Publication
Keeping your dawn raid guidance current
Unannounced inspections or ‘dawn raids’ are used by antitrust authorities to obtain evidence when there are suspicions that individuals or businesses have infringed the antitrust rules.
Global | Publication | July 2023
On 1 June 2023, the European Commission (EC) adopted the revised horizontal block exemption regulations (HBERs) on research and development (R&D) and specialisation agreements, as well as the revised Guidelines on horizontal cooperation (Guidelines). The updated EC regulations will enter into force on 1 July 2023 and will remain valid until 30 June 2035.
During a transitional period of 2 years, agreements that do not meet the conditions of the new HBERs but which meet the conditions of one of the previous HBERs can remain block exempted.
The new Guidelines provide welcome additional guidance on information exchange both in terms of clarifying existing concepts and providing specific guidance in relation to issues not previously covered such as the use of algorithms or information exchange in the context of M&A. The EC has also improved the structure of the Guidelines to make the document more readable, a move to address concerns that the existing text is unclear and difficult to interpret.
The Guidelines provide additional guidance on certain concepts relevant for all companies seeking to self-assess information exchange agreements, e.g. commercially sensitive information, age of information, unilateral disclosure, aggregation of information/data, and indirect information exchange (hub-and-spoke and third-party facilitators). The Guidelines also make it clear that Article 101(1) TFEU will apply if an exchange of commercially sensitive information is likely to influence the commercial strategy of competitors. This is notably the case where it reduces uncertainty regarding a competitor’s future or recent actions in the market, and regardless of whether the companies involved in the exchange are granted a benefit through their cooperation.
Commercially sensitive information: Information on pricing, costs, capacity, production, quantities, market shares, customers and business strategy is potentially commercially sensitive. It is not relevant whether the exchanged information is incorrect or misleading. Public information that is readily accessible, in terms of costs, to competitors and customers is usually not commercially sensitive. The Guidelines point out that information is not public if the costs involved in accessing it act as a deterrent to do so.
Age and aggregation of information: In general, the exchange of old and historical data should not raise competition concerns. However, this must be analysed on a case-by-case basis, paying particular attention to the relevance of the information and whether it has lost its commercially sensitive nature. This will differ between industries and sectors. The Guidelines note that the exchange of raw data could be less problematic than the sharing of already processed data, particularly, where each party uses its own processing method.
Unilateral disclosure: The EC provides additional guidance in relation to unilateral disclosures. The revised Guidelines clarify that the unilateral disclosure of commercially sensitive information could lead to an infringement where a competitor requests or at least accepts the information, acts on it and where there is a causal link between disclosure and the subsequent conduct. The EC gives some examples of means of disclosure, namely through (chat) messages, emails, phone calls or input in an algorithmic tool. While it will be presumed that the recipient adapts its market conduct after receiving the information the Guidelines refer to recent case law mentioning examples of how to rebut this presumption. Finally, disclosure through public announcements, for example by unilaterally advertising prices or commenting on market events, does not exclude the risk of a competition law infringement.
Indirect exchange: The Guidelines state that an exchange of commercially sensitive information among competitors can take place via a trade association, a supplier or a customer but also through a third-party service provider, for example a platform operator, or a shared algorithm, such as real-time price monitoring tools. The Guidelines note that while using publicly available data to feed algorithmic software is legal, the aggregation of commercially sensitive information into a pricing tool offered by a single IT company to which various competitors have access could amount to collusion.
The Guidelines provide specific guidance on the use of algorithms, noting that they may increase the risk of collusion. Algorithms may allow competitors to increase market transparency, to detect price deviations in real time and to implement more effective punishment mechanisms for such deviations. The Guidelines then set out two principles for the treatment of algorithms under competition law. First, it is highly probable that pricing practices that are illegal offline, will also be illegal online. Second, liability cannot be avoided by relying on the argument that prices were determined by algorithms. The practice of data sharing comprises all forms of data access and transfer including data pools and the contribution of data to a common database. Such pools can have pro-competitive effects in cases where the data exchange is necessary, proportionate and transparent. In this context the EC mentions arrangements to address supply shortages or to prevent counterfeiting.
Limited new guidance is provided on information exchange in an M&A or regulatory context. The text notes that information exchange in the context of M&A will be subject to the rules of the Merger Regulation if it is directly related and necessary for the implementation of the acquisition which makes the restraint ancillary. In the regulatory context, the Guidelines stress that Article 101(1) TFEU will continue to apply, and companies should limit any information exchange to what is required by the regulation in question. Precautionary measures should be implemented in case commercially sensitive information is exchanged.
A new section has been added giving guidance on measures to restrict access to commercially sensitive information or to control how it is used. The use of a clean team or trustees is proposed as a measure when competitors need to exchange commercially sensitive information. The Guidelines also point out that data pool participants should only have access to their own information and the final (aggregated) information of other participants. Technical and practical measures should be taken to ensure that a participant will not be able to access commercially sensitive information from other participants (e.g. data pool managed by an independent third party). To determine whether an undertaking has publicly distanced itself from an information exchange the understanding of the other participants will be decisive. Therefore undertakings should make sure that their objections are recorded in shared minutes or in their own notes.
The authors wish to thank Aliriza Ozturk, International Trainee, Norton Rose Fulbright LLP Brussels for his contribution.
Publication
Unannounced inspections or ‘dawn raids’ are used by antitrust authorities to obtain evidence when there are suspicions that individuals or businesses have infringed the antitrust rules.
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