Investigation is an evidence gathering and assessment tool used by competition authorities in order to uncover competition law infringements. By collecting, interpreting and assessing the evidence, competition authorities are required to prove the facts constituting an infringement, its scope, the involvement of different undertakings, the continuation and duration of the illegal conduct.
The illegal conduct under investigation and the evidence gathering methods directly depends on the powers granted to competition authorities.
In the EU, the principal competition law enforcement agency is the European Commission (EC). The investigative powers are provided by Regulation 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 101 and 102 of the TFUE. The EC performs activities of fact-finding and has the power to make determination on liability. In the US, both the Federal Trade Commission (FTC) and the US Department of Justice (DOJ) Antitrust Division enforce the US antitrust laws. By enforcing Federal Trade Commission Act, FTC is primarily responsible for civil violations of antitrust laws and can initiate proceedings in court or adjudicate them administratively. By enforcing the Sherman Act, the DOJ is also empowered to bring civil cases, but it has the exclusive competence to prosecute criminal antitrust law violations. However, the DOJ must seek criminal enforcement actions exclusively in federal courts. In the UK, the Competition and Markets Authority (CMA) has competition law powers which apply across the whole economy, while sectoral regulators may exercise competition law powers concurrently with the CMA in those sectors for which they have responsibility. The CMA uses its powers to investigate suspected infringements of competition law and impose sanctions under Chapters I and II of the Competition Act 1998, as well as under the Enterprise Act 2002.
Usually, the focus of investigations is undertakings but, in some jurisdictions, including the UK and the US, competition authorities also have the power to investigate individuals in case of the most serious competition law infringements.
Investigations may originate in different ways. For example, competition authorities may react and launch investigation after receiving complaints made by a third party, information provided by individuals (“whistleblowers”), leniency applications from one of the participants to a cartel and information received from other governmental bodies, or alternatively, they may take proactive steps to identify potential competition law infringements and gather information on their own initiative. The combined effects of emerging digital economy and lowering numbers of leniency applications are the main drivers beyond the decisions by several competition authorities to establish dedicated intelligence and data units. The use of the IT tools such as data engineering, artificial intelligence and machine learning could help the authorities to analyse digital markets and large sets of data more easily, thereby increasing the number of ex officio investigations.
Several types of evidence can be used to prove competition law infringements. The US legislation provides a broad definition where antitrust evidence means “information, testimony, statement, documents, or other things that are obtained in anticipation of, or during the course of, an investigation or proceeding under any of the Federal antitrust laws or any of the foreign antitrust laws” (15 USC 6211(1)). Competition authorities rely on both direct evidence, such as documents, written or oral statements that directly embodies or describe an infringement, and circumstantial evidence which can come in different forms, including communication evidence between undertakings (e.g. records of telephone conversations, minutes or notes) and economic evidence (OECD, 2006).
In the EU, the EC is empowered to require undertakings and associations of undertakings to provide all information necessary for an investigation, inspect business and private premises in order to examine their records and potentially seize relevant evidence, and interview any natural or representatives of legal person who consents to be interviewed. With respect to the criterion that requires information to be necessary, EU courts have ruled that EC enjoys a considerable margin of appreciation (Qualcom, paragraph 69). Further, the EC does not have to follow any specific sequence when it chooses among investigative tools. For example, the fact that inspections have already taken place cannot diminish powers to request information and vice versa (Orkem, paragraph 14). With a view to empower the competition authorities of the EU Member States to be more effective enforcers and to harmonise the enforcement rules, in 2019 EU legislators adopted the ECN+ Directive which aligns enforcement powers of national competition authorities with those held by the Commission. In the US, FTC and DOJ can gather information by issuing a subpoena or by civil investigative demands requesting testimony, documents, written reports, and written answers. In criminal investigations, DOJ may also use searches of business and private premises supported by the FBI investigators. In jurisdictions where some competition infringements are prosecuted as criminal offenses (for example, in the US, UK, Denmark, Canada, Brazil and Israel), the authorities are also empowered to exercise additional criminal investigation powers to detect cartels (e.g using wiretaps or undercover agents).
All the investigative powers intervene with the private spheres of companies and individuals concerned and must therefore be exercised in line with due process. The European Court of Justice (ECJ) repeatedly ruled that the EC must respect the rights of defense which are fundamental rights forming an integral part of the general principles of law (Aalborg Portland, paragraph 64). The need to separate investigatory and adjudicatory functions and to ensure judicial review which are essential to ensuring fairness to parties has been also extensively discussed in the courts’ decision both in the US and EU. In Wong Yang Sung v. McGrath, at paragraph 41, the US Supreme Court emphasised the need to ‘curtail and change the practice of embodying in one person or agency the duties of prosecutor and judge’. Similarly, the ECJ recognised ‘the need for protection against arbitrary or disproportionate intervention by public authorities’ (Roquette Frerres, paragraph 27). The OECD conducted a number of roundtables on procedural fairness and transparency while the International Competition Network (ICN) adopted its Recommended Practices on Investigative Process as well as the ICN Framework for Competition Agency Procedures, both designed to strengthen procedural fairness in competition law enforcement.
If sufficient evidence has been gathered by competition authorities to prove an infringement, an investigation might lead to an infringement decision with sanctions (both fines and/or remedies) being imposed on infringing undertakings as well as on individuals in certain cases. Some investigations might be terminated by settlement or commitments decisions.