'Dawn raids' are two words that are guaranteed to strike the...

'Dawn raids' are two words that are guaranteed to strike the fear of God into businesses, warns Andrij Jurkiw

Dawn raids are the highly disruptive, highly invasive, unannounced inspections conducted by competition regulators - and they are on the increase. So what exactly is their purpose, what can spark a raid and what happens when the regulators arrive? These are all questions regularly asked by businesses, closely followed by another question, what can I do to be better prepared for a raid?

The purpose of a raid
No business likes to think that it is a target for a raid. However, in the current climate of vigorous cartel busting, almost any business in the UK could receive a surprise visit from the UK Office of Fair Trading or the European Commission. The sole purpose of a dawn raid is to gather information about suspected infringements of competition law. A business could receive a visit either because it is a suspect or because it might have information relevant to the matter under investigation. At present, raids in the UK can be conducted by competition regulators under the following legislation:

  • The Competition Act 1998
  • The Enterprise Act 2002
  • Regulation 17/62/EEC, soon to be replaced by Regulation 1/03/EEC.

    Usually raids take place when a regulator has some evidence of suspected price fixing or market sharing. They may also be used where a business is accused of unfairly exploiting its market power.

    What sparks off a raid?
    Businesses are often surprised to hear that many raids are sparked by a tip-off from a disgruntled ex-employee. The dismissed secretary who typed the memo ordering executives to implement a price fixing agreement, or the former executive with copies of minutes from cartel meetings are typical sources of information for the regulators. Raids may also be sparked by an informant - the executive who feels things have gone too far and wishes to confess all in the hope of being granted immunity. Both the UK and the EU have leniency programmes to encourage informants, and their use is on the increase.

    The raid itself
    So what actually happens during a raid? Most raids by the Office of Fair Trading tend to start at about 9:30am with the arrival of a team of inspectors. The teams from the European Commission in Brussels tend to be early risers and will often arrive at 9:00am. The team leader will present himself to the security/reception staff and will usually ask to see either a named individual or the most senior executive on the site. The team leader will explain that he and his colleagues are there to undertake an inspection and will hand over copies of the mandate authorising the raid. This is the point at which panic often sets in. Well-briefed reception staff will know who to contact. Those who do not appreciate the severity of what is going on may antagonise the inspectors by keeping them waiting without explaining why nobody has come down to meet them.

    At this point, someone in authority within the business needs to take responsibility for dealing with the raid - ideally, a person who has at least some idea of what to expect. The inspectors will be keen to start. The business will want to know why it is being investigated and what it is accused of.

    It is important to read the copy documents provided by the inspectors. They will indicate who is authorised to conduct the raid, under what legislation it is taking place, what the inspectors are investigating, their powers and your rights of defence.

    It is equally important to get lawyers on their way: inspectors will typically wait no more than 45 minutes for external lawyers to arrive before commencing the raid. If the business has in-house lawyers, the inspectors will expect them to be summoned as soon as possible.

    Once the raid commences, it will have the following consequences.

  • Key executives and their secretaries will have their rooms disturbed and may need to vacate them.
  • The computer network will have to be searched.
  • Staff may be questioned.
  • Staff must be told not to destroy any documents (including e-mails).
  • The inspectors will need to be shadowed at all times.
  • Photocopiers will need to be assigned to the inspectors.
  • Key staff will need to be on hand to deal with any queries (it is likely that a number of staff will have their entire working day or days disturbed).
  • The business will need to have a press release ready in case the media finds out about the raid.
  • Staff will need to be told an appropriate message about the raid.

    What happens after?
    Following completion of the raid, the business will need to work out what was in the documents taken by the inspectors, why it was raided, what has actually gone on within the business and what exposure there is for the company and its employees. Then decisions will need to be taken as to whether to apply for leniency. Last but not least, lessons will have to be learned in terms of what the business did during the raid and what procedures need to be improved in case there is a follow-up.

    No business wants to be the subject of a dawn raid. However, simply ignoring the issue in the hope that it will go away is a recipe for disaster. When it comes to dawn raids, the motto 'ever ready' springs to mind.

    Andrij Jurkiw is a partner, competition unit, Burges Salmon, Tel: 0117 939 2000

    Be prepared
    No matter how many times a business is raided, the experience will always be disruptive and highly stressful. However, if staff know what to expect, they will be in a better position to manage a raid. The sorts of things businesses should consider doing to prepare their staff include:

  • training relevant staff on what to expect during a raid
  • drawing up protocols for security staff, reception staff and key executives on how to deal with the investigators
  • establishing a team of people from whom individuals could be chosen to manage the raid on behalf of the business
  • drawing up lists of key people (including experienced external lawyers) to contact
  • running 'mock dawn raid' exercises to establish how well the staff would cope with a real raid.