Surprise dawn raids are being stepped up
THE Competition Commission recently published its 2015-16 annual performance plan, which was developed in line with its strategic plan for 2015-20 and in terms of which it set a five-year plan with performance targets to ensure that it achieves its strategic goals.
One of the commission’s strategic goals is effective competition enforcement, and it expects to see the number of initiated cartels rise from 10 cases for 2015-16 to about 18 cases for 2019-20.
A dawn raid is one of the most powerful tools in the commission’s arsenal for fulfilling its investigative function.
As the name suggests, such a raid occurs when the commission arrives in the morning at the premises of a firm without prior warning and with a warrant authorising it to search for and seize information relevant to an ongoing competition law investigation.
Theoretically, by exploiting the element of surprise, a dawn raid enables the commission to uncover evidence of contraventions of the Competition Act, 1998 and/or procure information relevant to an investigation, which would presumably otherwise be impossible to obtain.
Dawn raids can be traumatic for firms as the commission will often bring in 20 or more investigators and a forensic information technology team to search a firm’s documents for competitive transgressions.
The commission will also involve the police if resistance is expected.
A CEO cannot help but be apprehensive when faced with this daunting scenario, and therefore it is important for firms to be prepared and to understand their rights and obligations relating to dawn raids.
The commission has historically utilised dawn raids sparingly, with about eight such raids being conducted between 2000 and last year.
The first conducted by the commission was in 2000 as part of its investigation into the cement industry. However, the Competition Appeal Court set aside the dawn raid on account of procedural irregularities.
Pursuant to its first and unsuccessful dawn raid in 2000, the commission refrained from using its search-and-seizure powers until 2007.
The commitment to ensure effective competition enforcement has led to an unprecedented number of dawn raids being conducted by the commission.
This year alone, it has conducted four dawn raids in different markets: the market for the supply of liquefied petroleum gas, the market for the provision of recruitment advertising services, the market for the provision of furniture removal services and the market for the provision of fire control and protection systems. About 19 firms have been raided. The commission has not only made commitments to initiate more cartel cases, it has also set targets for the success rate of cartel prosecutions. More specifically, it seeks a successful prosecution rate of 70% of cartel cases for 2015-16 and a 90% successful prosecution rate for 2019-20.
The provisions of the Competition Act bestow extensive powers on the commission in the context of dawn raids.
Perhaps the most invasive of these powers is the right to mirror image the firm’s server. This gives the commission access to electronic documents detailing a firm’s every action, potentially spanning decades.
The commission runs keywords searches on the mirror image in order to sift out documents and correspondence which may provide evidence of cartel conduct.
Despite the sheer volume of information stored on a server, if a firm’s employees are engaged in anti-competitive conduct, the commission is likely to find evidence of this conduct in this manner.
Moreover, it may also come across other contraventions which are unrelated to the subject matter of an investigation.
This power can serve as a springboard for the initiation of further complaints and investigations.
With the increasing number of dawn raids being conducted, firms in all industries would do well to identify and root out any cartel conduct. This is especially the case for firms that are already on the commission’s radar for previous contraventions.
Firms need to ensure that they are apprised of their rights and responsibilities in the event of a dawn raid, as this will enable them to resist an invalid raid, or to manage the process and identify possible risks of contravention (and steps in mitigation thereof).
Based on the commission’s strategic plans, firms may expect dawn raids to continue to take place regularly for the foreseeable future. Those that are not prepared for them face potentially calamitous consequences.
The Competition Commission has set its sights on initiating more cartel prosecutions
Natalia Lopes is a director, and Betty Mkatshwa is a candidate attorney in ENSafrica’s competition department.