Home Sweet Home? CMA Granted Domestic Search Warrant On Appeal By English High Court

In a recent court judgment, the English High Court reversed a lower court ruling and confirmed that when applying for a warrant to search a domestic dwelling, the UK Competition and Markets Authority (CMA) is not generally required to provide evidence that an affected individual may have a particular propensity to conceal or destroy relevant evidence. With the prevalence of home working, and the recent pattern of extensive and intrusive investigations by competition authorities, this judgment continues the theme of increasingly intrusive investigations by the CMA.

I. INTRODUCTION

1. In April 2024, the English High Court issued a landmark judgment confirming the ability of the UK Competition and Markets Authority ('CMA') to conduct raids of private residential premises when investigating suspected cartels (the 'High Court Ruling') [1]. In so doing, the High Court overruled a decision adopted by the Competition Appeal Tribunal ('CAT') on 7 December 2023 ('CAT Judgment') [2]. The CAT had granted search warrants to the CMA enabling the agency to raid business premises, but the tribunal had refused to grant a warrant to raid a private home. The CAT had insisted that a higher evidential threshold was to be satisfied by the CMA when applying for domestic search warrants, with the CMA required to provide evidence, beyond just the secretive nature of the alleged behaviour in question, that an affected individual may have a particular propensity to conceal or destroy relevant evidence. The High Court rejected the CAT's assessment and findings and instead held that the same evidential threshold should generally apply to applications for warrants authorising searches of businesses and domestic premises. In other words, additional evidence of a propensity to destroy evidence, would not normally be needed.

2. The contrast between the decisions of the High Court and the CAT is especially notable given their differing treatment of fundamental rights. The CAT attached significance to the sanctity of the home and the right to privacy, noting throughout its judgment, the highly invasive nature of a domestic search and using this to justify a higher evidential threshold for a domestic warrant compared to business dwellings. In stark contrast, the High Court Ruling does not consider the impact of the European Convention on Human Rights ('ECHR') in any detail and the interplay between the protections it confers, including in respect of privacy, and the evidence necessary to obtain a domestic search warrant.

3. The High Court Ruling follows a notable pattern of increasingly extensive and intrusive investigations by competition authorities. Since COVID lockdown restrictions were relaxed, competition authorities worldwide have made greater and more frequent use of invasive inspection powers in a concerted effort to crack down on suspected cartels through unannounced "dawn raids." The High Court Ruling is particularly deserving of attention in this context, removing what the CMA considered to be an "unwarranted fetter on the power to grant warrants". It serves as a timely reminder of the broad investigatory powers available to the CMA.

4. While it might be argued that there is potential difficulty in reconciling the High Court Ruling with fundamental privacy rights, it does seem to fit patterns of working behaviour post-COVID. Nevertheless, applying the same evidential requirements for both domestic and business raids, gives rise to practical problems due to the differences in professional and personal settings, as well as the plethora of difficulties this might trigger, not least from a privacy and technological perspective, noting in addition, that such raids will almost always be carried out at the same time. Still, competition authorities in other jurisdictions also appear intent on pursuing a similar policy, with dawn raids at domestic premises increasingly viewed as important for their enforcement capabilities. Businesses are on notice to ensure their compliance procedures keep pace with these developments and are sufficiently broad in design to address risks at both commercial premises and employees' private homes.

II. CAT'S REFUSAL TO GRANT A WARRANT

5. In this case, the CMA sought four warrants to enter and search both business and domestic premises in connection with an investigation into alleged anti-competitive behaviour in the chemical industry. [3] The CAT made an order issuing three of the warrants for the business premises, with the fourth application in respect of domestic premises failing. This is the first time the CMA has applied for a UK-wide warrant in a civil investigation to inspect domestic premises. The application was therefore heard by a full panel of the tribunal and focused on the powers of the CMA under sections 28 and 28A of the Competition Act 1998 ('CA98'). These provisions govern the powers of the CMA to enter business and domestic premises with a warrant and are to be used only when less intrusive options, like information requests (s26 CA98) and visits when documents can just be copied but not taken (s27 CA98), will not suffice.

6. In relation to business premises, the CAT accepted that the CMA had sufficiently demonstrated that the requirements of section 28 CA98 were satisfied, i.e. that there were reasonable grounds for suspecting that relevant documents to the investigation were at the business premises that the CMA is entitled to ask for, and that if such documents were requested by way of an information request, they would be concealed or destroyed in some way.

7. In relation to the domestic premises, the CAT was satisfied that in line with section 28A CA98, the CMA had properly established that there were reasonable grounds to suspect there were documents relevant to its investigation which it could ask for (the first limb of the legal test). However, the CAT found that the CMA had failed to establish reasonable grounds for suspecting that if these materials were required to be produced, they would be concealed, removed, tampered with, or destroyed (the second limb of the s28A test). Much of the judgment focuses on the factors relevant to assessing this second limb.

1. Insufficiency of secrecy

8. The CAT accepted that secret cartels operate covertly. This is axiomatic. It is also self-evident that where documents are sought in relation to a secret cartel, there is the inherent possibility that they may be concealed, removed, tampered with, or destroyed. However, to assert that a suspected cartel has been conducted secretly—and to draw from this the inference that documents are at risk of concealment or destruction—was not sufficient in the view of the CAT to justify issuing a warrant to search domestic premises in order to seek and preserve evidence. Instead, the CAT ruled that "something more to suggest a propensity to destroy needs to be asserted in evidence where domestic premises are identified for entry with a warrant, particularly where, as here, those premises are occupied by others and the scope of the warrant is wide-ranging."

9. It is not clear on the face of the CAT Judgment what precise evidential threshold is imposed by the requirement to adduce "something more" in the context of a domestic search warrant (and the CAT acknowledged the difficulty of reaching a definitive conclusion). Indeed, the CMA argued that this lack of legal clarity, coupled with the practical difficulty of obtaining "something more" in cartel cases, presented it with significant challenges in seeking domestic search warrants. On the other hand, the CAT Judgment captured the reality that intrusive searches of domestic premises should be looked at more carefully than raids on business premises, as required under the ECHR and the UK Human Rights Act 1998 ("and generally"). In this context, individual rights to privacy must be weighed against the public interest in ensuring effective prosecution of illegal cartel activities.

10. The remainder of the CAT Judgment suggested that the evidential threshold may be met when all the other circumstances of the case suggest that a domestic dawn raid is the only way for the CMA to secure the evidence it needs, or else when there is some other evidence that an individual would act improperly if asked to produce evidence. In this case, the CMA seems to rely solely or primarily on its claim that the suspected cartel was conducted secretly. This was not sufficient in and of itself for the CAT.

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Originally published in Concurrences