Dawn Raids! What to do?

Dawn raid plans in Africa are essential for companies and industry bodies

Publication Dec, 03, 2015

Three dawn raids by the South African competition authorities in a four week period highlight the need for companies operating in South Africa to have a comprehensive plan in place to deal with a search and seizure operation.

In October 2015, the Commission searched the offices of suppliers of liquefied petroleum gas and cylinders, as well as the LPG Association. This followed a raid at the end of September 2015 on four furniture removal companies, and another in mid-September on the offices of three recruitment advertising agencies in Gauteng. In March 2015, the Commission raided the offices of six suppliers of fire control and protection system companies.

What lessons can one learn from these recent raids?

Companies in every sector of the economy are at risk

Although the Commission has explicitly said that it will prioritise investigations in sectors of the economy with a particular impact on poor consumers in order to improve its effectiveness and conserve resources, it can and does conduct dawn raids on companies operating in industries which are not priority sectors for investigation. This means that not only companies involved in food and agro-processing, infrastructure and construction, banking and intermediate industrial products need to plan for the possibility of a dawn raid – all companies need a comprehensive plan in place.

This plan should identify the core team responsible for dealing with a search, including senior management, in-house legal counsel, the IT and security managers responsible for each site. An external support team, including the company’s competition lawyers and investor relations personnel, should also be identified. This needs to be practical to take into account travelling distances and the size and number of company premises potentially involved. Staff needs to be clear on the procedures to be followed and who is responsible for dealing with the regulator in the event of a raid.

For example, competition authority staff should be asked to wait for the company’s legal advisors to arrive before commencing the search. The warrant relied on should be photocopied. The identification of each official involved in the raid should be checked and noted. Staff should be appointed to monitor the conduct of the search and record each document reviewed, down loaded or removed by the authorities. This team of ‘shadow’ employees is critical in dealing with the complaint in the wake of a raid and they need to receive in-depth training, to ensure that they understand the crucial role they will play. Adequate measures should be put in place to protect the company’s legally privileged and highly confidential documents. It is a good idea to formulate an external communication plan to deal with questions from the press, as well as an internal communication plan to preserve confidentiality and deal with the impact on staff morale.

Industry associations beware

As the recent raid on the gas industry suppliers illustrates, it is fairly common for the Commission to conduct a search at the premises of industry associations at the same time, or shortly after, they search the offices of competitors. Besides taking advice to see that their activities are not anti-competitive each industry association needs its own comprehensive dawn raid plan in place. They should have a separate legal team on brief to assist in the event of a raid. Industry bodies which correspond with their members on issues and collect documents and data from competitors need to have clear procedures in place to identify and protect information which is confidential to their members. Clear procedures must also be put in place to protect any legally privileged advice which the association or its members may receive from their lawyers from time to time.

After a raid

Once the search is over, the company will need to conduct a thorough internal investigation in order to determine whether any contravention of the Competition Act has occurred. Although it may not be possible to qualify for immunity from prosecution in terms of the Commission’s Corporate Leniency Policy in relation to the complaint identified in the search warrant, it may still be possible to seek leniency in relation to other contraventions of the Act which the Commission is unaware of, for example, involving other product lines or different prohibited practices like minimum resale price maintenance. It may also be possible to substantially reduce the administrative penalty payable if one offers significant co-operation to the Commission.

Africa

It is important to bear in mind that competition legislation is now being actively enforced in a number of African jurisdictions. Companies that trade or have operations in neighboring countries like Botswana, Namibia, Swaziland, Zambia, Zimbabwe, Malawi and Tanzania may find that conduct which contravenes the South African legislation also exposes them to the risk of a dawn raid in neighboring states, or a contravention of other legislation and potentially fines in these other states. Some of these countries apply policies which are similar to the Commission’s Corporate Leniency Policy, or offer significant discounts on fines for substantial co-operation. These issues need to be carefully considered as soon as possible after a raid in South Africa.

A detailed competition law training and dawn raid readiness program will reduce the risk of a costly contravention and ensure that the company’s rights are protected in the event of a dawn raid. In light of the increased enforcement focus by African competition authorities, it is never too soon to consult your competition lawyers.


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