Case C-583/13 P Deutsche Bahn AG: Commission’s powers of inspection

The Court of Justice (“the Court”) delivered its judgment on appeal in Case C-583/13 P Deutsche Bahn AG a.o. v European Commissionwhich deals with three important issues concerning the Commission’s powers of inspection in competition cases. These three issues, as defined by DB’s three pleas on appeal, refer to, first, the interpretation and application of the fundamental right to the inviolability of the home provided for in Articles 7 of the Chapter and Article 8 of the ECHR; second, the interpretation and application of the right to effective judicial protection provided for in Article 47 of the Chapter and Article 6(1) of the ECHR; and third, the rights of defence due to alleged irregularities vitiating the conduct of the first inspection.

In this post, we will look closer into the third issue, i.e. the required scope of the Commission’s inspection decisions.

In brief, the facts of the case are as follows: DB is an undertaking pursuing its activities in the national and international rail transport sector for goods and passengers. On 14 March 2011 the Commission adopted an initial inspection decision due to potentially unjustified preferential treatment given by DB Energie to other subsidiaries of the DB group. On 30 March 2011, a second inspection decision was adopted concerning DB and potential practices implemented by DUSS in order to gain an advantage over the group’s competitors by making terminal access more difficult for them. And lastly, a third inspection decision was adopted on 14 July 2011 which concerned the establishment of a potentially anti-competitive system of strategic use of the infrastructure managed by companies within the group aimed at preventing, complicating or increasing the costs of the activities of the group’s competitors in the area of trail transport. DB, in the presence of its lawyers during the three inspections, did not raise any objections or complain about the lack of prior judicial authorisation.

Let’s come now to the merits of the third ground of appeal, i.e. the infringements of the rights of defence due to the irregularities vitiating the conduct of the first inspection.

First, the Court stated that Article 20(4) of Regulation No 1/2003 requires the Commission to state reasons for the decision ordering an investigation by specifying its subject-matter and purpose. This is a fundamental requirement, designed not merely to show that the proposed entry into the premises of the undertakings concerned is justified but also to enable those undertakings to assess the scope of their duty to cooperate whilst at the same time safeguarding their rights of defence (see judgments in Roquette Frères, C‑94/00, EU:C:2002:603, paragraph 47, and Nexans and Nexans France v Commission, C‑37/13 P, EU:C:2014:2030, paragraph 34).

Moreover, under Article 28(1) of Regulation No 1/2003, information obtained during investigations must not be used for purposes other than those indicated in the inspection warrant or decision (see judgment in Dow Benelux v Commission, 85/87, EU:C:1989:379, paragraph 17).

Such a requirement is aimed at preserving, in addition to business secrecy, expressly referred to in Article 28, undertakings’ rights of defence, which Article 20(4) is intended to safeguard. Those rights would be seriously endangered if the Commission were able to rely on evidence against undertakings which was obtained during an investigation but was not related to the subject-matter or purpose thereof (see, to that effect, judgment in Dow Benelux v Commission, 85/87, EU:C:1989:379, paragraph 18).

On the other hand, it cannot be concluded that the Commission is barred from initiating an inquiry in order to verify or supplement information which it happened to obtain during a previous investigation if that information indicates the existence of conduct contrary to the competition rules in the Treaty. Such a bar would go beyond what is required to safeguard professional secrecy and the rights of the defence and would thus constitute an unjustified hindrance to the Commission in the accomplishment of its task of ensuring compliance with the competition rules in the common market and identifying infringements of Articles 101 TFEU and 102 TFEU (see judgment in Dow Benelux v Commission, 85/87, EU:C:1989:379, paragraph 19).

It follows from the foregoing that, on the one hand, the Commission is required to state reasons for its decision ordering an inspection. On the other hand, if the statement of reasons for that decision circumscribes the powers conferred on the Commission’s agents, a search may be made only for those documents coming within the scope of the subject-matter of the inspection.

In the present case, the Commission informed its agents immediately, before the first inspection was conducted, that there was another complaint against DB concerning its subsidiary DUSS.

Following the Advocate General (see point 69 of his Opinion), the Court found that, although the efficacy of an inspection requires the Commission to have provided the agents responsible for the inspection with all the information that could be useful to them for understanding the nature and scope of the possible infringement of the competition rules as well as information relating to the logistics of the inspection, all that information must nevertheless relate solely to the subject-matter of the inspection ordered by decision.

However, whilst the General Court had observed, correctly, in paragraph 75 of the judgment under appeal, that the Commission’s inspection decision had to include a statement of reasons, it is clear that it had not taken the view that if the Commission informed its agents that there was an additional complaint about the undertaking in question prior to the first inspection being carried out, the subject-matter of that inspection as set out in that decision also had to include the particulars of that additional complaint.

That prior information, which was not part of the general background information on the case but rather pertained to the existence of a separate complaint, is unrelated to the subject-matter of the first inspection decision. Accordingly, the lack of reference to that complaint in the description of the subject-matter of that inspection decision infringes the obligation to state reasons and the rights of defence of the undertaking concerned.

Moreover, the fact that the second inspection decision was adopted whilst the first inspection was underway demonstrates the importance of the information gathered during that inspection in triggering the second inspection and that the third inspection was unambiguously based, in part, on information gathered during the first two inspections. Thus, the conditions under which the information concerning DUSS was gathered during the first inspection is capable of affecting the legality of the second and third inspection decisions.

Therefore, the first inspection was vitiated by irregularity since the Commission’s agents, being previously in possession of information unrelated to the subject-matter of that inspection, proceeded to seize documents falling outside the scope of the inspection as circumscribed by the first contested decision.

Thus,  the Court found that the General Court had erred in law in holding that the fact that the Commission told its officials about the existence of the complaint about DUSS before the first inspection decision was based on valid reasons for providing the officials with general background information on the case, without, moreover, providing reasons, when it is manifestly clear that such provision of information does not fall within the subject-matter of the first inspection decision and therefore disregards the safeguards forming the framework for the Commission’s powers of inspection.

In those circumstances, the Court upheld the third ground of appeal.

In this judgment the Court clarified the meaning of “accidental discoveries” in the course of an inspection concerning potential competition law infringements outside the scope of the inspection decision, and thus the Dow Benelux doctrine. In short, an inspection decision is well-reasoned only if the subject-matter of the inspection reflects the entirety of the information that the Commission inspectors are in possession.

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