In June, the European Commission (“Commission”) fined International Flavors & Fragrances (“IFF”) €15.9 million for deleting WhatsApp messages during an investigation into whether IFF breached European competition law.[1] This fine was announced in the same week that the UK High Court ordered the Duke of Sussex to provide a witness statement explaining why messages potentially relevant to his case against News Group Newspapers had been deleted.
In the modern workplace, in which business is increasingly transacted online and via messaging apps, the deletion and destruction of evidence is much easier than it has ever been. In this blog, we take stock on the implications of such message deletion in the context of private enforcement, and discuss how the courts and competition authorities consider evidence in the round, and place importance on circ*mstantial evidence and inferences, which in turn enables claimants to establish competition infringements.
Background
In March 2023, the Commission commenced an investigation into the fragrance industry, carrying out unannounced inspections (known as “dawn raids”) at the premises of IFF and other companies following suspicions of possible collusion in the supply of fragrances and fragrance ingredients. During the investigation, the Commission became aware that a senior employee of IFF had intentionally deleted WhatsApp messages exchanged with a competitor containing business-related information, after that employee had been informed about the investigation.
This is considered a serious obstruction of the Commission’s investigation (and indeed would be for most national competition authorities, including the UK’s Competition and Markets Authority (“CMA”)), which can result in a fine of up to 1% of the business’s global turnover,[1] and the Commission opened proceedings against IFF for obstruction. IFF acknowledged the facts and cooperated with the Commission to recover the data. Given the serious nature of the infringement, the Commission imposed a fine of €15.9 million, comprising 0.3% of IFF’s total turnover reduced by 50% to reflect its proactive cooperation with the Commission. This is the first time the Commission has imposed a fine for the deletion of messages sent via a social media app on a mobile phone. The investigation into the fragrance industry remains ongoing.
Whilst attempts to destroy or delete evidence is not a new issue, it has become all the more acute in the new digital age. Advancements in communication technology and its ever-increasing deployment, accelerated by the Covid pandemic, in conducting business and communicating within and between businesses has potentially made it easier for companies to (intentionally or inadvertently) delete messages that evidence anti-competitive behaviour. At the same time, less incriminating information (such as notes of secret meetings, or indeed notes of discussions) may be retained in handwritten or hardcopy form. Recent years have also seen the rise of messaging apps that automatically delete messages shortly after sending (see Hausfeld’s competition bulletin article on this topic for further insight).
Reaction by Courts and Competition Authorities
Given the ease in which electronic messages can be deleted, victims of anticompetitive conduct may be concerned that it will be harder to prosecute or litigate against companies that may have engaged in anticompetitive conduct.
The Commission’s recent fining decision against IFF is a good example of authorities wielding their administrative powers to ensure that companies are prevented from engaging in actions that might impact the effectiveness of an investigation, regardless of whether that obstruction concerns access to physical locations, hardcopy documents or online communications.
Further, the courts and competition authorities have always had to grapple with the question of evidence in competition cases, particularly relative to cartels. For example, in 2004, the UK’s Competition Appeal Tribunal (“CAT”), echoing similar rulings by the European Court of Justice (“ECJ”), noted that “cartels are by their nature hidden and secret; little or nothing may be committed to writing. In our view even a single item of evidence, or wholly circ*mstantial evidence, depending on the particular context and the particular circ*mstances, may be sufficient to meet the required standard.”[2]
The importance of circ*mstantial evidence and inferences was reiterated by the CAT in its 2024 judgment in Prochlorperazine, where it said that cartel cases “often concern matters which ‘are in some way hidden or secret; there may be little or no documentary evidence; what evidence there may be may be quite fragmentary; the evidence may be wholly circ*mstantial’ [...] We acknowledge the difficulties in proving a case in such circ*mstances. Circ*mstantial evidence and inferences can play an important role in proving such a case”.[3] The CAT also noted that, particularly relative to evidence that is unclear and potentially ambiguous, evidence has to be looked at “in the round”.
The overarching principle remains, as noted by the ECJ (and adopted by the English courts) that: “In most cases, the existence of an anti-competitive practice or agreement must be inferred from a number of coincidences and indicia which, taken together, may, in the absence of another plausible explanation, constitute evidence of an infringement of the competition rules”.[4] Accordingly, the authorities allow an infringement of competition law to be found even where a company has destroyed relevant evidence (or indeed was mindful not to produce incriminating evidence) through the use of circ*mstantial evidence and inferences.
In this regard, the new UK Digital Markets, Competition and Consumers Act 2024 (“DMCC”) introduces new enforcement powers for the CMA in relation to instances where a party falsifies, conceals, destroys or otherwise disposes of documents that the party knows or suspects to be relevant to an investigation. This applies not only where a party knows an investigation is being carried out, but also where it suspects an investigation is likely to be carried out. This puts an even higher onus on companies that may be engaged in anticompetitive behaviour to preserve documents by imposing an active ongoing duty of document preservation, which may be regarded as inimical to a company policy mandating the automatic or routine destruction of documents or electronic messages.
On 2 August 2024, the CMA published for consultation a draft updated version of its guidance on investigatory procedures[5] which clarifies the scope of the document preservation duty where a party knows or suspects that a competition investigation is likely to be carried out either in the UK or overseas. The draft guidance explains that the duty to preserve documents extends to not just documents which tend to prove or disprove an infringement, but also to “documents containing background information, such as information about conditions in the market in which the suspected infringement occurred”, and that as a matter of good practice a person “should take a broad view of relevant documents” for preservation purposes, given that the scope of a CMA investigation may change over time. Relative to any such documents, a business should suspend routine document destruction.
Furthermore, the DMCC introduces new rules for inspections under a warrant on extra-territorial information requests (such as for documents held on foreign servers) and the inspection of domestic premises.
Finally, a number of competition authorities, including the Commission and the CMA, have the power to conduct dawn raids of domestic premises, giving them more opportunity to uncover evidence. Further to a dawn raid of a domestic premise in 2022, the director of the Commission’s cartelunit explained that the Commission will make more use of this power in the future in order to respond to a shift to home working following the pandemic. The UK’s High Court confirmed in May of this year that there is no higher threshold that automatically applies to conducting such domestic raids; each case will depend on its particular facts and circ*mstances.[6]
Taken together, these new powers will further bolster detecting and establishing competition law infringements in a world where communications and conducting business increasingly take place online, and where employees are often working from home.
Impact on claimants
Whilst the immediacy and ease with which the destruction of documentary evidence can take place may raise concerns, as described above, the deletion or destruction of incriminating evidence is not a new issue and is an incremental rather than a revolutionary change to an undertaking’s ability to conceal illegal conduct. The case law and decisional practice of competition authorities shows that deletion of documents is not a barrier to finding guilty conduct, since the available evidence (or the lack thereof) will be considered in the round, whilst, in the absence of another plausible explanation, the existence of an infringement can be inferred from coincidences and indicia. This approach ensures that the role of private enforcement and the vindication of claimants’ rights to damages is sensibly maintained.
It is also worth noting that even if one party or individual deletes an electronic message or record, their counterpart(s) may keep a record, including for the purpose of seeking immunity or leniency from a competition authority. Accordingly, rather than reduce the likelihood of detecting an infringement, deleting the relevant evidence may simply serve to land the relevant firm additional fines.
The Commission’s recent decision against IFF acts as a welcome message to firms that deleting social media messages, or otherwise destroying evidence, will not enable them to avoid liability, whilst the courts are well equipped to draw inferences from the overall evidence and conduct.
It is therefore unlikely that the deletion of messages will have a material impact on the ability of claimants to prove their case or effectively litigate their claims for damages, and it is expected that, in the new digital age, the courts will continue to maintain a pragmatic approach to assessing evidence in the round. That is particularly the case in collective actions, where the Supreme Court cautioned against courts throwing up their hands and halting proceedings “because the necessary evidence is exiguous, difficult to interpret or of questionable reliability”.
Footnotes
[1] https://ec.europa.eu/commission/presscorner/detail/en/ip_24_3435.
[2] Article 23(1)(c) of Regulation No 1/2003.
[3] JJB Sports plc and Allsports Limited v Office of Fair Trading [2004] CAT 17, paragraph 206.
[4] Advanz Pharma and Others v Competition and Markets Authority [2024] CAT 36, paragraph 24.
[5] Aalborg Portland and Others v Commission, Case C-204/00 P, paragraphs 55 to 57.
[6] Consultation document: Guidance on the CMA’s investigation procedures in Competition Act 1998 cases: CMA8, 2 August 2024, at https://connect.cma.gov.uk/investigation-procedures-in-competition-act-1998-cases-cma8.
[7] Competition and Markets Authority v Competition Appeal Tribunal, [2024] EWHC 904 (Admin), paragraph 58.
[8] Mastercard Incorporated and others (Appellants) v Walter Hugh Merricks CBE (Respondent) [2020] UKSC 51, paragraph 50.
