The European Commission’s powers of inspection in competition proceedings

In a judgment delivered by the General Court of the European Union on the 12 July 2018, Nexans France SAS and Nexans SAS1 requested the Court of Justice of the European Union (Second Chamber), by their appeal, to set aside the said judgment by which the General Court dismissed their actions seeking an annulment of Commission Decision C(2014) 2139 of 2 April 2014 relating to, the implementation of the rules on competition laid down in article 101 and 102 TFEU2, which article relates to the Commission’s powers of inspection.

Article 20 of Council Regulation (EC) No 1/2003 of 16 December 2002 (“Regulation”) on the implementation of the rules on competition, specifically in relation to the Commission’s powers of inspection, provides the following:

In order to carry out the duties assigned to it by this Regulation, the Commission may conduct all necessary inspections of undertakings and associations of undertakings.

The officials and other accompanying persons authorised by the Commission to conduct an inspection are empowered:

To enter any premises, land and means of transport of undertakings and associations of undertakings;

To examine the books and other records related to the business, irrespective of the medium on which they are stored;

To take or obtain in any form copies of or extracts from such books or records;

To seal any business premises and books or records for the period and to the extent necessary for the inspection;

To ask any representative or member of staff of the undertaking or association of undertakings for explanations on facts or documents relating to the subject matter and purpose of the inspection and to record the answers.

Article 23(2) and (3) of the Regulation further states that the Commission may, by decision, impose fines on undertakings and associations of undertakings where, either intentionally or negligently they infringe article 101 or 102 of the TFEU.

The guidelines on the method of setting of fines imposed pursuant to article 23(2)(a) of the Regulation state that, in relation to the setting of fines, the Commission must have regard both to the gravity and to the duration of the infringement and that fines should have a sufficiently deterrent effect. The method to be used by the Commission for setting of fines comprises of two steps, first a basic amount is determined, and second that amount may be adjusted upwards or downwards.

On 17 October 2008, the Commission was informed of several cartel cases which concerned restrictive commercial practices – it proceeded with carrying out an investigation.

On 28 January 2009, the Commission inspectors, accompanied by the representatives of the French competition authority, visited the premises of the appellants in order to carry out an inspection. During such inspection, the Commission examined a number of documents and computers and also made copy images of hard drives of the computers of certain employees. The Commission then carried on its inspection of the material it had collected in its offices in Brussels.

With respect to the amount of fines imposed on the appellants, the Commission established the proportion of the value of sales which would reflect the gravity of the infringement and considered that the infringement, by its very nature, was among the most harmful restrictions of competition which justified a ‘gravity percentage’ of 15%. This also on account of their combined market share and the almost worldwide reach of the cartel.

The appellants brought an action seeking, inter alia, the annulment of the inspection and a declaration that the Commission’s decision to seize copies of certain computer files and to examine them subsequently at its offices in Brussels was unlawful. The appellants also brought an action seeking a reduction of the amount of fines imposed on them.

With respect to the appellants claim for annulment on the basis of infringement of article 20(2) – 20(4) of the Regulation, the General Court considered that, contrary to the appellants’ submissions, it was not apparent from article 20(2)(b) and (c) of the Regulation that the Commission’s power to take or obtain copies or extracts relating to the business of an undertaking under inspection was limited to the books of the business that it had already examined. The General Court further stated that given that the making of the copy image of hard drives was part of the process by which the inspectors operated the computer investigation software, the purpose of which was to search for information relevant to the investigation, this fell within scope of the powers conferred to the Commission by article 20(2)(b) and (c) of the Regulation. Furthermore, it was also stated that article 20(2)(b) of the Regulation does not provide that the examination of the books and records related to the business of an undertaking under inspection be carried out exclusively at their premises. This provision however requires the Commission to offer, when examining documents at its own premises, the same guarantees to undertakings under inspection as those required of the Commission when conducting an on-the-spot examination.

Consequently, the Commission’s right to make copies of computer hard drive does not constitute an additional power granted to the Commission but falls within the power of examination which article 20(2)(b) of the Regulation makes available to this institution.

The General Court went on to state that, while it is true that it is settled case-law that the Commission’s powers of investigation concerning competition law are strictly circumscribed, nonetheless that does not mean that the provisions conferring powers of investigation on this institution must be interpreted narrowly. It must also be ensured that those powers do not infringe the rights of the undertakings concerned. Those rights are safeguarded where, the Commission copies data, admittedly without a prior examination, but then assess whether the data is relevant to the subject matter of the inspection in strict compliance with the rights of defence of the undertaking concerned, before those documents found to be relevant are placed in the file and the remainder of the copied data is deleted.

In implementing its rights of inspection, the Commission should ensure that it does not affect the procedural safeguards laid down by the Regulation, nor the other rights of the undertaking under inspection. In addition, the Commission is to ensure that, after completing its examination, it shall only place in the relevant case file those documents which are relevant to the subject matter.

With respect to the interpretation applicable to article 20(2) of the Regulation relating to whether the Commission was entitled to continue the inspection in question at its premises in Brussels, the Court held that this was an inadmissible claim on the part of the appellants. The Court stated that indeed it is lawful for the Commission to continue the inspection in question at its premises in Brussels. There are legitimate reasons, which may lead to the Commission to decide, in the interest of the undertaking concerned, to continue at its premises in Brussels the inspection of the data which is has collected, this also on the basis that the time required for processing electronic data may prove to be considerable.

As regards the fines imposed on the appellants’, the General Court held that the claim was not one to justify a reduction in the amount – the Commission was entitled to take the view that the allocation of projects within the European cartel configuration by the European undertakings constituted an additional factor which warranted punishment by an additional percentage to reflect the gravity of the infringement.

The appellants are French undertakings active in the sector concerning the production and supply of submarine and underground power cables.

The Treaty of the Functioning of the European Union.

Deutsche Bahn and Others v Commission, C-583/13 P, EU:C:2015:404