Anyone for a spot of fishing? Opinion of AG Wahl in Case C-583/13 P Deutsche Bahn AG (and others) v European Commission
(by Alfonso Lamadrid and Sam Villiers)
Last Thursday AG Nils Wahl delivered his opinion on the Deutsche Bahn case, criticising part of the General Court’s September 2013 judgment (see here).
As you may remember, this General Court judgment served to confirm the Commission’s wide inspection powers under Art. 20 of Regulation 1/2003 when conducting dawn raids, stating specifically that there was no need for the Commission to obtain judicial authorisation prior to a raid and that documents discovered (genuinely) by accident which indicate a separate infringement may be used as evidence of that infringement, as long as the proper procedural requirements are respected.
The facts
The Commission had information that DB was offering its subsidiaries preferential rebates when supplying electric traction energy to operators.
During the course of the dawn raid at various DB premises in Germany, documents were discovered which the Commission considered may be indicative of separate anti-competitive conduct, outside the scope of the inspection decision (regarding the ‘strategic use of infrastructure’), but in relation to which it had also received a prior complaint. The Commission decided that a fresh investigation needed to be carried out in relation to this new conduct and so adopted a second inspection decision while it was still inspecting DB premises. (Seemingly not fully satisfied with the evidence gathered in the first two inspections, the Commission returned to DB premises later that year for a third inspection.)
DB was not all happy with the conduct of the Commission during the inspections and so brought actions for the annulment of all three Commission inspection decisions.
Prior judicial authorisation required for dawn raids?
DB argued that because the three inspection decisions were taken without prior judicial authorisation, various articles of the ECHR and the EU Charter (the right to the inviolability of private premises and the right to fundamental judicial protection) were infringed. With this plea the applicants were effectively challenging the current legal framework applicable to inspections under EU Competition law. AG Wahl dismissed this argument, agreeing with the General Court’s interpretation of the case law of the ECtHR.
Citing the ECJ’s Judgments in Chalkor and KME Germany, Wahl states that ex post judicial review carried out by the EU Courts offers an adequate level of protection of fundamental rights. He also makes a distinction between this case and the recent and interesting Czech case of Delta Pekarny, where the ECtHR ruled that fundamental rights were infringed, observing that this was due to the fact that the inspection decision was not subject to any—either ex ante or ex post—judicial review.
The opinion of the AG (and General Court) would seem to be sensible, in theoretical terms. Necessarily requiring prior judicial authorization, when ex post judicial review is available, seems excessive. A separate issue, though, is the quality of the judicial review itself. It is all very well catering for a judicial review – but it must be effective, and it is arguable that this has always been the case when it comes to, among others, the Commission’s investigatory powers (see here).
In any event, as we will explain below AG Wahl seems to strike the right balance in this regard.
‘Surprise’ discoveries
It is on the issue of the discovery of documents indicating a second infringement that the AG’s opinion differs from the General Court’s judgment. Although they both agree that under Art. 28 Reg. 1/2003 any documents collected during the inspection must be used for the purpose for which it was acquired (save for some exceptions in the regulation), and also that, by way of derogation, following the Dow Benelux case, documents found which aren’t covered by the inspection decision can be used to start a new investigation, AG Wahl thought that the GC neither correctly applied the Regulation nor the Dow Benelux case (paras 58-83) to the facts of this case.
The Commission’s undoing, it seems, is that before carrying out of the first inspection, Commission inspectors had been notified that a separate complaint had been filed against DB for a separate infringement. Dismissing the Commission’s argument that inspectors had been told about this merely for background information, AG Wahl suspected the “only plausible explanation […] is that information on the DUSS suspected infringement was given to the Commission staff so that they could ‘keep their eyes peeled’ for evidence related to the second complaint” (para 77). This means that the Commission effectively circumvented Art 20(4) of Reg 1/2003, either deliberately or through negligence.
In Dow Benelux the Court ruled that there was no reason why the Commission should disregard documents pointing to a different infringement if it was genuinely found by accident, but, as observed by AG Wahl in para. 82 “[t]his is clearly not the type of conduct which the Court meant to allow under its Dow Benelux case-law. There is, in my view, no difference between a case in which the Commission launches an inspection without a valid decision and one in which the Commission proceeds on the basis of a valid decision, but searches for information relating to another investigation, not covered by that decision”.
As Wahl states, there seems to be no good reason why the Commission did not just adopt two separate decisions, and simply carry out the inspections at the same time.
(For an interesting discussion on the subsidiary issue of the burden of proof, see paras. 84-99).
Final remarks
AG Wahl recommends the ECJ to annul the second and third Commission inspection decisions, believing that the breach of DB’s rights of defence and right to the inviolability of private premises is a sufficient basis. It will be interesting to see whether the ECJ takes the advice.
AG Wahl’s sensible and nicely drafted Opinion does a very good job summarizing the state of the law regarding inspections on the part of the European Commission, and only for that reason makes an interesting read. More importantly, in our view it also strikes a right balance by acknowledging that the Commission is to enjoy a certain leeway when it comes to investigations powers whilst, at the same time, advocating for an effective review over the use, and possible misuse, of those powers.
Chillin'Competition 
So if the ECJ were to annul the second and third inspection decisions, what would happen with the evidence gathered through those decisions?
Albert
19 February 2015 at 1:50 am
points 106 to 109 of the AG Opinion seem relevant to answer your question:
“106. the Court has clarified that, in the event that an inspection decision is annulled by the EU Courts, the Commission is prevented from using, for the purposes of proceeding in respect of an infringement of the EU competition rules, any documents or evidence which it might have obtained in the course of that investigation. Otherwise, the decision might, in so far as it was based on such evidence, be annulled by the EU judicature. (44)
(…)
108. … I observe that Article 28 of Regulation No 1/2003 is formulated in very broad terms. In particular, the verb employed (‘to use’) has a comprehensive meaning. The rule codified in that provision is, arguably, a general bar on any use of information gathered during an inspection in the context of different investigations, unless a specific exception applies. This is, after all, logical since that principle is of the greatest significance, intended to protect not only the professional secrecy of the undertakings concerned but also, and more importantly, the rights of defence of those undertakings. (46)
109. I thus deduce that the Commission is not only precluded from referring to that information as evidence of an infringement but, more generally, it cannot use that information as the basis for any other decision which is unfavourable or prejudicial to the undertaking concerned (or to any other undertaking, for that matter). I see no reason why that prohibition should not also cover decisions ordering undertakings to submit to an inspection under Article 20(4) of Regulation No 1/2003.”
[footnote 44 refers to the roquette frères judgment and footnote 46 to the dow benelux judgment]
luca
19 February 2015 at 7:13 pm
This consequence makes perfect sense to me. Thanks for the comments!
Alfonso Lamadrid
20 February 2015 at 8:50 am
AG Wahl’s opinion is really good and makes perfect sense to me.
Yet, besides the specific issue at stake, I have been trying to read it in a broader perspective, that is the long-debated issue of DG-Comp being prosecutor and decision-making body at the same time.
The reasoning of AG Whal at paras 61-63 below may very well be read in that wider context too. Yet, in my view such a position appears too indulgent, insofar as AG Whal states that “it is for the EU Courts to ensure that the rights of the undertakings and citizens involved in an investigation are fully respected”, thereby ultimately “accepting” the extensive powers enjoyed by DG Comp, to the extent that they are subject to an ex-post judicial control by the EU Courts.
I may agree with AG Wahl the day when the DGComp will have to plead the whole case before the EU Courts, as that being the ultimate EU institution that can impose a fine on undertakings for competition law violations.
Any thoughts?
61. It cannot be disputed that the Commission has been granted wide investigative powers under Regulation No 1/2003 which severely interfere with certain fundamental rights of companies and individuals. These powers are, as mentioned above, exercised on the basis of no (or little) ex ante judicial control. In addition, it should be pointed out that the internal checks and balances typically provided for when the Commission is to adopt decisions and other legally binding acts (33) do not apply to their full extent for decisions under Articles 20 and 21 of Regulation No 1/2003. Indeed, the power to adopt decisions pursuant to those provisions has been entrusted (34) to the Commissioner responsible for competition policy, who, in turn, has sub-delegated that power to the Director-General of the Commission’s Directorate-General for Competition (‘DG Competition’). (35) This means that inspection decisions are virtually decided by the staff of DG Competition alone, with other Commission services playing little or no role in the decision-making.
62. It is generally accepted, however, that the Commission should be entitled to enjoy such extensive powers, and to an appropriate margin of discretion in exercising them, as competition infringements constitute serious contraventions of the economic laws on which the European Union is founded. Likewise, it is reasonable that the adoption of inspection decisions is delegated to the Commissioner responsible for competition policy, so as to permit the rapid execution of inspections, while minimising any risk of leaks. (36)
63. At the same time, however, precisely because those powers are so extensive, the discretion so ample, and the decision-making subject to so few (judicial or administrative) prior controls, it is for the EU Courts to ensure that the rights of the undertakings and citizens involved in an investigation are fully respected. (37) In other words, the Commission is rightly entitled to interfere, at times severely, with the fundamental rights of undertakings and citizens in the course of antitrust investigations. It cannot, however, go beyond the reach of the law, as this would encroach upon the inviolability, as guaranteed under EU law, of the essence of those fundamental rights. (38)
Gabriele
21 February 2015 at 10:53 am
DGComp having powers or pleading cases? I tought it was the Commission. I have never seen DGComp pleading cases. Anyway, in the debate on the current institutional structure (which I thought it was “over” after some recent judgments, but I may be missing something), AG Wahl has not been one of those saying that it is “all wrong”.
joan
23 February 2015 at 2:43 pm
Hi Joan,
I meant to say those who carry out the investigation. My point is in perspective, if and when there will be a full separation of powers in comp law cases. Of course currently dgcomp does not plead cases.
True that as recently as in the Schindler case, the issue of the separation of powers appears “settled” or “over”, as you say. I would add “for the time being”, as I am not so sure that companies or other stakeholders are happy with the current situation. So, I would not be surprised if the issue should come up again from time to time. And I wonder whether, for instance, the accession to the ECHR may change the position also of the EU courts.
Gabriele
23 February 2015 at 10:38 pm