Waking up to threat of OFT dawn raiders
24 November 1998
7 April 2014
14 March 2014
18 November 2013
Execution of search and seizure warrants in criminal matters in respect of electronic data held by persons bound by secrecy rules
16 July 2014
30 June 2014
The Competition Act has given dramatic new powers to the Office of Fair Trading. But there are limits, says George Peretz. George Peretz is a barrister at Monckton Chambers, London.
On 9 November, the Competition Act 1998 became law. One important change it makes is to give strong powers to the Office of Fair Trading (OFT) to investigate breaches of competition law.
These powers resemble ones that the European Commission already has under EC law, but they are likely to be more widely used by the OFT.
The OFT's most dramatic new power is the right to launch a "dawn raid", that is, to turn up at the front door of a business and to demand to see relevant documents.
The only condition the OFT needs to satisfy is that it reasonably suspects that there has been a breach of competition law. In most cases, the first that the business will know of the OFT's plans is when the inspectors arrive.
When the OFT turns up, the business will have to decide very quickly whether or not to comply.
The OFT has said it will usually wait a reasonable time for the business to get legal advice - but it is likely to expect an in-house lawyer to be able to deal with the situation on the spot.
The first thing for the business's lawyer to do is to check that the inspectors have the right documents.
You should see:
a statement setting out the consequences of non-compliance with the raid;
the inspectors' letters of authority; and most importantly,
a document setting out the scope of the investigation - you will need this to work out what the inspectors are entitled to see.
If the documents are in order, it is a criminal offence for the business, its staff or its lawyers to obstruct the inspectors in the exercise of their powers, not to comply with a lawful requirement imposed by the inspectors, or to destroy documents covered by the investigation.
And the OFT can respond to such conduct by asking the High Court for a warrant, giving it the power to force entry and to search for and seize documents. This can be obtained in advance of the raid if the OFT can show that non-compliance is likely.
Finally, non-compliance is likely to mean higher fines if the OFT eventually finds a breach.
So you need to know about the inspectors' powers. What are they? First, the inspectors are entitled to enter any part of the premises.
Secondly, they can require anyone on the premises to show them documents that they reasonably believe relate to the matter they are investigating, and to explain those documents.
Thirdly, they can require documents held on computer disks to be printed out (note that the authorities have ways of searching out supposedly deleted documents held on computer).
Fourthly, they can take copies of documents away with them.
But you need to keep a careful eye on what the inspectors are up to, because there are limits to their powers.
The OFT has no power to see documents benefiting from lawyer/client privilege. Unlike EC raids, in-house legal advice is also privileged and should be clearly marked as such.
Nor do OFT inspectors have the power to require the business to produce documents that they have no reason to believe relate to the investigation.
Finally, the inspectors have no power to ask staff questions that do not relate to the documents. If the inspectors do exceed their powers, the business can seek judicial review of the OFT.
It is also worth bearing in mind the European Convention on Human Rights (ECHR), because this will have been incorporated into UK law by the time these new powers come into force.
The convention applies to businesses as well as individuals. The Strasbourg court has held that a defendant has a right, under Article 6 of the convention (right to a fair trial), not to have answers used against him that he supplied under compulsion.
The extent of this ECHR right is still unclear - but there is clear potential for points to be made.
All business lawyers should have contingency plans to deal with an OFT dawn raid. Lawyers should also brief staff on what to expect.
This should be done before the powers come into force in early 2000, as we can expect to see the OFT flexing its new muscles very early on.