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Northwestern Journal of International Law & Business Volume 3 Issue 2 Fall Fall 1981 National Panasonic (U.K.) Ltd. v. Commission of the European Communities: The ommonC Market's First Look at Warrantless Searches in Antitrust Investigations Catherine C. Gale Follow this and additional works at: http://scholarlycommons.law.northwestern.edu/njilb Part of the Antitrust and Trade Regulation Commons, Comparative and Foreign Law Commons, and the International Trade Commons Recommended Citation Catherine C. Gale, National Panasonic (U.K.) Ltd. v. Commission of the European Communities: The ommonC Market's First Look at Warrantless Searches in Antitrust Investigations, 3 Nw. J. Int'l L. & Bus. 684 (1981) This Note is brought to you for free and open access by Northwestern University School of Law Scholarly Commons. It has been accepted for inclusion in Northwestern Journal of International Law & Business by an authorized administrator of Northwestern University School of Law Scholarly Commons. NOTE National Panasonic (UKX.) Ltd P. Commission of the European Communities: The Common Market's First Look at Warrantless Searches in Antitrust Investigations National Panasonic (UK) Ltd v. Commission of the European 2 Communities' is the first decision of the European Court of Justice delineating the powers of the European Commission (Commission)3 to conduct evidentiary searches on the premises of firms suspected of vio- lating the European Economic Community's antitrust laws.4 The Court held that the Commission may conduct on-the-spot searches of 1 [1980] E. Comm. Ct. J. Rep. 2033, [1980] 3 Comm. Mkt. L.R. 169. 2 The Court of Justice of the European Communities is the ultimate reviewing body of deci- sions rendered by the Commission. The Court has two principal types ofjurisdiction: 1) review of formal decisions of the European Commission and 2) review of questions of Community law on reference from the Member States' national courts. B. HAWK, UNITED STATES, COMMON MARKET AND INTERNATIONAL ANTITRUST: A COMPARATIVE GUIDE 412 (1979). 3 The Commission in Brussels serves as the administrative organ of the Common Market. It consists of thirteen Commissioners, with two appointed by each of the four largest Member States. In addition, the Commission has a sizeable administrative staff. See Graupner, Commission Deci- sion-Mfaking on Competition Questions, 10 COMM. MKT. L. REV. 291 (1973), for a description of the internal procedures of the Commission in applying general anticompetition policies. 4 The primary competition rules in the Common Market applicable to private firms are Arti- cles 85 and 86 of the Rome Treaty. Treaty Establishing the European Economic Community, Mar. 25, 1957, 298 U.N.T.S. I1 (enteredin force Jan. 1, 1958 [hereinafter cited as EEC Treaty]. Article 85 is similar to section 1 of the Sherman Act. Article 85(1) prohibits "all agreements between undertakings, decisions by associations of undertakings and any concerted practices which are likely to affect trade between the Member States and which have as their object or result the prevention, restriction or distortion of competition within the Common Market. ... Id at art. 85(l). Article 86 prohibits abuse of an undertaking's "dominant position" within the Com- mon Market. Id at art. 86. National Panasonic 3:684(1981) firms without prior notification.' The Court's decision greatly expands the investigatory powers of the Commission at the expense of signifi- cant privacy and due process rights for firms operating within the Euro- pean Community. This note will examine the extent to which the Court's decision departs from both the language and intent of the Com- munity's statutory grant of investigatory powers to the Commission, and will explore safeguards that the Community's legislative authori- ties should introduce to protect a firm's rights while affording the Com- mission maximum discrefionary power. The Commission is empowered to enforce the European Commu- nity's antitrust laws pursuant to Regulation 17.6 Articles 11 through 14 of this Regulation enumerate the Commission's general investigatory powers. Article 11 establishes a two-step procedure under which the Commission may request and obtain information from commercial en- terprises.7 The Commission must first request the firm to tender the desired information voluntarily. If the firm does not comply, the Com- mission may formally demand submission of the requested informa- tion. Non-compliance may expose the firm to high financial penaltiesY 5 [1980] E. Comm. Ct. J. Rep. at 2054-55, [1980] 3 Comm. Mkt. L.R. at 185. 6 The Council of Ministers in 1962, acting pursuant to Article 87 of the E.E.C. Treaty, issued Regulation 17/62 which provided that the Commission play the major role in the enforcement of the E.E.C. competition law and policy. Article 9(3) of Regulation 17 limited the responsibility of the Member States to enforce certain E.E.C. competition rules. Article 9(3) of Regulation 17 states: As long as the Commission has not initiated any procedure under Articles 2 [negative clear- ance], 3 [cease and desist order] or 6 [exemption], the authorities of the Member States shall remain competent to apply Article 85(1) and Article 86 in accordance with Article 88 of the Treaty .... Regulation 17/62, 0. J. Eun. Comm. 87 (Spec. Ed. 1959-62) [hereinafter cited as Regulation 17]. See generally B. HAwK, supra note 2, at 415. 7 Article 11(2), (3) and (5) sets forth the two-stage procedure as follows: (2) When sending a request for information to an undertaking or association of under- takings, the Commission shall at the same time forward a copy of the request to the compe- tent authority of the Member State in whose territory the seat of the undertakings or associations of undertakings is situated. (3) In its request the Commission shall state the legal basis and the purpose of the re- quest and also the penalties provided for in Article 15(1)(b) for supplying incorrect informa- tion. (5) Where an undertaking or association of undertakings does not supply the informa- tion requested within the time limit fixed by the Commission, or supplies incomplete infor- mation, the Commission shall by decision require the information to be supplied. The decision shall specify what information is required, fix an appropriate time-limit within which it is to be supplied and indicate the penalties provided for in Article 15(l)(b) and Article 16(1)(c) and the right to have the decision reviewed by the Court of Justice. Regulation 17, supra note 6, at art. 11. 8 Article 15(l)(b): I. The Commission may by decision impose on undertakings or associations of un- dertakings fines of from 100 to 5000 units of account where, intentionally or negligently:... (b) They supply incorrect information in response to a request made pursuant to Arti- Northwestern Journal of International Law & Business 3:684(1981) Since an enterprise may deny the initial informal request for informa- tion, the two-step procedure may be seen as a defacto safeguard, pro- tecting firms from unnecessary investigations.' Article 14 empowers the Cbmmission to conduct evidentiary searches of a firm's premises."0 Under Article 14(1), the Commission is granted the right of access to a firm's premises, land and vehicles and is authorized to examine books and other business documents, to make copies of these documents, and to request on-the-spot verbal explana- tions. 1 Two procedures for the exercise of these powers are impliedly provided in Article 14(1) and (2). According to the Commission's es- cle 11(3), or to Article 12, or do not supply information within the time limit fixed by a decision taken under Article 11(5); Article 16(l)(c): 1. The Commission may by decision impose on undertakings or associations of under- takings periodic penalty payments of from 50 to 1000 units of account per day, calculated from the date appointed by the decision, in order to compel them:... (c) to supply complete and correct information which it has requested by decision taken pursuant to Article 11(5) ... Regulation 17, supra note 6, at arts. 15, 16. 9 For a discussion of safeguards in the two-step procedure, see text accompanying notes 80-83 ,ifra.- 10 Article 14 of Regulation 17/62 states: 1. In carrying out the duties assigned to it by Article 89 and by provisions adopted under Article 87 of the Treaty, the Commission may undertake all necessary investigations into undertakings and associations of undertakings. To this end the officials authorised by the Commission are empowered: a) to examine the books and other business records; b) to take copies of or extracts from the books and business records; c) to ask for oral explanations on the spot; d) to enter any premises, land and means of transport of undertakings. 2. The officials of the Commission authorised for the purpose of these investigations shall exercise their powers upon production of an authorisation in writing specifying the sub- ject matter and purpose of the investigation and the penalties provided for in Article 15(l)(c) in cases where production of the required books or other business records is incomplete. In good time before the investigation, the Commission shall inform the competent authority of the Member State in whose territory the same is to be made of the investigation and of the the identity of the authorised officials. 3. Undertakings and associations of undertakings shall submit to investigations or- dered by decision of the Commission. The decision shall specify the subject matter and pur- pose of the investigation, appoint the date on which it is to begin and indicate the penalties provided for in Article 15(l)(c) and Article 16(l)(d) and the tight to have the decision re- viewed by the Court of Justice.