On October 12, 2021, the European Commission (EC) announced that it had carried out surprise inspections of companies active in the wood pulp sector due to cartel behavior suspicions. The following week, on October 22, 2021, Margrethe Vestager, head of the European antitrust enforcer, publicly declared that it was "just the start of a series of raids that we're planning for the months to come."1 The EC delivered on its promise just three days later, with the dawn raid of animal health company Zoetis in Belgium over abuse of dominance (i.e., monopolization) charges.
The EC actually started the series in June 2021 with the surprise inspection of a German clothing company following suspicions of cartel behavior, the first in two years and since the COVID-19 outbreak. On this occasion, the EC also reversed its long-standing policy of only confirming inspections once made public, as it issued a press release regarding the inspection before the news had become publicly available. Other national competition authorities in France, Greece, Hungary, Norway, Poland, Portugal, Romania, and Slovenia also announced similar inspections in summer 2021 in a variety of sectors.
Unannounced inspections at company premises (or dawn raids) have long been a critical tool used to detect and prosecute cartels and other types of antitrust infringements. They allow the EC and national competition authorities to search company premises, seize key evidence, and interview relevant employees. However, dawn raids became less frequent following several "mega-cartels" between 2013 and 2017 in the financial, auto-parts, and trucks sectors that led to high fines and substantial follow-on damages litigation. The adoption of the Damages Directive in 2014, which facilitates damages claims of victims of antitrust breaches, also led to a reduction of leniency applications and cartel investigations. In the same October 22, 2021 statement, Commissioner Vestager also explained that "with the number of leniency applications going down, we are investing more effort in building up these other ways of detecting cartels." New detection tools include, for example, the launch of an anonymous antitrust whistleblower tool in 2017 and the creation of intelligence and forensic intelligence units, which, according to Commissioner Vestager, seem to be bearing fruit. On this basis, anti-cartel enforcement in Europe is expected to increase substantially over the coming months.
In her October 22, 2021 speech, Commissioner Vestager further stressed that the investigations would not just focus on traditional "hardcore" cartel behaviors (e.g., price-fixing or market sharing), but also on more complex cartel infringements, such as agreements on technical development, buyer cartels (e.g., fixing the prices of supplies), and no-poach agreements (agreement not to poach each other's staff). Regarding collusion on technical development, in July 2021, the EC fined five German carmakers EUR 875 million (USD 1.05 billion) for limiting competition in relation to the cleanliness of the exhausts of diesel cars (see our alert here). While buyer cartels are a regular topic in European antitrust enforcement (e.g., the car battery recycling purchasing cartel in 2017, and more recently the ethylene purchasing cartel in 2020), no-poach agreements have not been an enforcement priority in Europe.
The U.S. Department of Justice and the Federal Trade Commission have been prolific in their recent challenges of no-poach agreements. However, despite being on the radar of some national competition authorities in Europe (e.g., Portugal, Italy, the Netherlands, and Spain), no cases yet exist before the EC. Commissioner Vestager's statements are an indication of change in the near future.
Implications. Companies should re-visit their antitrust compliance programs, inspections guidelines, and training to ensure that employees know what to expect and how to respond to dawn raid procedures. In addition, Wilson Sonsini recommends that companies review their recruitment and human resources policies in Europe to ensure that policies or practices are in compliance with antitrust laws, e.g., that companies have not agreed to limit salaries or other compensation in agreement with other companies, or refused to solicit or hire employees from competing companies.
[1] Vestager, M., Speech delivered on October 22, 2021 at the Italian Antitrust Association Annual Conference, “A new era of cartel enforcement,” transcript available here.
