The European Court of Justice recently ruled that the European Commission does not have to take additional precautionary measures to respect the right of legal professional privilege when conducting a new dawn raid at the same company. Companies are well-advised to mark clearly all communications covered by legal privilege as 'privileged and confidential' and to keep all privileged communication separate from other communication.
However, solely marking communication as privileged and confidential does not automatically make it so; the CMA imposed a GBP 20,000 fine on technology company Sabre for (initially) having ‘over-designated’ documents as privileged. Companies should always verify whether the documents have been rightfully designated as privileged by checking their contents.
ECJ dismisses appeal by Alcogroup on alleged violations of legal privilege
On 17 October 2019, the ECJ dismissed an appeal by Alcogroup N.V. and Alcodis N.V. (together: Alcogroup) concerning the treatment of privileged documents following dawn raids by the Commission in two parallel investigations.
In this case, the Commission carried out two separate inspections at Alcogroup's premises. The first inspection took place in October 2014 and concerned potential collusion in the oil and biofuel markets. The second inspection followed in March 2015; this time however it concerned potential coordination and information exchanges relating to bio-ethanol sales.
Following the first inspection, Alcogroup's lawyers exchanged with their client numerous e-mails and memoranda containing legal advice on the subject matter of the first inspection. These communications were marked as 'legally privileged'. During the second inspection, a number of these documents showed up as part of the Commission's digital sweep, but were ultimately tagged by the Commission as legally privileged and separated from the Commission's file (with the exception of one document). Alcogroup subsequently sent a letter to the Commission requesting the suspension of its second investigation, as it considered that the Commission had violated its rights of defence by potentially reviewing legally privileged documents during that second inspection. The Commission responded with a letter stating that those concerns were unwarranted, as it had not yet taken a position as to the privileged nature of the documents concerned. Alcogroup lodged an appeal to the General Court (GC) on the legality of the second inspection decision and the Commission's letter.
The GC ruled that Alcogroup's appeal was inadmissible. The GC held that (i) the Commission's second inspection decision could not have been impacted, as the alleged violation of Alcogroup's rights of defence could only have arisen after that decision was taken, and (ii) the Commission's letter did not amount to a 'decision' affecting Alcogroup's legal position.
On further appeal, the ECJ upheld the GC's ruling. In particular, the ECJ dismissed Alcogroup's contention that the second inspection decision should have included special "precautionary measures" to prevent the Commission from reviewing legally privileged advice that was drafted specifically as a result of the first inspection. The ECJ confirmed that the Commission is in any event bound to respect the rights of defence and treatment of privileged information as a matter of law, and that the lack of additional 'precautionary measures' in this case could not lead the inspectors to believe that it should treat such information any differently during its second inspection. To the extent the Commission would have violated Alcogroup's rights of defence, the parties could raise these concerns in their appeal against the Commission's ultimate infringement decision. As the Commission had taken no decision with legal effects, the ECJ confirmed the inadmissibility of Alcogroup's appeal.
CMA fines Sabre for incorrectly claiming legal privilege over certain documents
On 11 October 2019, the Competition and Markets Authority (CMA) CMA published its decision to fine Sabre Corporation GBP 20,000 for failing to submit relevant documents on time during its merger control review of Sabre's intended acquisition of Farelogix Inc.
The CMA had asked Sabre to provide all documents in its possession relating to certain specific topics, including the methodology used to retrieve such documents. Sabre's lawyers based their initial document submission to the CMA on a similar submission it had made to the DOJ in the context of merger control proceedings in the US. This submission excluded a large number of documents that were marked as legally privileged. Subsequently, however, two months after the deadline for its initial response, Sabre submitted 444 additional documents in response to the CMA's questions. Sabre explained that, after further review, these documents appeared to have been erroneously classified as privileged.
The CMA held that, even though it was aware that Sabre intended to base its submission on the files submitted in the US procedure, it could not have been aware that a large number of documents, which had been submitted in response to the CMA’s specific requests, would be withheld as a result of an incorrect assessment of legal privilege. The CMA stressed that it is the parties' responsibility to ensure that all relevant material is produced on time in response to its requests. The CMA considered that Sabre could not simply rely on foreign submissions, but had to independently assess its document submissions to the CMA and ensure that all relevant information would be produced. In that context, the CMA took note of the fact that Sabre had not submitted any information on the methodology according to which it had withheld (potentially) privileged information in its initial response.
In conclusion, both cases once again highlight the importance of ensuring that meticulous safeguards are put in place with respect to the selection and review of legally privileged documents.
This article was published in the Competition Newsletter of November 2019. Other articles in this newsletter: