood. Great. So that was obviously all about businesstraditional dawn raid business premises which haven't reallychanged with Covid of course accept that many of us haven'tbeen in the business premises for the last couple of years. When wedid this back in September, the big area of interest was aboutpeople's homes. We are all working from home or have beenworking from home and we have got documents and laptops at home andour senior executive team do all that at home with piles of paperat home. What are the CMA powers about coming in your house?
Bernardine: In short David they are prettyextensive. Historically the ability for the CMA and otherauthorities to enter in domestic premises was a bit of a rump endof their investigative powers but now they are very, very real. Theonly small comfort in this is that they must be conducted underwarrant so the CMA will not go into somebody's home lightlythat is for sure, but they could certainly enter domestic premiseswhich are premises which are used as a dwelling in connection withthe affairs of them undertaking all where documents are kept so ifyou are bringing home your work diary or your work mobile or yourpersonal mobile which is used in work, it is very, very simple andeasy for the CMA to be able to establish it is appropriate for usto raid these particular premises an so when the CMA is raiding oneit is able to use reasonable force and reasonable force canactually involve knocking the front door down quite frankly andalso it can actively search. Contrast warrants for the business, itis does not have the ability to seize and sift in other words itdoes not have the ability to empty your study out and take theoriginals away. It can only take copies of the study but it canalso require individuals to give explanations of relevant documentsas Sam said the question of fact is this your handwriting? Whatdoes that say? I cannot read the handwriting. Also, compulsoryinterviews as well. I would have to say though I do question whatprobative value a compulsory interview would be under thosecircumstances, somebody being suddenly raided at home andquestioned. They could take copies of documents which can includeand we have seen this in the past where the CMA has raised homesthey do take mirrors off people's sim card essentially to seewho they have been texting and walling and also they can seal partsof the premises so it is imperative that people aware that if theydeal off a study, they really overnight should not open that sealotherwise they will be in considerable trouble and basicallyrequire certain documents to be made available.
So this is very real. The CMA have used these powers in the pastand anticipate they are going to be using them more. So one of thefirst things, a practical point for us to consider in the initialshock and confusion of a dawn raid is think who is not showing up,who has not reported in, who at top level sales level are we nothearing from because you may find that there may be people who haveturned up at their front door step and they may well have turned upearlier than the 8.30am to 9.30am "dawn raid" and alreadyabsolutely submerged under a CMA investigation so that is a reallyimportant practical point is think outside the box in terms of yeswe are being right now, is somebody at home in parallel beingraided as well? So looking to the future, the CMA wants theGovernment to consider actually enhancing these powers to include aseize and sift which would basically be seizing the originalsinstead of taking mirror copies of laptops and mobile actuallytalking the originals so that joy is to come possible.
David: So the CMA has the power to get warrantto come into your house and look at documents and all that kind ofstuff. Do they really? I mean there is one thing about what powersthey have. Have they actually been raiding people's houses?
Bernardine: Yes they have absolutely yes and weanticipate that happening more.
David: Is that a new Covid thing or were theyraiding people's houses previously?
Bernardine: They were. I mean in fact since theinception of the Competition Act it was a possibility then.Actually 2004 they made it harder to raid insofar as they said youmust have a warrant in other words, you have to go before the HighCourt with evidence, convince a judge look we have reasonablereason to believe that this illegal act has happened and there is apossibility of destruction, so it is a high burden but the CMA hasbeen using those powers pre-Covid and we now anticipate some raidsin this area. We have not seem them yet. The European Commissionhas started raiding apparently under Covid secure circumstances,which they are all wearing masks so we envisage this should startsoon.
David: Right OK so this is not new but it isjust becoming more apparent and there is a higher risk the CMA isgoing to be in people's homes because the stuff is atpeople's homes now because people have been working athome.
Sam: It raises the temperature for certainindividuals. We have been working at home for 18 months. It givesthe definition of domestic premises. There must be millions ofhomes in the country now that fall within that category whichbefore were maybe borderline, so I think there is that additionalrisk and it is something for the companies to bear in mind in termsof not everyone would have the risk of their home being the subjectof a dawn raid but it is definitely something to factor into thetraining, to give a message to key people that this is what we needto do, be aware of this and in terms of how you equip people, ifthe worst case scenario was to happen.
David: No not surprisingly we are gettingflooded with question so we will just pick up some of them becausesome of them because I think is good to ask them in the heat of thetalk. What happens if they raised the FD's house but the FD isnot at home and it is just his wife and kids or husband and kids athome? Do they have to wait for the FD to be there or can then comein?
Bernardine: It is the premises they areinterested in. The person in question does not have to be there isentering into the premises to take copies of other documentationthat is there and one of the questions us absolutely they cannotjust look at them at work mobile, they can have the IT forensics,the software and they will basically take a copy of it and theywill do the same for laptop. They will take a copy of it.
David: And if we are being really, really bluntabout it in terms of the powers essentially there can be no otherpremises as long as they have tried to make contact with someoneand they couldn't do it, they could still go into premisesbecause relates the premises and not having someone there to beoverseeing and invigilating the dawn raid. They have informationabout powers and they have the ability and statute to exercisethose.
Bernardine: And reasonable force will includebreaking the door.
David: So then the message in your refreshingyour dawn raid manual is to remind certainly the senior executivesthat it is possible they could be raided at home but they areentitled to ask for the warrant but if there is a warrant then youhave to stand aside and let them in and actually it might besensible to tell other people they live with just in case they arenot in at the time to be aware that this could happen. That is whatI am hearing I think.
Bernardine: It is a balance. I certainlywouldn't tell every single member of staff you could be raidedat home. I think that would panic people and they would befrightened to do their day job so I think it is a careful balance.You are basically make compliant sensitive people aware of thisrather than everybody in the business.
David: Somebody has asked would it bereasonable to assume that dawn raids of domestic premises arelimited or geared towards the directors?
Sam: I think that is a reasonable startingpoint. I think you can also pull into that category to be honestthe high risk people so people who are perhaps head in sales teams.They have got that more kind of competitive contact type role inthe organisation. In terms of cases that we have been involved inand cases on a public record I would say it is tilted more in termsof proportionality that there are more directors who would perhapshave their domestic premises inspected but it is certainly not justdirectors so it would also be sort of key people in leadership teamso people have got that competitor facing world.
Telling everyone cross the business be aware you might have yourfront door knocked. That I think makes them feel very nervousactually doing their day jobs, they are confident in their day today role. They may also question what the business is actuallydoing if you send a widespread message that at any point the doorcould be knocked by the CMA. It is a question, as Bernadine saidabout having that balance and looking at who by reference to yourown business would be a high risk individual for want of a betterexpression and making sure that they then have the know-how that ifthe worst case did happen, that they were equipped to deal withthat as best they could.
David: Now on that point about as an in-houselawyer you are being raided at the business premises, be aware thatwho is not in may be being raided at home. Can you ask the CMA ifthey are raiding anyone at home?
Bernardine: You can ask but they will not tellyou, but you can ask. They are not there to make your lifeeasier.
David: Right OK which is why you have gone gotto be proactive.
Bernardine: Assume the worst. Assume theworst.
David: And can the person who is at home beingraided is he or she allowed to call into the office to say helpI'm being raided?
Bernardine: I think there is no such thing asallowed, but I think it would be a very, very reasonable requestand to be quite forceful in terms of saying this is a reasonablerequest. I need to do this and the CMA want to facilitate thishappening. Also they will be very conscious that this is anindividual so I think they are likely to facilitate that.
David: So they are not going to be really nastyto the person but they will be aware that that they are enteringsomebody's home and ought to have some respect of that.Somebody has asked about the old chestnuts about cars. You know thesales director has gone and put all the files in the cars, wheredoes that fit into all this?
Bernardine: Yes the definition of premisesincludes land and/or means of transport. Not a lot of people knowthis but those rules are actually taken from the Italian BlackMarket rules devised in World War II. It is funny because wediscussed this earlier, the commission always make a big, big pointof saying we have the power to look at vehicles and they alwaysmake a point. Everyone has to trot out to the car park and inspectsomeone's boot, but it is a common thing. You know people panicand a car boot to sling the files is actually quite a good place tohide stuff so it is not surprising that there that ability.
David: Someone has asked about dawn raids.Normally that happens you talked about on a business day but theycan they happen at the weekend?
Sam: I have never heard of that.
Bernardine: I have never heard of that. Alsocautiously we have noticed they usually happen on a Tuesday. Mondayto get everyone tooled up and prepared, Tuesday to go in. So thatis our anchor day as a team, we all work in one place on aTuesday!
David: This is the last one. I cannot ask allthese but there is one I quite enjoyed is somebody said havein-house lawyers been specifically targeted based on pastexperiences be raided at home. Are they seen by the CMA as a highrisk useful person?
Sam: No I have never come across an in-houselawyer being targeted. One of the reasons for that is the wholething around legal privilege as in-house lawyers and you haveparticular professional commitments, you have a regulatedprofession.
Bernardine: Yes I think they would have to havesome really good evidence to go into an in-house lawyers' houseso much of it would be privileged. In-house lawyers do getprivilege.
David: So probably the in-house lawyer'sjob on the day is running around managing everybody else and willnot hopefully will not have to worry about the rest of his teambeing raided. At least that helps focus. OK I am sorry I have notasked all the questions. There was obviously a lot there. We talkedabout very, very extensive powers that the CMA has. What are thelimits to their powers?
Sam: So the first time wraparound limit isgoing to be the scope of the warrant for authorisation and that isgoing to be getting out really what they suspect an infringement isin high level terms and so if the infringement is suspected inrespect of product X then any searches questions should really beabout around product X it's not a fishing expedition here andneed to stay focused in terms of the parameters of theinvestigation so the premises so if they have delineated in awarrant for authorisation the premises which are not the ones theyare at. I am sure that is the wrong place for them and they havenot got authorisation to be there, they should not be conducting adawn raid they should not be engaging on that basis.
Personnel so the warrant will list individuals who are enable tobe present on the day from the CMA's perspective. If there areadditional people there, if you are not named on there then againthey should not be there so again that scope of the warrant forauthorisation initially wraps around the framework that the CMA towork to.
Outside of that we have legal privilege so a business can berequired to disclose communications which in proceedings in theHigh Court would benefit from legal professional privilege and ifthere is a dispute as to whether something attracts LPP then whatwe would normally seek to do is to just keep those documentsseparate. They normally would be sealed and put in an envelope orput into a box all taped up and you would put them to one sidepending resolution as to whether or not those documents actuallyare covered by legal professional privilege. I think as a point ofgood order in any event for businesses keeping your legalprivileged documentation clearly separate both the electronicfiling and also the physical filing. It is just a good habit to bein. We have done dawn raids, before. We have gone into people'soffices and we have found our own legal advice on top of filingcabinets just lying around so it is a just a good idea in any eventto have an idea of where your safe place is for your legallyprivileged documentation.
And the last limit in these circumstances will beself-incrimination so a business cannot be required to answerquestions that would admitting infringing with your competition lawso the CMA can ask questions of fact as we touched upon, did youattend? Did that person attend the meeting but could not askquestions around did you engage in price fixing at that meeting,did you engage in price fixing at that meeting? Did you engage inmarket fixing because to answer those question would then move intothat frame of admitting and infringing competition law so those aresome of the key notes actually there.
David: So I'm just getting my head aroundthat that on the one hand, you cannot be obliged toself-incriminate on the other hand you have to answer questionstruthfully and maybe I watch too many US police dramas but is it abit like 'I am going to plead the fifth not answer questions atall'. Is that how it works?
Sam: It is really good question and it is quiteI think from our perspective it is quite interesting in terms ofhow this actually unfolds in practice because we talked earlierabout these compulsory interviews and it has mentioned what theseenable an officer to do is provide they have given formal notice,they can compare an individual with connection with the businessand investigation to answer certain questions and going to yourpoint David can you do I am thinking about the bit in terms of nocomment. There is no right to remain silent in these circumstancesso you can be compelled to answer questions. In terms of who can becompelled to answer questions, this notion of connection with?Essentially it means an individual who is or was concerned inmanagement control of the investigation or employed or otherwiseworking for the business. Now obviously that would include thingslike current directors, former employees. The guidance they alsoextend that to professional advisors so you could find that thiswould not perhaps happen in the context that you are raiding yourpremises but you could find that your professional advisors arealso being asked questions under these powers and being compelledto answer questions.
In terms of what you can do in this context once you havereceived the formal notice this is going to set out for you whatthe investigation subject matter is, where and when the questionswill be asked and in theory that notices could say they will beasked immediately after your receive this notice. It will also setout the fines that can be imposed. These are fines that can beimposed to a company and an individual if they fail to answerquestions under the notice and what the notice will so it will makeclear that there are limits by use of answers given by theindividual in criminal prosecutions. What cannot happen in thecontext of a section 26a interview is you cannot have a situationwhere you are being compelled to disclose communications and traplegal privilege, so that is one thing that cannot happen in termsof questioning. Individuals in these circumstances they can ask tohave a look at their questions and may be represented by a lawyerwho is also representing the business and you could have asituation if everyone can square the conflicts away that the legalteam representing the business may also act for an individual isbeing questioned under these powers. What the CMA is reallyreluctant to have happen is that for lawyers representing only thebusiness get to sit in on these compulsory meetings because theirconcern there is if you as an individual, you have got effectivelyyour employers lawyers sat in the room that may make you morereluctant to answer the questions as fully as you would otherwiseand thinking about self-incrimination this is an area which I thinkthere is room for a discussion in going forwards in this. But whatwe have ween do far is as I mentioned, the notice sets out clearlimits on how answers an individual may give, how they may be usedagainst them in criminal prosecutions and from the CMA perspectivewe have a couple of procedural officer decisions which set out whatappears to be the CMA's approach to this which is that if youare being questioned and you are giving answers it is you as anindividual answering questions. You do not have a right in terms ofprivilege self-incrimination because the answers you are givingthey cannot really be used against you in criminal prosecutions.You are not under a cartel offence interview here and the fact thatthese answers could be used against you in directordisqualification proceedings that is different CMA perspective.Actually they well actually that is not criminal prosecution law soself-incrimination does not apply in these circumstances. You dohave to answer questions and you are protected fromself-incrimination by virtue of the limited use in criminalprosecutions directors' disqualification, they are not criminaland therefore answers you give can be used in that context againstusing individual and director disqualification. So we have notreally seen this tested thoroughly but to my summing which I thinkthere is a natural tension there in terms of how this informationcan impact individuals when director disqualification has itsimpact by individuals so to my mind this is not perhaps a debatethat may evolve as time goes on.
David: Sam is the compulsory interview is thatlikely to happen on the day of the dawn raid or is the dawn raid asort of document and information gathering moment, followed by theinterviews.
Sam: That is a really good question David. Sowe have not seen ourselves compulsory interviews taken place duringdawn raids. I am not aware from everything that has been madepublic by the CMA that they have happened. It is a power that is onthe statute books. We have had instances after the dawn raid wherethe investigating authority has dug deeper into the documentationas set at the compulsory interview to compel answers to certainquestions. Assuming that this does exist as a power what we wouldsuggest is that if you had an officer who was looking to conduct acompulsory interview during the dawn raid what you try and do is toagree this takes place at a later date. I think key facts is makingsure that the individual can access appropriate legalrepresentation and also given evidential questions about how thequality of evidence, how good will that be, how robust will that beif someone is actually in a state of shock and panic and extremestress during a dawn raid which is just unfolding in front of them,what the quality answers will be. I think it is also just worthmentioning at this point that the Government is currentlyconsidering broadening compulsory interview powers so as Imentioned before I do the connection with. That was quite limitedjust focusing up on the business under investigation. TheGovernment is thinking about broadening these powers out so as tocover things like customers, suppliers so people with a widerrelationship with the business those individuals could also berequired to submit compulsory interview so to my mind this is nowwe will see more activity which may prompt more questions about howthis should be applied and whether there should be any additionalsafeguards from individuals in these circumstances.
David: OK. Obviously there is always somebodyisn't there the dawn raid happens and they are quickly runningoff the files, burning them in their cars, the classic naughtyperson goes and hides them. What happens?
Bernardine: You are absolutely right David. Itis certainly our experience and it is borne out by the decision ofpractice. Invariably somebody panics and does something silly withevidence. So practically speaking presume somebody is going toconceal or destroy evidence so the role of in-house counsel is tomake sure that does not happen because what happens if that doeshappen so in principle it is criminal offence for an individual todestroy, conceal, hide a document or ask someone else to do it or aobstruct an officer in the exercise of their powers or beeconomical with the truth so to speak. Also that is from anindividual perspective also in principle, an individual could befined up to £30,000 or £15,000 a day for every day theyare in default producing documentation. And then from a businessperspective the CMA can also fine a business for failing todisgorge information or destroying information and we saw a caseFender, Fender case which is those of you with teenagers at homeconcerned guitars, or people with teenage mind sets perhaps sounder the section 27 authorisation the company was required to giveover certain documentation. Day 2 an officer reminded Fenderthey'd asked for notebooks of this individual, so somenotebooks were given over. A senior individual said, 'well,here's my diary and a notebook but I always destroy my oldnotebooks and I just carry over what's of interest, so nothingto see there.' And that was the CMA's understanding, thatthose notebooks had been destroyed. Three weeks later tenadditional notebooks were given to the CMA and this came out of theether, so the CMA... sorry, the company heard through a casualremark that there were these extra notebooks. The senior individualhad asked a junior 'please can you hide these', andthey'd taken them home and it was only because of a passingremark that the business became aware of these documents and ofcourse the business quite properly gave it their lawyers and thengave it to the CMA.
So Fender was fined £25,000, notwithstanding said,'well, hang on, this was a rogue employee. This wascompletely... we were co-operating, the business was co-operating.This was completely out with what we wanted that employee to do. Wethe company should not be on the hook for that.' And the CMAwas having none of it. They said, 'no, you're on the hookfor this because that was your employee, you're responsible foreverything they do and that will include the wilful destruction ofevidence.' And you know arguably in the face of instructions tothe contrary. And so you could say, well, £25,000, that'snot so bad. That's true because, as I say there's a flatrate for companies of £30 a day... sorry, £15 a dayplus a flat rate of £30,000 compared to the millions of acartel ultimate fine. And so the government is aware of this thatthey're out of sync with the rest of other regulatorsthroughout the world, so the CMA wishes to up the ante of that. Sowhereby you have one per cent of turnover, global turnover per...of a fixed fine then five per cent per day etc, etc, so give itsome real, real teeth.
So what we're observing here is... and some might find thisquite extraordinary, sometimes there are quite egregious in termsof destruction of evidence by an individual and we saw... and thisis on the public record in the Galvanised Steel jury trial, anindividual said 'yes, in my diary I knew there was a cartelmeeting the next day, I always noted the instructions I was goingto give to the MD in terms of what was happening.' That wouldhave been the most beautiful piece of evidence or a piece for thebusiness to give to the CMA and he's now destroyed it. That...no repercussions for that individual. So ironically in principleit's a criminal act but what we see happening in realityit's the companies that are on the hook for this.
So query, what should the company do? So absolutely this is whatyou should always do as a matter of best practice is immediatelysend out a pre-prepared email to all staff - please have one readyon your desktop to send - making it very, very clear in simpleterms, it's a highly confidential investigation, pleasedon't take social media. Inform nobody outside of the businessthat an investigation is taking place. You must give accurate andcorrect information to officers and absolutely do not destroy anydocuments including phone messages, electronic documents etc, etc,and make it clear that this is a criminal act and also ifanyone's got any concerns discuss it with the individual in thecase. So if you haven't got a prepared email, your externalCounsel will have a prepared email so make sure absolutely one goesthrough. But to my view that is never quite enough, so whenyou're involved in a... you know, certain individuals will havebeen identified, you must eyeball them. Make it clear, make a noteof that, have several witnesses to say 'we told them, we madeit very clear', and the consequences for them is this is acriminal act, although I have to say in reality we are not seeingindividuals being prosecuted, we're seeing the companies on thehook for... at the moment they're quite low fines but weanticipate that they will get higher and higher and alsothere's a reputational aspect. And the other aspect to mentionin terms of destruction and tampering with evidence are seals.It's so important that you communicate to staff that seals mustnot be broken. In the EU Aeon was fined £38 million forallegedly breaking a seal, so you must make it very, very clear toindividuals that seals cannot be broken. And I would actually sayif overnight there's a seal there we always suggest to thecompanies you should have a security guard standing there becauseyou can't always be sure. So absolutely I would say have asecurity guard stand there all night, it's not a risk that isworth taking in the circumstances.
David: Great, so a huge amount of informationcoming over there but let's split them... I mean, the triggerfor this was talking about coming out of Covid, what shouldbusinesses be doing? So with that in mind, Sam and Bernadine, whatshould businesses do? What should in-house lawyers do actually nowwe've sort of come out of the hibernation of Covid?
Sam: Yeah, embracing the new normal postlockdown. So in terms of business premises, you know, what we knowfrom time in the trenches is that managing a dawn raid requiresteamwork across the business. Now in the olden days as I'llcall them that was really quite easy because everyone by and largewas in the premises and the people who weren't there most ofthe time you knew kind of where they were. So you had a team thereand you could work with them, business could use that to engagewith the CMA. What we now find is obviously everyone'sembracing hybrid working patterns and there are situations wherepeople perhaps would normally be in an office in the olden days,now perhaps come in once a week, maybe, you know, twice a week,maybe not on a Tuesday, maybe they're coming in sort of towardsthe back end of a week to fit with their own commitments. Who'savailable to provide IT support? Is that someone on site who in theolden days was always there, now comes in on a temporary basis? Ifthat is the case, can they give IT support remotely? So if the CMAwere wanting to access certain things, is there someone who canenable that to happen?
We've obviously got a wealth of pre-Covid policies andprocedures with companies at the moment. I think the key questionhere is looking at those and thinking about, you know, teams,teamwork, who's going to form that core team with the variousroles delegated. Someone mentioned shadows in a question - youknow, will you have enough shadows on a given day? When you'relooking at these policies and procedures, how do they need to betweaked and refreshed just to reflect these new staff workingpatterns under the new normal? And if you have new joiners, ifthere've been internal promotions, departures, you know, whendid you update your contact lists, because obviously contact listsare only as good as the numbers that are in there and if thosepeople perhaps aren't there anymore those numbers becomeredundant very quickly and the contact list soon loses the functionthat it should have which is when it is a state of extremis youhave a ready-to-hand list you can quickly work through to selectinformation. So are those things up to speed? And, you know, thisis all kind of quick wins if you think about it but it's justthe practical aspects I think need to be just touched on andrefreshed. And also external Counsel contact lists - have peoplemoved around in the pandemic, have people moved offices, what aretheir homeworking arrangements? That may be a question that'sworth having in terms of can they still provide the support thatyou expect them to on a given day? So those are things... justtweaks around aspects there. Like another really good question,putting the documents to one side is whether it's appropriatenow to have refresher training about, you know, what to do, whatnot to do and who to contact.
So we've emphasised not hiding or destroying documentation.If that's in the policies and procedures and people haven'tlooked at those in perhaps a couple of years, that may not be frontand centre of their mind, whereas if you're able to give theman in-house session just to recap some of these key points, thatthen should bring it back to life for them in terms of taking thisopportunity with the new normal to sort of reinstate, to refreshcompliance culture within the business. And then thinking aboutdomestic premises, and we have touched upon this in terms of keyindividuals and we have emphasised that they need careful messagingaround this, but are key individuals aware of the possibility ofdawn raids at home? Is this addressed in policies and procedures?Would it be worth giving some refresher training again for thatperhaps small group of key individuals to think about if this didhappen in your home, you know, here are some hints, here are sometips, here are some strategies, because I think what we find inpractice is you can give people documentation and some people aretruly diligent and they will read that and think about, otherpeople perhaps will just put it to one side and think,'I'll turn to that when I need to', and the problemwith these sorts of scenarios is when you need it, you usuallydon't have the time if you're reading it for the first timeto engage with that document. So that refresher training, thebackground, just to give people a baseline which can be topped upwith a one-pager that people can have in their home offices settingout perhaps some key do's and don'ts around a dawn raid andalso contact details so they have up-to-date contact details forpeople in the office, for external Counsel, just so they have that,again preparing for the worst - not expecting the worst - but justpreparing for that so if something did happen they would be in aposition where they were able to confidently, you know, assert whatthey had to do in the circumstances.
David: So Sam, one thing that's occurringto me as an in-house lawyer let's imaging you're wellorganised, you've got your dawn raid policies, you don'tneed training, you done all of that, and actually listening tothis, if I was an in-house lawyer, I think I'd want to havesome of my own... what do... what do I do in the first two hours?Because when panic and I can't think straight. If I'vealready thought about that in a calm place and got it all setout...
Sam: Absolutely right.
David: ... then that will help you be calm atthe time because you can go 'oh, my God, the worst thing everis happening', pull out this document - what to do? First step1, step 2. That would be I think a really good practical tip,wouldn't it?
Sam: I agree, David. Honestly if you'redoing it in that calm space, you don't have the opportunity tothink, 'oh, I've got a question about that', and thenyou can, you know, go and fetch Counsel and maybe just check'my understanding is this, is that right, or should we be doingthis slightly differently?' That calm space gives you thechance to almost kind of visualise and think about how you canengage with it and I think that that does take some of the panicsome of the panic away from what is otherwise a very, verystressful situation.
David: And all eyes are going to be on you ifyou're the senior in-house lawyer, I bet all eyes turn,don't they? And if you can do that in a really... reassurepeople and manage it then you're going to come out well, but ifit's flapping around in panic that's not going to reflectthat well, is it?
Bernadine: I think people also sometimes focustoo much on what they're looking at, what they're lookingfor, what are the buzzwords? Relax on that front because at the endof the day or at the end of the raid, they will sit down with youand say 'right, this is what we're taking.' So you willget transparency with respect to that. What you really should befocusing on is, as Sam said, is actually the pastoral care issue,calming everybody down, focussing on individuals and also where isbeing raided? So make sure there isn't some offshoot, somesmall subsidiary that is being raided and not getting adequateoversight, and also it's imperative, it's when it's notthe crime, it's the cover-up, that you are making sure evidenceis secure because that really is I think the most important roleyou can play as an individual, as an internal Counsel, is securethe scene and afterwards as well secure the scene.
David: Now there's a couple of questionsabout keeping this in proportion effectively, so are dawn raids...is this something irrelevant to big companies in markets wherethey've got turnovers and market shares?
Bernadine: No, absolutely not. This issomething the CMA call the 'balanced portfolio'. They makea point of going after smaller companies as well. They really wantthe world to know they don't just simply focus on largecompanies, it is all small... also smaller companies and there havebeen a number of investigations where the market, the whole of theUK market was £10 million turnover a year for that wholemarket, so absolutely not. I mean, the numbers of times we'veheard 'we're too small, it's a victimless crime'etc, etc. No way, it is absolutely no defence to say we're asmall company, it's a small market, who cares? The CMA willcare.
David: I don't know if you already know theanswer to this question, somebody asked it, roughly how many dawnraids a year do the CMA carry out?
Bernadine: Not that many actually. It's abit like lightning, when it strikes, it's horrific. I hesitateto say - would it be three, Sam?
Sam: I think it depends because if you havecertain investigations, when you look at the investigations, sowith the investigations in the musical instruments sector, therewere a number of cases that came out of that but that was at thetime simultaneously organised dawn raids. I think there was perhapssome suspicion this could be an arrangement between competitorsrather than individual actors undertaking their own activities, sothat was co-ordinated as a raid. There have been other cases wherethe case is just one case but actually a number of raids in thecontext of that case was maybe six, seven, eight. So think itreally depends, I think it's hard to say in a given year. Ithink the CMA previously has indicated aspirations to open acertain number of investigations in a given year. I thinkthey've now kind of moved back away from that but they arestill focussed upon, you know, seeking infringements, havinginformation on infringements. So this remains a live issue in thatcontext.
Bernadine: Yes, also don't forget, those ofyou in regulated sectors, the current regulators also haveconcurrent powers, so Ofgem for example has used its powers, so youknow, damned if you do, damned if you don't, so be aware alsoof those parallel dawn raids as well.
Sam: So it's not, it's not likethere's a dawn raid every day.
Bernadine: No, no.
Sam: So they're not... they're not thatfrequent but they're unpredictable and you certainly won'tknow if your company or your sector is going to be raided tomorrowand you have got no... you've not... there's not going tobe any warning signs, are there?
Sam: And so therefore you need to be prepared.It's like none of us expect our buildings burn down but westill have fire extinguishers and fire exits because if it doeshappen it's really bad news.
Bernadine: And also it's a useful tool tohave, actually to train people around dawn raids because it justfocusses their minds on day-to-day compliance because they alsowant to make sure individuals 'we don't want this tohappen', they realise the seriousness of a dawn raid andinvestigation therefore please comply with the rules in the firstplace whereby there isn't a danger of having a dawn raid.
David: Great. I'm going to draw it to aclose but I know we haven't answered all of your questions.We've had, I don' know, about 15 questions - I'mthinking we've answered about half of them, I think about tenof them, so we will review the questions we haven't answered wewill be in touch with people on that. But as I said we will besending round the slides, there will be the recording as well whichyou can review and share as well and hopefully that has been auseful refresher for all of you. Thank you very much.
Sam: Thank you.
Bernadine: Thank you.
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