Breaking seals in competition investigations – a “pandora’s box” for compliance

January 2013  |  MARKET OUTLOOK 2013

Financier Worldwide Magazine

January 2013 Issue

January 2013 Issue

Europe’s highest court has dismissed an appeal against a European Commission (Commission) decision imposing a fine of €38m on E.ON Energie AG (E.ON) for breaking a seal during an EU competition inspection or ‘dawn raid’. The case should be viewed against the growing body of cases where the Commission has sanctioned companies for practices which it suspects may interfere with its investigations. 

The Commission is entitled to seal any business premises and books or records for the period and to the extent necessary for its inspection. It is entitled to impose a fine of up to 1 percent of total turnover in the preceding business year for intentional or negligent breach of a seal.

In May 2006, the Commission conducted a dawn raid of certain energy companies in Germany. During its inspection at E.ON’s premises, officials placed a seal on an office door, in order to secure documents. On the second day of the inspection, the Commission discovered that the seal that it had placed had been broken. A ‘VOID’ message was evident over the surface of the seal.

In its 22 November judgment, the Court of Justice dismissed in its entirety E.ON’s appeal against the General Court’s judgment upholding the original fine. The Court of Justice noted that the fine represented only 0.14 percent of E.ON’s annual turnover. A fine of up to 10 percent of E.ON’s annual turnover could have been imposed if the Commission had established the existence of anti-competitive behaviour that was the subject of its investigation. Therefore, the fine of €38m was not considered disproportionate in light of deterrent goals.

The judgment will no doubt embolden the Commission in cracking down on what it views as procedural violations that jeopardise its competition law investigations. It comes as a stark reminder of the monetary significance of penalties not only for violating the substantive provisions of EU competition law, but also the enforcement obligations to comply with inspection visits.

Although this was the first time the Commission had imposed a fine for breaking a seal, later cases have raised similar issues. For example, in March 2012 the Commission fined Energetický a průmyslový and EP Investment Advisors a total of €2.5m for obstructing an investigation into suspected infringements of EU competition law in the Czech energy sector. An appeal has been lodged against the decision.

Several practical insights emerge for businesses designing compliance programs. First, ensure that dawn raid guidelines and staff training provide specific guidance on the obligations to cooperate and the role of seals in a competition investigation. Second, steps should be taken to ensure that seals are not unintentionally broken, including identifying sealed areas using protective markers and banners if there is any risk that seals may be interfered with. Finally, if there are disagreements between company representatives and Commission (or national authority) inspecting officials as to the procedure that was followed, ensure that any company objections, clarifications and explanations are noted on the minutes of inspection.

Suzanne Rab


King & Spalding 

T: +44 (0) 20 7551 7581


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Suzanne Rab

King & Spalding

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