Unannounced on-site inspections by competition authorities, or dawn raids, have been increasing in number and scope across Europe and the U.K.. 2023 saw the highest number of dawn raids in these regions in six years.  Data from the first half of 2024 indicates this trend is only continuing.

One driving force behind this surge is the expansion of regulators’ investigatory powers. This year the European Commission launched its first dawn raid under the EU’s new foreign subsidies regime, which enabled it to investigate businesses suspected of receiving foreign subsidies that may distort the internal market. New digital markets regimes in Europe and the U.K. are also broadening the remit of regulators in carrying out on-the-spot searches.

How dawn raids are becoming more complex for legal teams

Meanwhile, the nature of dawn raids is becoming more complex, reflecting shifts such as hybrid working, cloud computing and the wide use of multiple communication channels in the workplace.

Several raids are being conducted remotely, with authorities collecting data through virtual rooms or by requesting direct access to IT systems. It is not uncommon for investigators to raid multiple sites simultaneously, including residential locations and more traditional workplaces.
 
The increased sophistication of authorities’ search tools and methodologies is another noteworthy trend. Many are using AI to sift through vast datasets, often leveraging prior learning modules by AI models to fast-track case analysis. With 95% of inspections targeting digital devices and networks, enforcement agency teams now almost always include IT forensic experts, whose technical language and demands can often be challenging for legal counsels and lawyers to grasp.

How in-house legal teams can prepare for dawn raids

Unannounced inspections can be highly stressful. But having an effective protocol in place helps minimise the disruption, protects the interests of both the business and its employees and minimises or eliminates unnecessary delays when responding to the authorities’ requests.

Updating your dawn raids playbook to reflect IT complexities

Legal teams looking to take a proactive approach should begin by updating current playbooks to reflect modern dawn raids practices.

With the growing focus on digital devices and systems, playbooks should  map out the current structure of the company’s IT environment. This includes detailing:

• where electronic data is stored;
• who controls it (as often different administrators, including third party providers, could manage access to different systems);
• and how it can be accessed.

This effort should not be underestimated. For instance, a lack of familiarity with the procedures for extracting data from remote servers can cause delays and be perceived by authorities as a lack of cooperation – potentially leading to fines.

Leaning on technical experts in dawn raids to support the legal team

Businesses should also fully integrate digital forensics experts into their dawn raid response teams.

The role of these technical partners will involve tracking and monitoring the technical processes used by inspectors during a search to ensure legal teams know what data is being collected. This intelligence will be crucial to support the business through the inquiry, and feed into any parallel investigation of the same data sources identified or collected by the authorities. 

Reviewing data retention practises within the business

Data retention and disposal practices should be reviewed from a dawn raid preparedness perspective too. Communication on tools like WhatsApp, Slack and Microsoft Teams  are increasingly used as evidence in competition proceedings.

It is best practice to only retain information that is relevant and necessary, and not keep it for longer than needed on the company’s or any third-party systems. Taking a more cautious approach will reduce the data volume and narrow the pool of information that may fall within the scope of an investigation, while ensuring compliance with recordkeeping laws and best practice.

Legal teams must make sure  all personnel are trained on the updated policies and procedures, so they understand their responsibilities and legal rights in the event of a raid. Protocols must be tested regularly to ensure staff is “dawn raid ready” and the response plan is fit for purpose.

How legal teams can use AI for rapid reaction to dawn raids

Many businesses direct all efforts toward preparing for and dealing with the raid procedure itself. However, the strategy for the aftermath of an on-site inspection is equally critical for an effective response. This strategy should minimise the reputational risks for the firm and facilitate the rapid identification of potential issues that may lead to fines.

As a first step, a post raid debrief with the core response team, external lawyers and departments with major involvement in the incident being investigated is recommended as soon as possible. The absolute priority should be on developing a strategy to comply with regulatory requests and respond with the requested information in a timely manner. 

This, in turn, will primarily depend on the company’s ability to perform document reviews quickly. AI-powered analytics are increasingly supporting legal teams, as they allow practitioners to identify, analyse and review the likely relevant information in shorter timeframes. 

For instance, one typical use case of AI in relation to dawn raid responses is sentiment analysis. Here, the tool can identify documents containing negative emotional tones, which can then be used to easily locate documents that show unusual or highly charged interactions between employees.

Other AI applications include issue review – locating material relating to different legal or competition related issues or relevant case strategy – and the rapid identification of “hot” documents. GenAI platforms can further enhance this process by using the documents identified from the review stage as input to draft an appropriate summated narrative.

Running a parallel investigation enabled by AI can give companies a crucial head start in investigations. It allows response teams to identify problematic documents quicker than the regulator, giving the business the opportunity to respond to inquiries and assess business exposure/remediation steps early in the process. This proactive strategy can prevent reputational harm and reduce costs from prolonged investigations and potential fines.

The landscape of dawn raids is becoming increasingly more complex, with technological advancements and expanding regulatory powers. To remain ahead and compliant, in-house legal teams need to take a proactive approach. The first step to this proactive approach is to review the dawn raid playbooks for the business. With a focus on IT components, integrating IT experts, and leveraging AI-powered tools, legal teams can navigate these challenges more effectively.

This article was first featured in Crafty Counsel: Updating your dawn raids playbook with AI - Crafty Counsel