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Bi-lateral agreement Switzerland/Germany increases risk of dawn raids
New Cooperation Agreement between Swiss and German competition authorities
Switzerland and Germany signed the Agreement on November 1, 2022. It is expected to enter into force in September 2023 at the earliest, as the Swiss Federal Assembly still has to approve the Agreement. The ratifying German Federal Ministry of Economics and Climate Protection, on the other hand, was authorized in advance in §187 (10) of the German Act against Restraints on Competition1 to conclude the Agreement without consent of the German Federal Council.
The Agreement aims to ensure efficient enforcement of competition law in cross-border situations. For this purpose, the Agreement will enable future cooperation between the Swiss Competition Commission and the German Federal Cartel Office (together the "Authorities").
The Agreement is modelled after the agreement between the European Union and the Swiss Confederation concerning cooperation on the application of their competition laws2, which entered into force in 2014. In terms of content, there are strong parallels between both agreements. The Agreement does, however, allow for greater cooperation with the German Federal Cartel Office.
In the future, the two Authorities will be able to take coordinated enforcement actions as set forth in Art. 8 to10 of the Agreement. They may exchange views and information on the application of their respective competition laws, including information obtained in an investigation. Under certain conditions, either authority may transmit information it already possesses to the other for use as evidence.
In addition to the service of the broadly defined sovereign acts, the Agreement also allows for the direct service of notices, requests for information and other letters that do not constitute sovereign acts in the respective other contracting state.
Furthermore, the German Federal Cartel Office is entitled to disclose information obtained under Art. 8 of the Agreement to the EU Commission. The disclosure of such information to the competition authorities of other EU states, on the other hand, requires the prior consent of the Competition Commission.
After the Agreement will have entered into force, an increase in parallel proceedings in cross-border cases in Switzerland and Germany is to be expected, e.g. through coordinated dawn raids or the exchange of confidential information and evidence.
Increased risk of coordinated dawn raids
Dawn raids are a typical start of complex antitrust proceedings. They do harbor the chain risk of problematic bycatch, which can lead to further proceedings. After a short Corona-related time-out, the competition authorities have gone back to performing dawn raids on companies in the last year both in Switzerland and the European Union (the European Commission as well as the national Competition Authorities in the European Union). The German Federal Cartel Office is particularly active among the European competition authorities. In 2022, it conducted 18 dawn raids, of which 2/3 were on its own initiative and 1/3 by way of administrative assistance3. It is precisely with this authority, the Swiss competition authority can cooperate more intensively in the future. This is expected to increase the risk of simultaneous dawn raids in both countries.
Cross-border proceedings require a uniform and coordinated procedural strategy for both countries in order to protect the interests of the concerned company and to ensure that the investigations can be carried out with the least possible internal and external impact. This starts with the preparation of corporate guidelines for a potential dawn raid. Therefore, the authors provide recommendations on what to consider for companies that want to revise their dawn raid guidelines accordingly or to draw up such guidelines for the first time.
Dawn raid Guidelines
General Remarks
Dawn raids are usually conducted without warning as a coercive measure which are, by analogy, subject to the Federal Act on Administrative Criminal Law. House searches in companies may be triggered for various reasons. Given the widespread home-office practice, the term "house" also encompasses home-offices of employees. This will increase the need for cooperation and discipline further. In ignorance of the concrete inducement and the party rights, mistakes can happen already at the beginning of the house search, which can have considerable effects on the later proceedings, the sanctioning (e.g. as aggravating circumstance) and the reputation of the companies concerned.
For many employees, a dawn raid is their first contact with law enforcement. Investigating authorities can therefore cause uncertainty and concern among employees. During on-site investigations, the seizure of evidence and any interrogations, everyone involved is required to maintain the necessary objective distance and restraint vis-à-vis the investigators. An emergency number to call in case of a dawn raid and guidelines on the most important rules of conduct are essential and can provide em-ployees with basic comfort. Specific dawn raid apps, like the one of Lenz & Staehelin help accessing this information.
As long as the company has not decided to cooperate, statements on the matter in the sense of anticipatory obedience should be avoided and discussions with the investigators should be limited to the technical details of the search, if possible.
Dawn raid stages and responsibilities
In general, a dawn raid can be divided into three stages that require the actions of different groups of personnel: (i) the arrival of the investigative agency representatives, (ii) the raid itself, and (iii) the follow-up to the raid.
Internal guidelines and the targeted organizational involvement of legally qualified employees (legal department, compliance management and external attorneys) can prevent mistakes when investigators arrive, during investigative activities and their follow-up, thus protecting employees and the company. It is crucial, that such guidelines also cover home-offices. By the same token, in case of parallel dawn raids of several enforcers, cross-border information and coordination is essential.
The following rules of organization and conduct are intended to help employees properly handle investigative activities even before consulting internal or external legal counsel They should therefore take into account all of the five phases listed below:
i) Responsibilities
Response Team
The company's management is responsible for staffing an internal group of persons to accompany the investigation (the "Response Team"). The implementation of this task can be delegated to the competent compliance officer on account of its interdisciplinary function or to the general counsel (the "Head Response Team"). The exact organization of the Response Team is based on the circumstances on site and the fact whether home offices are raided and/or cross-border raids are conducted. At smaller or purely production units, this role can also be performed by experienced managers. The Head Response Team stays in constant contact with the head of the investigation authorities as well as with (internal/external) attorneys involved, and with premises raided abroad. He informs higher level offices of the companies (General Counsel, Chief Compliance Officer and the relevant competent corporate management) on the progress of the investigation.
Support Team
The Response Team is accompanied by a Support Team, depending on the extent of and reason for the search. The members of the Support Team accompany the investigators during the search.
External attorney
The company affected by a search has the right to call in an attorney, but not the right to delay the search until the attorney arrives. The involvement of an external attorney shall ensure that the rights of the company are respected by preventing mistakes during and after the raid. Also during the dawn raid, the exchange of information between the company and the external attorney is subject to attorney-client privilege, unlike correspondence with an in-house counsel.
ii) Arrival of the Investigators
Employees of the reception or plant security (or at the home-office) are usually the first to be confronted by the investigating authorities.
Members of the authorities may enter the premises and occupy the (home-)offices without waiting for the company concerned to consult an attorney. Generally, the authority grants the company a short delay to consult with legal counsel prior to the actual search. However, the search may routinely begin before external legal counsel has arrived. Still, no substantive questions should be answered without an attorney present. Therefore, it is important that agency personnel are properly received and that the chain of custody is set in motion when they arrive. For this reason, reception staff should be trained in how to handle such investigations and given a clear checklist to follow.
The reception/plant security checklist should include a list of the Response Team members, including their telephone numbers, information about the chain of command and a template for recording information about the Investigators. Reception / plant security should first clarify which agency is conducting the investigation and inform the Response Team. Then, reception / plant security accommodates the Investigators in separate rooms for the initial and final meeting with the Response Team and their subsequent accommodation during the investigation. A copier/scanner should be available in these rooms to prevent the seizure of original documents. If necessary, appropriate rooms for the investigation must be cleared immediately.
The Response Team should immediately move to the defined location upon information and should verify whether home-offices are also raided and/or premises abroad are also affected by a parallel raid.
iii) Raid
Initiation
The officer conducting the search (the "Head Investigator") must identify himself at the beginning of the investigation to the owner of the premises and inform him of the reason for the search. In the case of legal entities to the person in charge of the company, i.e. the CEO or the person present holding the highest hierarchical position in the company. To this person, the Head Investigator hands a duplicate of the search warrant, the notification of the initiation of the investigation, the instructions on the right of appeal, the information sheet and the form on the bonus scheme against acknowledgement of receipt. However, it may be in the best interest of the company to have the Head Response Team receive these documents. If these documents are not clear on parallel home-office raids and/or raids abroad the Head Response Team must raise this question.
Based on this information, the Head Response Team performs the following tasks:
The Response Team should obtain an overview of the pending investigation activities by examining the search warrant as well as the allegations, initiate personnel and organizational measures, and inform other offices in the company or group. All Response Team members should have access to an action statement on the Response Team's tasks and on the review of search warrants.
During the dawn raid, the means of communication of the company are limited, e.g. because the telephone connections are cut off during the dawn raid. That is why it is often easier if the external attorney maintains the contact with the parallel investigations abroad. Comparing the scope and the allegations of the two authorities is crucial at this stage.
Execution
Accompanying the Search
The investigators have comprehensive investigative powers. In principle, they may search all business premises and, if necessary, also private residences (home-offices) of the persons to be investigated and of third parties, as well as vehicles (Art. 48 para. 1 VStrR). In addition, the containers located in these premises and data, which can be accessed in the searched premises (access principle). Furthermore, records of any kind, whether on paper or on another data carrier, i.e. written documents, photographs, video or audio recordings (Art. 50 para. 3 VStR). Rooms that cannot be searched immediately are usually sealed for evidence preservation reasons until the search.
The investigated company has the right, but not the obligation, to participate in the search (Art. 49 para. 2 VStR). In exercising this right, Support Team members may accompany the Investigators in order to ensure that the activity can be carried out in accordance with the law while protecting the interests of the company and with the least possible impact internally and externally. The improper fulfilment of the duty to provide information as well as tampering with or breaking seals may be sanctioned. Sanctions may be imposed on the company for an amount of up to CHF 100'000 (Art. 52 KG) and on natural persons who intentionally fail to comply with up to CHF 20'000 (Art. 55 KG). The Support Team should be able to contact the Head Response Team by telephone at all times during the raid in order to inform him about the course of the search, if necessary.
In order to prevent the breaking of a seal by employees, which is punishable by imprisonment (Art. 290 StGB5), the Support Team should visibly sign the sealed room immediately, as employees may not intuitively understand the meaning of the official seal.
Due to the use of electronic communications equipment and storage media, the IT experts (in-house or service providers) should be available during the dawn raid at locations with appropriate staffing so that they can provide guidance on how their IT systems work as well as administrator rights. Usually, electronic data is only secured but not searched on site. The owner of the data is further entitled to participate in the subsequent search of the electronic data at the premises of the Secretariat of the Competition Commission through its own representation and/or an attorney (Art. 50 para. 3 VStR). It is not recommended to waive this right, especially to designate business secrets. The search of electronic data can also be objected to and sealing can be requested (Art. 50 para. 3 VStrR).
The Investigators will usually copy the data collected by the search warrant, save and index them for the subsequent search.
Interrogations:
The Investigators may interrogate representatives of the company as witnesses (Art. 42 para. 1 KG) on the day of the raid or in the following days. The company is entitled to have its external lawyer present. No substantive questions should be answered without an attorney present. The individual interrogated must be instructed about its rights, especially the right to remain silent. The authority will try to interrogate as many individuals as possible during the day of the raid and the following days. Interrogations typically take place in the offices of the authority or at the next police station.
Final meeting
After the raid itself has been executed, the Head Response Team and the external attorney should discuss the next steps with the Head Investigator. In this final meeting, they may inspect the evidence found during the raid, comment on its contents and, if necessary, request that it be sealed. As papers, electronic communication and other records seized are very likely to include private and privileged information, it is strongly recommended to seal all documents and data seized. Especially in cases of parallel raids abroad this is crucial, as otherwise documents and date seized in both raids may not any longer be protected.
A signed list of all copies and extracts that have been produced during the search must be requested. The objection to the seizure and removal of documents and data will be formally noted on file. It must be checked whether all items seized are covered by the scope of the search warrant and whether they are listed in the search and seizure protocol (cf. Art. 47 para. 2 VStrR).
At the end of the final meeting, the principles of the future cooperation should be discussed. Outstanding points, such as the submission of additional documents and data, are to be clarified. The date and time of the end of the search is to be recorded on the search warrant. Efforts are to be made to ensure that the Investigators refrain from making a press release.
iv) Follow-up to the search
The formal follow-up on the dawn raid serves to record the dawn raid process as well as to record and prepare all seized documents and data for internal assessment. The members of the Support Team provide their records of the investigation activities and produce a detailed chronology. For this purpose, all handwritten notes, reports, and transcripts drawn up by the persons involved are sorted and compiled into records.
On the substance, the follow-on activity focuses on assessing the legal risk. If it turns out that employees have caused potential anti-competitive behavior, the companies concerned regularly feel compelled to start an internal investigation. Part of this defense strategy is the assessment of cooperating with the authority (i.e. application for immunity, for leniency, for leniency plus). This strategy needs to be coordinated with parallel investigations abroad.
Footnotes
1. §187 of the German Act against Restraints on Competition (GWB) is available on the following website: https://www.gesetze-im-internet.de/gwb/__187.html.
2. The agreement is available on the following website: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A22014A1203%2801%29.
4. Federal Act on Administrative Criminal Law.
5. Swiss Criminal Code.
Authors
Claudia Walz