By Jennifer Finnigan, Head of Competition Law, Partner in the Corporate & Commercial Law department
The Competition Commission is increasingly enthusiastic in the execution of dawn raids. This may well result in search warrants and the execution of dawn raids coming under the spotlight during 2017. When dealing with a dawn raid, it’s always important to remember the basics. Ask for a copy of the warrant. Read the warrant and make sure that the premises to be searched are properly identified in the warrant. Carefully observe the way the Commission conducts the raid and keep notes recording your observations. Remember that section 49(1) of the Competition Act obliges the Commission to carry out searches “with strict regard for decency and order, and with regard for each person’s right to dignity, freedom, security and privacy”.
Warrants are supposed to tell the person being searched why and by what authority their privacy is being invaded. The case of Thint (Pty) Ltd v National Director of Public Prosecutions and Others; Zuma v National Director of Public Prosecutions and Others held that a warrant must be “reasonably capable of being understood by the reasonably well-informed person who understands the relevant empowering legislation and the nature of the offences under investigation”. If the warrant is unintelligible then even if the investigators give the person being searched further particulars or explain the warrant, the warrant may still be unlawful.
Are broadly framed warrants lawful? The PPC Case is the only South African case dealing with search warrants issued in terms of the Competition Act. In that case, the Court held that the Commission must provide the searched person with a copy of the affidavit which the Commission used to obtain the warrant and that refusing to do so infringed PPC’s right to access to court. In the PPC Case, the Commission’s search warrants were also challenged on the basis that they were too broadly framed. The Court did not reach any conclusions about this issue but it pointed out that “with a view to the future … serious questions are raised by the argument that the warrants are overbroad, imprecise and not in accordance with the Act. I refrain from making any further comment, other than to say that a warrant should be tailored for the occasion not simply taken from stock” (paragraph 74).
The Thint case dealt with the National Prosecuting Authority Act which is very similarly worded to the Competition Act. The court held that a warrant which allows investigators to carry out an unlimited search is an invasion of privacy. There must be a clear link between the alleged offences and the potential role of the person being searched. Dawn raids involve a balancing act between the legitimate purpose of the Commission in enforcing the Competition Act and the constitutional right to privacy. As the Competition Appeal Court applied the principles governing the validity of a search warrant issued in terms of criminal statutes to a summons issued in terms of the Competition Act, the validity of a search warrant issued in terms of the Competition Act may also be tested against criminal law principles.
The Constitutional Court decision of Minister of Safety and Security v van der Merwe and Others 2011 (5) SA 61 (CC) neatly summarizes the requirements for a search warrant issued in terms of criminal law. A valid warrant must identify the law in terms of which it is issued, identify the searcher, mention the authority conferred on the searcher, identify the premises to be searched, describe the articles to be searched for and seized in sufficient detail and specify the offence being investigated, all “in a reasonably intelligible manner”. When considering the validity of the warrant, the key questions are whether the warrant clearly describes what it permits and whether it goes beyond what is permitted by law?
The PPC Case established the key principle that the person being searched is entitled to know the case against him. Thint qualifies this principle by saying that a broad description of the scope of the investigation is all that is required and that a search warrant doesn’t have to list the suspects or where and when the offences were suspected to have been committed. Langa CJ held that providing these details in the warrant may undermine an investigation or that this information may not be known to the investigators at the time the warrant is issued.
In March 2016, the Court of Justice of the European Union dealt with a challenge to requests for information issued by the European Commission following dawn raids which it had carried out on cement companies (HeidelbergCement AG v European Commission 62014CJ0247). European institutions must state the reasoning followed when adopting measures so as to enable the people subject to those measures to understand the reasons for them and to enable courts to review the legality of those measures (article 296 of the Treaty for the European Union and see paragraph 16 of HeidelbergCement). The court went on to say that it is not necessary for the reasons to include all the relevant facts and points of law (at paragraph 16) but that the requirement to state specific reasons “is a fundamental requirement, designed not merely to show that the request for information is justified but also to enable the undertakings concerns to assist the scope of their duty to cooperate whilst at the same time safeguarding the rights of defence” (paragraph 19). As a minimum, the Commission must clearly indicate the suspicions which it intends to investigate (paragraph 21). HeidelbergCement referred to the decision of Nexans SA and Nexans France SASA v European Commission, Case C-37/13P which dealt with a challenge to documents authorizing a dawn raid. In describing the requirements of the statement of reasons required for institutional measures of the European Union, the court held that “the statement of reasons required … must be appropriate to the measure at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted that measure in such ways as to enable the persons concerned to ascertain the reasons for it and to enable the competent Court of the European Union to exercise its jurisdiction to review legality” (at paragraph 31). The court went on to say that the reasons will be assessed taking account of the circumstances of the case, the measure concerned (for example, whether that measure involves a surprise inspection or dawn raid or a request for information similar to a South African summons), the nature of the reasons given and the interests of the addressee of the measure in obtaining explanations (at paragraph 32). The court recognized that as dawn raids usually take place at the beginning of an investigation, the Commission may lack “precise information to make a specific legal assessment and must first verify the accuracy of its suspicions and the scope of the incidents which have taken place, the aim of the inspection being specifically to gather evidence relating to a suspected infringement” (at paragraph 37). In HeidelbergCement, however, the court held that “an excessively succinct, vague and generic – and in some respects, ambiguous – statement of reasons does not fulfill the requirements of the obligation to state reasons … in order to justify a request for information” made at a time when the Commission had information which would have enabled it to present its suspicions of infringement more precisely (at paragraph 39).
Remember that the execution of these warrants is a unilateral act. It doesn’t need the agreement or consent of the person being searched.
IT issues are usually the focus of objections to search warrants. In practice, the Commission copies enormous databases and then has these databases searched using keywords so that they can try and find the evidence it needs to support its case. The difficulty with this is that it can copy vast quantities of irrelevant highly confidential information. It may also be copying information on storage facilities which are not based in South Africa. Searches of data storage “clouds” can lead to complicated questions about jurisdiction and the scope of the warrant. All these issues are likely to hit the Competition Tribunal sooner rather than later bearing in mind the zeal with which the Commission carried out its dawn raid program during 2016.
For more information on the above contact
Jennifer Finnigan, Head of Competition Law
+27 82 499 0522