AI can now trigger a competition-law dawn raid

The use of artificial intelligence (AI) in anti-competitive enforcement has now become a reality in Europe. It is bypassing the need for a whistleblower or a complainant by simply scanning publicly available documents to support suspicions of anti-competitive conduct.

The clear distinction is that such quantitative findings must be followed by a manual qualitative review.

Read:

WesBank and Toyota Financial Services to pay R30m penalty in CompCom settlement

Calls for scrap metal inquiry after price-fixing-cartel ruling

Adcock faces possible antitrust charges

In South Africa, administrative laws ensure that regulators will be held accountable if their decisions are without proper reasons.

There is little doubt that digital evidence has become equally and even more important than hard evidence.

This is the word from Safee-Naaz Siddiqi, professional support lawyer in the Cliffe Dekker Hofmeyr (CDH) knowledge management and competition law practice.

AI tools can scan large volumes of documents with natural language processing to find trends, patterns and do analysis of, for example, cartel behaviour.

During a webinar on dawn raids by regulators such as the Competition Commission, Siddiqi referred to developments in the European Union (EU).

Suspicious phrases

The European Commission has developed AI tools to catch wrongdoing without waiting for a whistleblower or a complaint.

It uses AI to scan publicly available documents looking for suspicious phrases.

Already in 2024, the European Commission found phrases that indicated price collusion that offered enough evidence to warrant a dawn raid on tyre companies, including Michelin, Continental and Perilli.

The EU general court confirmed that the screening method was a legitimate basis for a raid.

Andries le Grange, director in the competition law practice of CDH, says dawn raids by South Africa’s Competition Commission were quite prevalent around 2010 but settled down during – and after – the Covid-19 pandemic.

Insurance companies and scrap metal producers have recently been the targets of dawn raids by the commission.

These raids are quite invasive, and it is critical for companies to have a dawn raid policy with a set of procedures in place, says Le Grange.

There must be a designated team that can deal with dawn raid officials. Front office employees such as security guards and receptionists need training on how to respond when investigators come knocking.

Rights during a raid

Dawn raids are frequently used by the South African Police Service, the Hawks, the South African Revenue Service and more recently the Information Regulator to ensure compliance with the Protection of Personal Information Act and the Promotion of Access to Information Act.

Sentebale Makara, director in the dispute resolution practice of CDH, says individuals who are confronted with a search and seize warrant have the right against self-incrimination, the right to legal representation, and the right to confidentiality while the raid is being conducted.

“When an official approaches someone from the company during the raid and starts an ostensibly mundane conversation it is important to know that the conversation can be placed on record.”

A witness has the right to privacy, legal protection, legal counsel and the protection against self-incrimination. They must be informed of these rights, stresses Makara.

Le Grange points out that in the competition law environment a warrant only allows for the attachment of documents whether electronic or hard copies. Interviews may only be conducted to a limited extent.

“There is a separate process in the Competition Act through which witnesses can be subpoenaed. This does not happen during a dawn raid. The investigators may only ask people to point out the location of the documents. They may not sit them down in a room and start asking questions.”

Read: More lifestyle audits on their way, this time by the FIC

This is particularly important since the act now provides for criminal sanctions. If someone is simply interrogated, their rights may be infringed unless they are advised against self-incrimination.

**Legal privilege **

Makara also points out that confidential information or documents protected by legal privilege may not be part of the warrant.

It is critical to have people available who can approach the court on a matter of urgency to limit the scope of the warrant.

“We have encountered instances with the Special Investigating Unit where the warrant was so wide that everything besides the kitchen sink was included.”

Siddiqi says AI is quite helpful in scanning documentation for legal privilege or confidentiality. However, she warns that employees’ conversations with AI are not subject to legal privilege.

She referred to a case in the US where a CEO was required to disclose his AI prompt history in civil proceedings. “There was nothing the company could do to clothe those prompts with privilege after the fact.”

Listen/read: Cargo cartels: CompCom accuses eight shipping giants of price-fixing