The European Commission’s €15.9 million fine against IF&F signals an expanded enforcement approach, extending its investigative powers to digital communications like WhatsApp, setting a precedent for future competition law investigations.

Background

In its recent decision dated 24 June 2024 the European Commission (the Commission), while investigating International Flavors & Fragrances IFF (France) SAS and International Flavors & Fragrances Inc. (jointly IF&F) for a possible competition law infringement, examined a senior employee’s personal WhatsApp account on their work smartphone. The Commission imposed a fine of €15.9 million for obstructing the investigation after it was discovered that the employee had deleted business-related messages with a competitor upon learning that he was a target of the investigation, essentially preventing the Commission from accessing evidence that could have been crucial to the investigation.

Expanding EU competition law to digital platforms

This groundbreaking decision marks the first time the Commission has interpreted the deletion of WhatsApp messages as obstruction of an inspection, leading to the imposition of a fine on the company. This decision highlights the Commission and national competition authorities' willingness to keep pace with technological developments and extend their inspections to new forms of communication, such as electronic communication platforms.

However, this decision also marks the first time that the cooperation procedure was applied. Specifically, after IF&F admitted, albeit retroactively, the incident and the deletion of the messages, the company not only dismissed the employee in question for breaching the law, but also fully cooperated with the Commission’s forensic technicians in recovering the deleted messages. This late admission and significant cooperation were taken into account as mitigating factors by the Commission when determining the inevitable fine, which was reduced by 50%, resulting in a final amount of €15.9 million.

The broad scope and consequences of dawn raids

The Regulation[1] grants broad, unusual, and highly effective powers to conduct dawn raids and digital forensic investigations to the Commission and the national competition authorities, including the ability to search not only business premises but also employees' personal spaces, such as their private residences, if there is reason to believe that relevant activities are taking place there,especially with the rise of remote work. Furthermore, they have the authority to inspect books, records, documents, and all kinds of data related to the business, as well as any necessary technological devices such as smartphones, tablets, and personal computers, provided they are used for business purposes.

Preventing or obstructing such a raid and investigation is a violation of the Regulation in itself and can result in significant fines, as seen in the IF&F case, which are calculated on a proportionate and deterrent basis of up to 1% of the annual turnover of the infringing company or association. In the IF&F case, the fine amounted to 0.03% of the total turnover because the obstruction was found to have been carried out intentionally by an employee who had been informed that they were a target of the investigation. It was only after the discovery of the obstruction that IF&F admitted the wrongdoing and cooperated in recovering the deleted messages. However, this cooperation led the Commission to reduce the fine by 50%, down to 0.015% of the total turnover.

It should be noted that EU personal data protection legislation remains in force, but during a dawn raid, it cannot prevent the full and comprehensive inspection of records and electronic devices. Any personal data mixed with business information may be examined if deemed relevant to the investigation. However, the inspectors are expected to process this personal data in compliance with GDPR regulations, ensuring that irrelevant personal information is excluded from the investigation.

The IF&F case, which remains ongoing as the investigation is not yet complete, illustrates how a single incident can lead to serious financial consequences. Cypriot companies, operating in a traditionally small but growing market, often face implications related to EU competition laws. Successful handling of a dawn raid by the Competition Protection Committee can only be ensured by taking proactive measures such as staff training and obtaining timely, adequate, and effective legal advice and representation. This will help companies withstand the pressure and avoid actions that could be interpreted as obstructing the inspection, which would inevitably lead to heavy fines.

Footnotes

[1]Articles 20 and 21 of the Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty