Raids by Asia-Pacific Enforcers Are on the Rise: A Guide to Being Prepared for When the Enforcer Comes Knocking

More Raids in the APAC Region

The increasing use of raids by authorities across the Asia-Pacific region (as well as globally) highlights the risks of such unannounced on-site investigations by antitrust, anti-bribery, cybersecurity, and other government enforcers, as well as the importance of ensuring that local corporate offices and employees are prepared to handle such events. These raids often involve an on-site search, inspection and seizure of documents, and employee interrogations, and they are almost always both highly disruptive to business operations and a source of anxiety for the affected personnel. It is critical that companies prepare relevant employees for the possibility of government raids and for steps they can take during and after raids to appropriately protect corporate interests.

A few recent examples from various jurisdictions within the Asia-Pacific region:

• In January 2024, Hong Kong's Competition Commission ("HKCC") executed search warrants at several funeral service companies and the offices of a trade association.
• During 2023, the Chinese antitrust authority (the State Administration for Market Regulation or "SAMR," along with its provincial offices) carried out on-site investigations in 16 of 19, or 84%, of published penalty cases, up from 67% during 2022.
• In November 2023, the Competition and Consumer Commission of Singapore ("CCCS") carried out unannounced inspections at the premises of certain companies in the local construction service sector.
• In June 2023, HKCC conducted a third round of inspections at one of the city's largest fish markets. The agency searched the Aberdeen Wholesale Fish Market as part of an ongoing investigation code-named "White Whale."
• In March 2023, Chinese authorities raided the Mintz Group's Beijing office and detained some of its local staff for alleged "unapproved statistical work." In October 2023, they raided a subsidiary of advertising company WPP for alleged commercial bribery.
• In November 2022, The Competition Commission of India ("CCI") raided offices of small-scale steel companies for alleged price collusion with respect to steel products used in construction. The CCI then conducted another raid of steel producers in February 2023, again related to alleged price collusion.
• Recently, the Japan Fair Trade Commission ("JFTC"), together with the special investigation unit of the Tokyo District Public Prosecutors' Office, conducted dawn raids on Dentsu Inc., a major advertising company, and Cerespo Co., Ltd., an event production company, as part of an investigation into suspected bid-rigging of events at the Tokyo Olympics and Paralympics in 2021. The JFTC also undertook an inspections of power suppliers (three times) and pharmaceutical distributors.

Authority to Conduct Raids

Investigation powers vary across enforcement authorities. For example, antitrust authorities in China and Singapore may conduct dawn raids on their own; the Australian Competition & Consumer Commission ("ACCC") and Commerce Commission of New Zealand first must obtain search warrants from local courts; and the HKCC is required to obtain police assistance. For criminal investigations, the JFTC must obtain a search warrant before conducting a dawn raid, but for administrative investigations, the JFTC may conduct a dawn raid without a warrant and without assistance from the police. Moreover, in many jurisdictions, multiple government authorities, including the police, cooperate and coordinate with one another on particularly serious or high-profile matters: In China, for example, the participation of the Public Security Bureau brings enhanced powers to seize materials and compel testimony.

Limits on Investigative Powers

At the same time, the investigative powers of enforcement authorities in the APAC region are not unbounded. Corporate and individual targets of government investigations can seek to ensure that enforcers do not overstep their authority or exceed the scope of the search warrant at issue. For example, China's Administrative Penalty Law requires at least two enforcement officials to be present during dawn raids. In addition, many jurisdictions, such as Australia and New Zealand, prevent enforcement officials from accessing, reviewing, or seizing privileged materials. In Japan, the JFTC adopted a procedure to protect certain confidential attorney client communications in relation to possible violations of antitrust law.

Penalties for Obstruction

While companies and individuals possess certain protections in the context of dawn raids, failure to comply with legal obligations during such raids can result not only in fines and incarceration for obstruction of justice, but also increased penalties for the underlying substantive violations. For example, in China's 2020 Calcium Gluconate Case, SAMR fined two companies and 14 employees a total of RMB 2.53 million (around $360,000) for allegedly hindering SAMR's investigation. The company that allegedly led the conspiracy also was fined RMB 253 million ($36 million), comprised of RMB 109 million in confiscated illicit gains and an RMB 144 million penalty, marking the first time SAMR imposed the maximum penalty of 10% of annual revenue. In 2022, amendments to the Chinese Anti-Monopoly Law further increased the penalties for obstruction of investigations.

Reducing Risk

In the current enforcement climate, it is important for companies to minimize the risks and potential impacts of dawn raids. In addition to establishing robust compliance programs, any companies subject to on-site investigations should be prepared for the possibility of a raid and, more specifically, for what may occur during a raid. Preparation efforts should involve corporate personnel likely to be involved in interacting with law enforcement authorities on site (e.g., receptionists, office managers, IT staff), and those personnel likely to participate in the assessment of any measures to undertake in the aftermath of a raid. Key steps that companies may take in this regard include:

• Develop and implement a comprehensive dawn raid response policy and ensure that relevant employees receive appropriate training regarding what they should do in the event of a dawn raid;
• Designate a response team, which would typically include members of the legal department, senior management team, corporate communications teams (for public relations and investor relations), and IT department;
• Ensure that relevant employees understand the need to appropriately cooperate with law enforcement authorities in the course of a dawn raid, while understanding—and being prepared to assert—the rights of the company and its personnel, in the event the authorities exceed the scope of authorized activity; (To the maximum extent possible, outside counsel for the company—or if outside counsel is unavailable, in-house counsel—should handle substantive communications with the government enforcers.)
• Obtain all information regarding the raid immediately afterwards (e.g., the participating agencies, the personnel interviewed and what they told the authorities, the materials seized, statements made and questions raised by the authorities); and
• Develop an internal and external communications strategy, and a strategy for further engagement with the enforcement authorities involved, and also seek advice on its compliance obligations, such as reporting duties and document preservation.