What is a dawn raid?
The following provides guidance on what you should and should not do during a dawn raid. The phrase “Dawn raid” is commonly used to describe unannounced inspections of a competition authority at the premises of a company to search and seize (copies of) documents and data that they may use against the company in antitrust proceedings. The term “dawn raid” stems from the fact that such inspections usually start in the early morning hours.
What can the authority do?
Where can officials search?
The officials of the Hungarian competition authority (GVH) or the European Commission (EC) usually search business premises (meeting rooms, offices, etc.). The officials of the GVH may also inspect private rooms and vehicles if they are used by the current executives (managing directors), employees, agents, or a person (shareholder) exercising control over the company, or who were in such positions during the period under investigation.
EC officials may only search private vehicles or rooms based on the prior consent of the national courts where the private rooms/vehicles are located; otherwise, the search is limited to the business premises of the company.
Can they enter without your permission or in your absence?
The officials may appear and enter the premises even without the specific consent (or even presence) of any the management/reception/employees or legal adviser. The applicable rules foresee that the search is conducted preferably in the presence of those concerned, but there is no obligation to do so. The competition authority usually waits for the management/lawyers if they arrive within a reasonably short time.
What do the officials actually do during the search?
Once inside, the officials collect and copy potential evidence to prove the alleged infringement – written material, including contracts, handwritten notes, and calendars. In today’s hi-tech society, do not be surprised if your computer/notebook, tablet, or even mobile phone is seized and copied. To this end, the officials may resort to forensic IT tools.
Officials may also ask questions at the premises being searched. Both the scope of potential addressees of the questions and the subject matter of the questions are wider under Hungarian than under EC law.
Can you be forced to cooperate?
The competition authorities may impose a procedural fine for non-cooperation.
The GVH may impose a fine on the company (eg, if someone breaks the seal put on premises or documents by the authority) and on any individual (eg, if an employee prevents the authority making a mirror-copy of his laptop). The minimum procedural fine is HUF 50,000 (ca EUR 170) for natural persons and – as of 1 July 2014 — HUF 200,000 (ca EUR 670) for companies. The maximum fine is HUF 500,000 (ca. EUR 1,700) for natural persons and 1% of the company’s net turnover in the preceding business year for companies.
The EC may impose a fine — of maximum 1% of the company’s net turnover in the preceding business year — only on companies.
The GVH may also resort to the help of the police to overcome resistance by the raided company in granting access to certain premises or documents.
Your rights, the authority’s obligations
There are various rights that companies and employees should be aware of in order to use them to the best extent possible – it is too late if you become aware of these rights after the dawn raid.
The GVH must obtain prior court authorisation for the search, specifying the possible infringement. Companies being raided should therefore look out for and request to review the court authorisation of the search. The GVH also issues a decision on the start of the proceeding.
In case of a dawn raid carried out by the EC, companies should be presented with a certified copy of the decision issued by the EC. Written authorisations on the names of the officials and the EC ID cards should also be requested.
The above documents should be requested and checked before the start of the search. This is pivotal as knowledge of the actual scope of the search allows the company under investigation to keep the search and any questions of the officials within the boundaries of what has been approved by the court or the EC.
Legal privilege – client attorney privilege
Documents containing communication between the company and its attorneys for the purposes of exercising the right of defence may not be seized or examined during a dawn raid and later may not be used as evidence against the company.
How does this work in practice? The company or the authorised attorney must refer to the legal privilege when the officials wish to seize such documentation. The officials may take a so-called “cursory look” at the documents to establish whether the reference to the client-attorney privilege is clearly unfounded. If in the view of the company and the official on the privileged nature of the document does not correspond, the officials must place the disputed documents in a sealed envelope. The fate of the documents is then decided directly (Hungarian law) or ultimately (EU law) by the relevant court.
Communication with in-house lawyers is not protected by the legal privilege under Hungarian or EU law.
The Hungarian dawn raid rules are mostly harmonised with European competition law, with some procedural differences, one of which concerns documents not covered by the initiating decision/prior court authorisation.
Under European competition law, documents related to market B may not be searched, copied, or seized if the search warrant only covers a possible infringement on market A. On the contrary, under Hungarian competition law the GVH may search and seize documents not related to the subject of the investigation and not covered by the court authorisation if they indicate an antitrust infringement. In this case the GVH must obtain the court authorisation afterwards. If such authorisation is not granted, the obtained evidence may not be used by the GVH.
You should make use of further practical rights, including making a copy of all documents being seized/copied, which makes it possible to ascertain what evidence the competition authorities have in their possession, making preparation of defence easier.
Being aware of your rights during the dawn raid may also affect the scope of documents the competition authorities may take with them and use against the company as evidence in the antitrust proceeding.
The few hours spent at the company may be crucial for the outcome of the proceeding, as well as for the future of the company.
There are various rights that companies and employees should be aware of in order to use them to the best extent possible – it is too late if you become aware of them after the dawn raid.