On June 24, 2024, the European Commission ("Commission") decided to impose a fine of €15.9 million on International Flavors & Fragrances Inc. and International Flavors & Fragrances IFF France SAS (together "IFF") for obstructing an unannounced inspection ("dawn raid"). During the dawn raid that occurred in 2023, the Commission discovered that a senior employee of IFF had deleted several WhatsApp messages exchanged with a competitor. This is not the first fine imposed for company misconduct during a dawn raid, but it is the first case where the deletion of messages exchanged via social media was both the trigger and the core of the investigation. This outcome is as such not surprising, but it provides helpful clarification about the scope of the Commission's investigation powers, of which all companies in the EU must be aware.
The Investigation
The Commission inspected the premises of IFF, a company active in the consumer fragrance industry. When reviewing the personal tablets and mobile phones of certain persons potentially involved in the conduct under investigation, the officials discovered that a senior employee at IFF had intentionally deleted several WhatsApp messages after the Commission notified IFF of the inspection decision. The messages in question had been exchanged with one of IFF's competitors and contained commercial and business-related information.
Once this misconduct was discovered, IFF acknowledged the facts at hand and helped the Commission recover the deleted data. This cooperative attitude of IFF also continued after the inspection, when the company accepted its liability for the infringement, and also the range of the fine suggested by the Commission. In exchange, the Commission took this broad and genuine cooperation by IFF into consideration when setting the amount of the fine at a significantly lower level than initially determined.
To start with, the Commission considered this conduct a very serious infringement of the procedural duties of companies under inspection, especially because the senior employee had intentionally deleted the WhatsApp messages during the ongoing dawn raid and did not reveal this by himself right away. The Commission emphasized the gravity of obstructing inspections, and underlined its capabilities, with modern forensic tools at its disposal, in detecting any such deletion or manipulation of electronic information during inspections.
Therefore, the Commission reached the conclusion that the overall fine should be 0.3% of IFF's total turnover in the previous financial year. While this as such is not a very high percentage (in previous cases, the Commission had already applied 0.25%), the fine would still have exceeded €30 million. However, due to IFF's proactive cooperation during and after the inspection, the Commission awarded IFF a 50% reduction of the fine. This was done under the (unwritten) cooperation procedure, inspired by the cartel settlement process, albeit resulting in a much more significant fine reduction than the latter, which is capped at 10%. This allowed the Commission to complete the investigation within a very short timeframe. Ultimately, IFF was fined €15.9 million, representing a total 0.15% of its total turnover.
Legal Background
According to Articles 20 and 21 Regulation No 1/2003 implementing Articles 101 and 102 TFEU, the Commission has the right to conduct inspections at the premises of companies suspected of breaching EU competition law. During such dawn raids, the Commission has the right to examine and take copies of records related to the business conduct covered by the inspection decision.
This right exists irrespective of the medium on which such data is stored. Therefore data kept on personal laptops, tablets and mobile phones that are also used for professional purposes can be included as well. These have gained a lot of relevance under the "work from home" policies of many companies. Private homes and cars of company employees can also be subject to the inspection powers. During dawn raids, companies are obliged to actively cooperate with investigators and should act with particular diligence, including all appropriate measures to allow the preservation of evidence stored on any technological devices.
To preserve the effectiveness of the investigation, the Commission strictly scrutinizes any cases of obstruction. According to Article 23 of Regulation No 1/2003, the Commission can impose fines of up to 1% of a company's total turnover in case of any intentional or negligent misconduct obstructing the investigation. The amount of the fine is essentially being set based on the gravity and the duration of the infringement. In addition, the Commission shall ensure that the amount of the fine is high enough to be a deterrent to any company seeking to cause such obstruction.
Takeaways
This is an interesting case in several ways. In is the first time that the Commission imposed a fine for deleting messages exchanged over social media. This specific aspect was absent in previous decisions regarding procedural misconduct, which also shows the evolution of business-related communication by using new channels. However, several national competition authorities in EU Member States have already condemned similar practices. In September 2023 the Polish competition authority (UOKiK) imposed fines of about €2.6 Million on two companies for deleting WhatsApp messages during an inspection of suspected price fixing for coffee machines. In 2019, the Dutch competition authority (ACM) had imposed a fine of €1.8 million for similar conduct, including a 20% discount for cooperation by the companies involved.
The second interesting aspect of the Commission decision against IFF is the application of the cooperation procedure on procedural infringements like the one at hand, with a very significant benefit for the infringer. This leads to two final remarks: it is important for companies to comply with the duties in the first place, but if something goes wrong, quick and full cooperation will help to soften the bill.
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