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Legal Watch: What to do when the competition authorities come knocking

The Competition Commission’s (CC) market investigation into the supply of statutory audit services to large companies was initiated in October 2011 by a reference made by the Office of Fair Trading (OFT). 

Both the OFT and the CC have expressed the preliminary view that the market is characterised by limited rivalry. The CC has identified the predominance of the Big Four as leading to possible adverse effects on audit quality, pricing and competition in non-auditing markets. 

The powers of the CC are extensive, including the ability to compel information via information requests; however the possibility of more stringent measures such as “dawn raids” also exists.
Whenever an industry sector comes under the competition law microscope this is always a potential. In broad terms, the OFT has the power to carry out unannounced, on-site inspections with the aim of obtaining relevant documentation.

Of course in this instance the risk of a “dawn raid” taking place is low, but companies should always remain prepared.

To minimise the risk precautionary measures should be implemented. At the very least a company should: (i) identify and isolate privileged information to mitigate the risk of inadvertent disclosure and a waiver of privilege issues; (ii) conduct an audit of potentially damaging material, for example by reference to individuals working in “risky areas”; (iii) provide competition law compliance training for staff. As the front line interface, security and reception personnel need to know what to say and who to call when officials first arrive, as failure to comply with the duty of cooperation can result in fines being imposed. Managing a raid effectively is equally as important. In the first instance, inform a member of your legal team and put into place your “dawn raid” procedures.

These can and should be tested with “mock” raids which your legal team should be able to organise. It is important that no document or record is destroyed or removed from the site and that the investigation is not disclosed externally. The aim, after all , is to allow the officials to complete their work as quickly as possible, with minimal disruption to the business while ensuring that they do not exceed their powers.

Jane Howard is a partner in Wragge & Co’s professional liability group. 

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