EU-Commission clarifies treatment of legally privileged information in competition proceedings

The European Commission (“EC”) recently issued a working paper on the treatment of legally privileged information in competition proceedings. This 2018 working paper summarizes the EC´s current practice with regard to legal professional privilege.

Principles developed by the European Courts

The European Court of Justice (“ECJ”) established its principles on privilege in its 1982 decision AM & S vs. Commission and its more recent 2010 decision Akzo v Commission. In particular, in Akzo, the ECJ held that the legal privilege extends to communications originating from independent lawyers for the purposes of the client´s rights of defense in competition investigations. Furthermore, it confirmed that communications to and from in-house lawyers do not attract privilege in the context of a EC investigation. In essence, the argument is that privilege is only granted to independent lawyers. As employed in-house lawyers do not enjoy the same degree of independence as an external lawyer, their advice does not benefit from privilege.

Principles also apply to merger situations

Although the previously cited case law only refers to cartel cases, the EC now expressly states in its working paper that the principles shall also apply to merger control proceedings. This very important clarification is in particular relevant in the context of Requests for Information that the EC sends to merging parties in complex merger investigations. To further clarify this specific situation, the EC is currently preparing "Best Practices on requests for internal documents under the EU Merger Regulation".

No privilege beyond the legal advisors client relationship

According to the EC’s interpretation of the case law the legal privilege does apparently not extent to communications between a company and the external lawyer of another company - or to the communication between external legal advisors of several companies. This narrow understanding, however, could undermine the rights of defense if external legal advisors need to exchange their advice, for example, in the joint assessment of efficiencies in Art. 101 para. 3 TFEU cases. In practice, constellations with the need to exchange information between external advisors to ensure the best possible defense are also addressed by joint defense agreements.

While the EC in general excludes legal privilege for the communication with other professional advisers, such as accountants or economists, it mentions relevant communication with  patent attorneys as possibly benefiting from legal privilege, if the company concerned demonstrates the communication is related to the assessment of future competition law litigation. Furthermore, the EC clarifies that the privilege only refers to certain information and not a document in itself. In other words: If a document contains privileged and non-privileged information, the EC can access and use the non-privileged information.

Exchanges with national competition authorities

The EC working paper confirms that documents obtained during an information exchange with a national competition authority can be used as evidence by the EC and vice versa, irrespectively of the scope of the legal privilege in the investigation concerned. While this approach might have some efficiency benefits for the EC, it is obvious that it risks that privilege standards in Member States, which can provide for a higher protection, are undermined by the information exchange and possibly even diminished if the national law would view this involuntary disclosure of parties’ information as a waiver.

Internal handling of legal advice

In accordance with the respective case law, the EC has confirmed that legal privilege extends to documents dated from before the initiation of investigations, provided they have a relationship to the subject matter of that investigation. Likewise, internal documents summarizing the content of privileged communications will enjoy privilege. However, the EC did not clarify the limits, i.e. the instances when internal summarizing and forwarding could actually jeopardize privilege protection.

A general take-away for clients is that they are well advised to involve external lawyers from an early stage in competition law sensitive matters in order to ensure legal privilege and safeguard their rights.