In three recent judgments issued on 5 October 2020, the General Court of the European Union ("GCEU") partially annulled the European Commission’s ("Commission") decisions of February 2017 which had authorized onsite unannounced inspections ("dawn raid”) to be carried out at the headquarters of two French food retail chains, Casino and Intermarché ("ITM"). With these judgments, the GCEU further clarified the limits of the investigative powers of the Commission.

Key takeaways

• The GCEU confirmed that the Commission has extensive powers of investigation. However, these powers are not unlimited and due account must be given to the fundamental rights of the companies being investigated. 
• For the first time, the GCEU clarified the level of evidence required to legitimately suspect an infringement of competition law and justify an onsite inspection. In practice, the applicable standard of proof will depend on the nature of the infringement concerned and is necessarily lower than that required to prove the infringement itself. It must therefore be assessed on a case-by-case basis.
• With respect to an alleged exchange of information, general and non-strategic statements communicated to the public cannot, on their own and without further evidence, be considered sufficient to raise suspicions of a potential infringement that would justify an inspection.

Case background

After receiving information concerning alleged information exchanges between several food retail chains, including in particular Casino and ITM, the Commission adopted decisions on 9 February 2017 authorizing dawn raids to be conducted at the premises of these two companies (the "Decisions"). 

These Decisions were adopted pursuant to Article 20 of Regulation No. 1/2003¹, which grants the Commission extensive powers of investigation to conduct all necessary inspections in the event of a suspected infringement of competition law. 

In this case, the Commission suspected ITM and Casino of having implemented two potential anticompetitive practices in several Member States, including notably in France:

• First, an alleged exchange of information (i) on discounts obtained from suppliers on the markets for the procurement of everyday consumer goods, and (ii) on the price of  the services provided to manufacturers of branded products or so-called commercial cooperation (the "First alleged conduct");
• Second, alleged exchanges of information concerning their respective future commercial strategies, in particular in terms of product mix, retail expansion, e-commerce and promotional policy in the markets for the procurement and sale of everyday consumer goods (the "Second alleged conduct").

On this basis, the Commission visited the headquarters of both ITM and Casino in France. These two companies subsequently brought actions seeking annulment of the Decisions, alleging, inter alia, that the Commission infringed their right to respect for their home, which is protected by Article 7 of the Charter of Fundamental Rights of the European Union and Article 8 of the European Convention on Human Rights. 

Partial annulment of the Commission’s Decisions

While generally confirming the Commission’s broad powers of inspection, the GCEU judgments reminded the Commission that its powers are not unlimited and clarified the level of evidence required to lawfully authorize a dawn raid. 

The GCEU first observed that the level of proof required to launch an inspection is obviously lower than that necessary to characterize an infringement of competition law. With this fundamental distinction in mind, and taking into account the nature of the alleged practices in the present case, the GCEU considered that the threshold for considering that the Commission has sufficiently strong evidence - to suspect a concerted practice such as an information exchange - is, in practice, relatively low. Indeed, the burden of proof on the Commission to establish a concerted practice being already eased thanks to the existence of a presumption that a company receiving information from a competitor will adapt its market behavior accordingly, the level of evidence required to launch an investigation against a company suspected of having engaged in such practices should be  even lower. 

The GCEU therefore concluded that the Commission, which brought forward evidence suggesting that ITM and Casino simultaneously requested similar level of discounts from their suppliers, had sufficiently strong evidence in relation to the First alleged conduct to justify a dawn raid. 

But, in relation to the Second alleged conduct, the GCEU considered that the Commission failed to show that it had sufficiently strong evidence to reasonably suspect an illegal exchange of information between ITM and Casino regarding their future commercial strategies. 

To reach this conclusion, the GCEU carefully analyzed the evidence on which the Commission’s suspicions were based and noted that the Commission relied almost exclusively on one piece of evidence concerning a general meeting organized by ITM in September 2016 to present its commercial priorities, at which a representative of Casino was present. 

However, it appeared that this representative in fact attended the meeting only in his capacity as co-executive director of INCA (the central purchasing organization that, at the time of the alleged practices, negotiated both ITM’s and Casino’s commercial terms with suppliers) and was bound by strict confidentiality obligations. In addition, the GCEU noted that more than 400 suppliers as well as journalists participated in that meeting, and that ITM’s announcements were publicized after the meeting in specialized press. 

The GCEU thus pointed out that the information communicated by ITM at that meeting could not be regarded as confidential, but, to the contrary, ought to be considered as genuinely public, which in itself prevents the characterization of an anticompetitive information exchange. Therefore, the GCEU concluded that, without further evidence, the mere dissemination at a public event of general information on ITM’s commercial strategy was not sufficient to give rise to a suspicion on the part of the Commission of a potential illegal exchange of information between ITM and Casino.

The partial annulment of the Decisions is a welcome reminder to the Commission that, in exercising its powers, it must give due account to the rights of the companies being raided and thus cannot, without sufficient evidence to suspect a potential infringement, order an inspection that is, by its very nature, intrusive. 

Footnotes

1) Regulation No. 1/2003 on the implementation of the rules on competition laid down in Articles 81 and 82 (now 101 and 102) of the Treaty (OJ L001 4.1.2003, pp. 1-25).