Procedural errors – rich case law and five key takeaways

Co-authored by Friederike Melters.

Earlier this month, the European Court of Justice (ECJ) declared dawn raids by the European Commission invalid. The decisions confirm that a “procedural” step like a dawn raid can be appealed by itself and that it can be invalid because of previous procedural mistakes. They tie in with other court decisions, both recent and older.

Starting with French supermarkets…

In February 2017, the European Commission carried out dawn raids at the premises of French retailers (including Casino and Intermarchè), suspecting anticompetitive agreements. The dawn raids were, inter alia, based on interviews the Commission had conducted with third parties. For its file, the regulator had only prepared summaries of these interviews but no full interview minutes.

Each of the companies appealed the dawn raids. Overturning a judgement by the EU’s General Court, the ECJ found that the Commission is obliged to record any interview it conducts to collect information related to the subject matter of an investigation, regardless of whether the interview takes place before or after the launch of a formal probe. The ECJ also held that interview recordings must be shared with the respective interviewee for review and comment.

But the ECJ did not stop there: Given that the Commission had made these procedural mistakes, the ECJ ruled that the dawn raids themselves were invalid. The court seems to have left open, though, what this will mean for the Commission’s overall investigation.

… moving on to the semiconductor industry…

The supermarkets cases tie in with other recent judgements criticizing the Commission’s (past) procedural practice: Many readers will know that the Commission – in entirely separate cases – imposed significant fines on both Intel and Qualcomm for abuse of a dominant position.

On appeal, Intel as well as Qualcomm claimed, inter alia, that the Commission had infringed their rights of defence because the regulator did not transcribe meetings with third parties. Both were successful:

• In Qualcomm, the General Court found that the Commission had not only failed to provide Qualcomm with concrete evidence of the content of meetings with third parties, but had also failed to hear Qualcomm in relation to a modification of the Commission’s case.
• In Intel, the ECJ held that the Commission must record any interview related to the subject matter of an investigation regardless of the interview’s formality. I.e., there is no distinction between “formal” and “informal” interviews when it comes to due process.

In the end, the courts annulled both the Commission’s fining decisions. Procedural errors were not necessarily decisive in both cases, but the judgements nevertheless emphasized what is expected of the Commission in practice: a thorough documentation of all interactions during investigations.

…and closing off with railways, cement, and parcel services

Supermarkets, Qualcomm and Intel in some sense are also in line with earlier judgements on procedural errors, spanning a range of industries and practices:

• Dawn raids – In 2011, the Commission dawn raided Deutsche Bahn to gather evidence on whether the company had abused its dominant position. Prior to the dawn raid, the Commission briefed its staff on a suspicion against Deutsche Bahn not covered by the dawn raid decision.
  
  During the dawn raid, the regulator found evidence on this suspicion, and issued a second and later a third dawn raid decision. On appeal, the ECJ annulled the second and third dawn raid and held that the Commission cannot use information obtained during investigations for purposes other than those indicated in the dawn raid decision, and can start a new investigation only based on new evidence genuinely found by surprise/coincidence.

• RFIs – In 2011, the Commission sent a 90-page request for information to HeidelbergCement concerning suspected anticompetitive conduct. On appeal, the ECJ found that the Commissions did not give sufficient reasoning to justify such a request for information and annulled the request (the Commission’s case then ultimately fell apart).

• Merger control – In 2013, the Commission blocked the takeover of TNT by UPS. As (a required) part of the merger control proceeding, the Commission sent a statement of objections to the parties, laying out its concerns and its potential decision, and giving the parties the opportunity to be heard.
  
  However, in its final prohibition decision, the Commission – to the surprise of the parties – used a different econometric model in its analysis compared to the one used in the statement of objections. The ECJ overturned the prohibition, finding that the Commission has to give parties the opportunity to comment on the analysis the regulator actually bases a decision on.

Five key takeaways

All these cases concern procedural errors. They are welcome clarifications regarding the rights of parties involved in regulatory investigations. There is a lot to take away from the judgements, but here are five of the most important takeaways:

• The (European) courts take procedural errors seriously and are willing to intervene.
• Dawn raids can be appealed in their own right.
• Even though there is no strict “food of the poisonous tree doctrine” in European law, to some extent the case law points in that direction.
• In an increasingly digitalized and remote working world, the question of what due process looks like could become even more complex.
• Companies should be willing to fight for their procedural rights were necessary – the (European) courts seem open to listen.
  
  

Co-author Friederike Melters studies law at the University of Munich (and recently interned at ROCAN).

Photo (for this post) by Sarah Kilian on Unsplash