It's competition time

Late last year Ireland's newly-constituted Competition Authority conducted its first “dawn raid” at the Dublin premises of Opel Ireland. The authority was investigating a complaint that the company's up-front advertising campaign, which promised that every Opel dealer would offer the same low price on certain new Opel cars, contravened the Competition Act.

Soon after the raid Opel modified its pricing, and the authority did not pursue its investigation. However, this immediate success proved the power of the dawn raid.

A&L Goodbody was the first law firm to complain about Opel to the authority. It did so on behalf of an anonymous complainant. Vincent Power, A&L Goodbody's head of EU and competition law, believes that the dawn raid is a very important tool for the regulator.

“The ability of a regulator to catch someone unawares is actually a very important power, because if you have to arrange a meeting with them or arrange to visit them they will be prepared for you, whereas the principle of 'thief coming in the night' is a potent weapon to be used by a regulator,” he says.

Unlike the UK, Irish Competition Law is based on European Competition Law established under the Treaty of Rome. Although the Opel case is the first of its kind, the Competition Authority's dawn raid powers are not new. They were introduced in the Competition Act 1991 which established the authority. Until 1996, however, it had no power to enforce the law: it could not carry out investigations on its initiative and it could not prosecute a company for a breach of the law.

The Competition (Amendment) Act 1996 changes this by giving the authority power to investigate breaches of Competition Law and, where necessary, competitive arrangements or abuses of dominant positions. It also provides for fines up to IR£3m or 10 per cent of turnover and/or a term of imprisonment.

The reconstituted authority is made up of four members who review any case where Competition Law is breached. This panel is chaired by Paddy McNutt, an economics professor. The other three members are Bill Prasifka, formerly a solicitor with William Fry, Iseult Goggin and Pat Massey, the authority's director of competition enforcement.

Changes brought about in the 1996 Act have made the competition system more effective. “The Irish system was not effective before the changes in 1996 because it was primarily enforced by private litigation,” says John Meade, a partner with Arthur Cox. “Competition cases can be complicated, lengthy and expensive. This meant that few cases were taken in practice.”

Do the changes in the authority's powers mean that Irish businesses can expect more unannounced visits from officials in the future?

Massey thinks so: “The 1996 Act has changed things and I expect the amount of action taken will increase.”

All the authority needs to carry out a raid is a search warrant, which is issued by a district judge. It can obtain this without any notice to a third party, including the company under investigation.

Obstructing the officials when they are actually conducting a raid is a criminal offence which can lead to fines and/or imprisonment.

During a raid officials can enter and inspect a company's premises and vehicles. A company or its employees must produce the firm's records and give any information regarding entries in these records. Officials can also copy or take extracts from the company's records.

Client awareness of Competition Law has increased since the 1996 Act, as has the burden on solicitors to advise clients on the possible consequences of any given conduct.

“Clients were already aware of their responsibilities because Competition Law was already in place, but the new obligations imposed by Irish law make these responsibilities more important,” says John Handoll, head of the EU competition department at William Fry.

The new powers conferred on the authority by the 1996 Act are backed up by rules of procedure which could leave its decisions open to challenge. In addition, without these rules, a company's or individual's rights are not set out.

“The individual should know his rights. He should know whether he has the right to be heard before a decision is taken, whether he has access to the identity of the complainant and whether he has right to challenge a decision,” says Ken Casey, a partner at Gerrard, Scallen & O Brien.

Members of the profession believe it is important that the authority is selective when taking cases. A&L Goodbody's Power believes that it is, wisely, using its power sparingly at the moment.

“In the first few years the authority has to take cases where it pretty much knows it's going to succeed,” he says.

“Comparisons could be drawn with the Serious Fraud Office in the UK, where a lot of prosecutions were brought in the early years and did not succeed, and therefore the system fell into disrepute.”