Unwelcome Visitors? UK Court Greenlights Domestic Search Warrants In Competition Cases

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The CMA's successful appeal in R (CMA) v The Competition Appeal Tribunal [2024] EWHC 904 is a key development in a broader shift in searches (often referred to as "dawn raids")...
UK Antitrust/Competition Law
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In Short

The Development: The UK Competition and Markets Authority ("CMA") has successfully appealed a decision of the UK Competition Appeals Tribunal (the "Tribunal") rejecting its application for a warrant to search domestic premises—paving the way for increased use of domestic searches in future competition investigations.

The Background: With the increased adoption of hybrid and home working since the COVID pandemic, competition authorities in the United Kingdom and around the world have been adopting strategies to ensure that evidence of anti-competitive conduct, whether located at a business or off-premises, can still be identified and collected.

Looking Ahead: The CMA is expected to rely increasingly on domestic searches as part of its evidence-gathering strategy. The targeting of evidence that may be located outside of traditional business premises comes alongside a greater focus on digital evidence, with the CMA dedicating significant resources to investigative tools that take advantage of automation and artificial intelligence.

The CMA's successful appeal in R (CMA) v The Competition Appeal Tribunal [2024] EWHC 904 is a key development in a broader shift in searches (often referred to as "dawn raids") and other evidence-gathering strategies by competition authorities to keep pace with the rapid evolution in working patterns. These strategies are intended to address the increased acceptance of remote working environments and the technologies used to facilitate such work.

The recent appellate decision relates to an investigation into suspected anti-competitive conduct in the supply of chemical admixtures for use in the construction industry. In connection with this investigation, the CMA applied to the Tribunal last October for warrants to search a number of business premises in England and domestic premises in Scotland.

It is important to note that the CMA has the power to inspect business premises (but not domestic premises) without a warrant, including without notice where the premises are occupied by a party to an agreement or conduct that is the subject of a competition investigation. However, the CMA usually seeks a warrant where there is a suspicion that information relevant to the investigation might be "concealed, removed, tampered with, or destroyed," and must establish grounds for such suspicion as a threshold for obtaining a warrant to search business premises. A warrant is always required to search domestic premises.

The key issue that the High Court was required to consider in this case was whether the same legal thresholds must be satisfied for the granting of a warrant in relation to both business and domestic premises. It is well established that, where there is a suspected secret cartel, the Tribunal applies a strong inference that evidence sought in relation to that cartel may be concealed, removed, tampered with or destroyed, thereby satisfying the relevant threshold for a warrant to be granted. In the current case, the Tribunal accepted this position, finding that the CMA established the requisite conditions for the warrants to be issued in relation to the relevant business premises in England.

However, although the legislation contains identically worded provisions for searching both business and domestic premises, the Tribunal determined that a higher order of scrutiny was required to be applied in relation to the latter as a result of the operation of Article 8 of the European Convention on Human Rights ("ECHR"), which concerns the right to respect for private and family life. Specifically, the Tribunal considered that, in the case of domestic premises, the CMA must adduce evidence that would suggest a "propensity to destroy", rather than just a suspicion that documents might be concealed, removed, tampered with, or destroyed.

The CMA appealed this finding, claiming the Tribunal's decision undermined its enforcement capabilities, and asserted that it would be "practically impossible to obtain a warrant for domestic premises" under the Tribunal's proposed standard, given that when it is necessary to conduct such searches, "it would be a very rare case in which it would be able obtain evidence of such a propensity, particularly at the launch of an investigation".

After hearing the appeal by the CMA, the High Court rejected the Tribunal's approach. Specifically, the High Court determined that the Tribunal had erred in law by seeking to import a general principle that the CMA must establish a propensity to destroy documents before obtaining a warrant to search domestic premises, and accepted the CMA's submission that the Tribunal had incorrectly concluded that the operation of the ECHR "compelled a different construction of an identical statutory provision". It is not expected that the case will be appealed further.

In a statement released after the High Court's decision, Sarah Cardell, CEO of the CMA emphasized that "with the increasmote-working – and electronic communication – it's essential that [the CMA] are able to search domestic premises to secure evidence of potential breaches of competition law where appropriate to do so". More broadly, the CMA has in recent years made clear that it intends to expand the scope of its searches to include domestic premises given the increase in remote working.

There are also a number of amendments contained in the Digital Markets, Competition and Consumer Bill, which is expected to be enacted into law in the coming months, that are intended to further strengthen the CMA's evidence-gathering powers, including:

  • Clarity that warrants include the power to compel production of information held electronically which is accessible from the premises, as well as information being held directly on the premises;
  • The extension of the CMA's "seize-and-sift" powers, which allow it during searches to remove potentially relevant material for later review, so that this is permitted during searches of domestic premises as well as business premises; and
  • The introduction of civil fines for failing to comply with, or obstructing, searches conducted by the CMA, which can more easily be levied by the CMA than the existing criminal penalties.

In addition, there has also been a notable trend by the CMA to include within the scope of searches and other evidence-gathering exercises personal devices used for business purposes and to look at evidential material in non-traditional communication channels such as WhatsApp, Teams, and social media. These expanded search requirements can raise a number of employee management complexities for businesses, in addition to having to manage the search process itself.

Three Key Takeaways

  1. Given the expected increasing sophistication of dawn raids, both as a result of the CMA's stated intentions to make greater use of existing powers and the more permissive investigatory powers contained in the incoming legislation under the Digital Markets, Competition and Consumer Bill, businesses should ensure that their training and procedures are up-to-date and regularly communicated to key staff.
  2. Businesses should also update dawn raid training and processes to address what employees should do if investigators from a competition authority arrive at their domestic premises, given the specific risks that such searches can present and the fact that staff may feel more exposed than would be the case in the context of a dawn raid at business premises.
  3. Finally, as digital workspaces evolve, and particularly with the shift to cloud-based services, in order to avoid significant sanctions for non-cooperation it is important that businesses maintain the technical capabilities to preserve evidence and curtail the ability of individuals to delete or alter content on electronic systems and devices, if the company is subject to a dawn raid by a competition authority.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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