Home truths: UK CMA wins in dispute over searches of domestic premises

Background

In October 2023, the CMA applied to the CAT for warrants to search business and domestic premises as part of an investigation into anti-competitive behaviour in the supply of chemical admixtures for use in the construction industry.

The CAT granted the CMA the warrants in respect of the business premises but refused the application for a warrant to search the domestic premises of a named individual.  This was on the basis that the CMA had not identified specific evidence that an occupier of the domestic premises had a “propensity” to destroy physical or electronic evidence held there. 

The CMA subsequently applied to the High Court for judicial review of the CMA’s decision.  Although it was no longer seeking the warrant it had applied for, it was concerned that the CAT’s decision would have a lasting impact on its ability to investigate cartels in future cases. 

This was particularly important to the CMA because the CAT had stated that its ruling amounted to a “guideline judgment” which could be cited in the future before any court.

The power to enter business and domestic premises

The disagreement between the CMA and the CAT focussed on the interpretation of two provisions of the Competition Act 1998 (“CA 1998”) – sections 28 and 28A, which provide the power to enter business and domestic premises respectively under warrant.  There are two conditions which appear within these sections which are identically worded and which were relevant to this case.  In summary these are:

• First, that there are reasonable grounds for suspecting that there are documents at the (business or domestic) location which the CMA has the power to require to be produced.   
• Second, that there are reasonable grounds for suspecting that if those documents were required to be produced, they would not be produced but would be concealed, removed, tampered with or destroyed.

In relation to the second condition, the CAT decided that because the CMA was investigating a secret cartel there was a strong motive to conceal evidence of the parties’ involvement.  An inference could therefore be drawn that the condition was satisfied in relation to the business premises.

In contrast, the CAT found that the same inference was not enough in and of itself to justify the issue of a warrant in respect of domestic premises.  This was despite the identical wording used in the two relevant provisions of the CA 1998.

The CAT decided that “something more to suggest a propensity to destroy needs to be asserted in evidence where a named individual’s (i.e. a natural person’s) domestic premises are identified for entry pursuant to a warrant, particularly where, as here, those premises are occupied by others, and the scope of the warrant is wide-ranging”. 

The High Court’s judgment

The CMA, in its submissions to the High Court, said it accepted that a warrant for searches of domestic premises requires a higher degree of scrutiny (both generally but also under the European Convention of Human Rights).  But it said that the CAT was wrong to find that this required a different interpretation of two identically worded provisions. The CMA also argued that, in practical terms, it would very rarely be able to obtain evidence of an additional propensity to destroy documents at such an early stage of a secret cartel investigation.

The Court found in favour of the CMA, effectively overturning the CAT’s “guideline judgment”.  It decided that the CAT was wrong to assert that specific evidence of a propensity to destroy documents is always required in warrant applications relating to domestic premises.

The Court found that even without some additional evidence of propensity to destroy, the extent of an individual’s involvement in a suspected cartel, or their position at the business under investigation, could mean that the inference to be drawn from the suspected existence of the cartel itself could be enough to justify the issue of a domestic warrant.  This would need to be assessed on a case-by-case basis.

In summary, this means that when the CMA applies for a warrant to search domestic premises under the CA 1998 it will not necessarily have to provide specific evidence that a person at the premises is likely to destroy documents held there.

Implications  

This outcome is a significant victory for the CMA, which regards the power to search domestic premises as an important feature of its investigative toolbox, and returns the CMA to the position it was in before the CAT’s judgment. 

It is also notable that although the CMA has not used its powers to search domestic premises in a large number of cases, there are indications that the changing work environment may signal an increase in the future: in reacting to the High Court’s judgment, the CMA’s Chief Executive Sarah Cardell said “with the increase in remote-working – and electronic communication – it’s essential that we are able to search domestic premises to secure evidence of potential breaches of competition law”. 

The High Court’s judgment in this case therefore acts as a timely reminder that the risk of “dawn raids” by the CMA is not only limited to business premises.  

If you would like to discuss any aspect of this article, including on how to prepare for the possibility of dawn raids by competition authorities, then please get in touch with any of the contacts listed.

Authored by Jamie Pollock, Stelios Charitopoulos, and Karman Gordon.