April 26. 2024

English High Court sets aside fundamental rights to support CMA raids of private residential premises | Consequences for businesses, their executives and employees


1. Overview

The English High Court has 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.1 

Overturning an earlier ruling of the Competition Appeal Tribunal ("CAT"), on 22 April 2024 the High Court held that when applying for a domestic search warrant the CMA is not required to provide evidence that an affected individual may have a particular propensity to conceal or destroy relevant evidence. 

It was generally accepted that a party involved in a secret cartel has a "strong motive" to conceal evidence of its illegal activities. From this, an inference or presumption can be drawn that evidence of cartel conduct is at risk.  In its earlier ruling, the CAT had accepted that this inference or presumption justified the issue of a warrant to the CMA to search business premises. However, in relation to private residential premises the CAT insisted that this presumption was insufficient and a higher threshold had to be satisfied, the tribunal ruling that additional evidence of a propensity to conceal or destroy evidence was always required before a domestic search warrant would be issued. On appeal, the CMA had argued that, in practice, it would be near impossible to meet this test, the CAT ruling placing an "unwarranted fetter on the power to grant warrants". 

In its judgment, the High Court found that the CAT had committed an error of law when setting such a strict test in relation to domestic search warrant applications. Following this judgment, when investigating a suspected secret cartel the CMA will generally be able to rely on the presumption that evidence is at risk to obtain a warrant to search either business or private residential premises.

The High Court judgment is an emphatic vindication of the CMA's far-reaching investigatory powers. In its ruling, the CAT had placed a strong emphasis on the importance of protecting the privacy of a home.  In stark contrast, the High Court insists that business and private residential premises should be treated similarly and are similarly vulnerable to CMA inspection.

The CMA has welcomed this judgment, noting that "[w]ith the increase of remote-working – and electronic communication – it's essential that we're able to search domestic premises to secure evidence of potential breaches of competition law where appropriate to do so".2  The CMA plainly views inspections of private residential premises as essential if it is to detect and successfully prosecute cartels.

2. Background

In October 2023, the CMA applied for four warrants to enter and search both business and private residential premises as part of an investigation into a suspected cartel in the chemical industry.3 Although the CMA had in the past applied for domestic dawn raid warrants, this was the first occasion it had made an application for a UK-wide warrant, relating to premises situated in England, Wales and Scotland. Accordingly, the warrant application was heard by a full panel of the CAT, underlining the significance of the case.

The CAT agreed to issue warrants to search relevant business premises, but refused to grant the CMA a warrant for the residential inspection. 4 In reaching this decision, the CAT considered in detail the powers of the CMA under sections 28 and 28A of the Competition Act 1998 ("CA98"), which respectively enable the CMA to inspect business and domestic premises, on the basis of essentially identical statutory provisions. 

  • In relation to business premises, the CAT accepted that the CMA had sufficiently demonstrated that the requirements of s28 CA98 were satisfied. i.e. there were reasonable grounds to suspect that there were documents on the premises which the CMA could require to be produced (under s26 CA98) and it was reasonable to presume that documents sought in relation to a suspected secret cartel may be concealed, removed, tampered with or destroyed.
  • In relation to the domestic premises, the CAT was satisfied that in line with s28A 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 (first limb of the legal test).  However, given the application related to domestic premises the CAT maintained that it required a "higher order of scrutiny".  While it was possible to rely on a presumption that documents were at risk when considered a warrant to search business premises, and thereby satisfy the second limb of the statutory test, the CAT ruled that this was not sufficient to justify a domestic search warrant -  instead "something more to suggest a propensity to destroy [documents] needs to be asserted in evidence when a named individual's … domestic premises are identified for entry".
  • In finding that a "higher order of scrutiny" applied to applications for domestic search warrants, the CAT considered and relied on the European Convention on Human Rights (the "ECHR"), including Article 8 ECHR which expressly provides that all individuals have a right to respect for their privacy that extends to their family life and home (with Article 8 ECHR incorporated into English law under the UK Human Rights Act 1998). It is interesting to note that the High Court, in overruling the CAT, did not comment in detail on these points or else give reasoned guidance on the relevance of the ECHR to applications for domestic search warrants.

In setting a high evidential threshold for domestic search warrant applications, the CAT itself conceded that it was unclear what precise evidence the CMA would need to adduce to demonstrate a propensity to destroy (the CAT characterising this as a "near-impossible question to answer"). 

In December 2023, the CMA bought an application for judicial review asking the High Court to overturn the CAT ruling.  Among the grounds of appeal, the CMA argued that requiring tangible evidence of a propensity to destroy relevant evidence, and not just being allowed to infer this from the suspected existence of a secret cartel, imposed an "unwarranted fetter on the power to grant warrants under section 28A of CA 1998".5

3. Key findings of the High Court

In an emphatic ruling, the High Court endorsed the arguments made by the CMA and found that the CAT had wrongly applied the law in this case. 

The High Court held that the CAT had committed an "error of law" in laying down that the CMA always needed to provide specific evidence of a propensity to destroy electronic or physical documents for a domestic search warrant to be issued.  The High Court is critical of the CAT for "going too far" in introducing this additional evidential requirement which, according to the CMA, would make it "practically impossible to obtain a warrant to search domestic premises". In particular, the High Court ruled:

  • The evidentiary burden which the CMA is required to meet will depend on the facts of a case. Whether or not the inference of a propensity to destroy relevant evidence can be drawn from the suspicion of a secret cartel will depend on the circumstances. Relevant factors might include the seniority/role of the employee whose home is being inspected and the extent of that individual's involvement in the suspected cartel.
  • By their very nature, secret cartels are difficult to investigate, so extra evidential requirements might be impossible to meet.  In this context, the High Court maintained that past case-law did not provide a basis to distinguish between domestic and businesses premises for the purpose of granting search warrants.  In addition, the High Court observed that the express statutory tests included in sections 28 and 28A are identical and do not support the divergent interpretation applied by the CAT.

4. Domestic dawn raids – businesses are on notice

In recent years there has been a transformation in working practices: working from home has become ubiquitous in many professions and sectors. This has been coupled with comprehensive changes not only to where people work, but also to how we work: technological advances have meant that business is increasingly conducted on personal devices, and via instant messaging services, in addition to e-mails. As a result, competition authorities, like the CMA, are prioritising access to personal electronic devices. Access to such devices is viewed as critical by competition agencies since data that they hold may not be available through inspection of a business premises and access to a business's IT systems and infrastructure. 

The CMA's investigatory powers are set to be enhanced, and clarification provided as to the CMA's ability to require the production of electronic information and documents stored remotely, when the Digital Markets Competition and Consumer Bill comes into force later this year. 

For executives and employees, this latest ruling raises potential concerns in terms of the protection of their fundamental rights. It is notable that the High Court judgment did not consider the impact of the ECHR in detail and the interplay between the protections it confers, including in respect of privacy, and the evidence necessary to obtain a domestic search warrant. It follows that the High Court judgment does not preclude the possibility of legal challenges to CMA inspections at private residential premises.6  It may further be noted that the High Court did stress that, in appropriate circumstances, a higher evidential burden would apply for a domestic search warrant application.  This might be the case where, for instance, a private residential premises is shared by a family.  The seniority and role of the relevant employee whose home is to be raided may also be a factor.

For businesses, this ruling also presents complex challenges. From a practical perspective, it is difficult to prepare for and, in a worst case, respond to unannounced inspections conducted simultaneously at business premises and at employees' homes.  Dawn raid training and preparation has traditionally focused on inspections at business premises.  Resources and amenities are immediately to hand in this context, including in-house legal counsel and IT staff are familiar with a company’s IT systems. Such amenities and resources are not immediately available when faced with a domestic raid, factors that compound the difficulty of responding effectively.

2024 has seen the CMA prosper before the UK courts.The year started with the Court of Appeal affirming the power of the CMA to require overseas companies to produce documents and information when it is investigating suspected anti-competitive conduct.7 Spring has seen the High Court 'unfetter' the CMA's powers to conduct domestic down raids. It is clear that the CMA is resolved to use all its available powers to crackdown on cartels and will appeal any court rulings that conflict with this overarching priority.

The Antitrust team at Mayer Brown can assist with all aspects of competition inspections and resulting liaison with competition authorities around the world. For an in-depth analysis of the legal and practical aspects of competition inspections under UK and EU law, please see this practical guide published with Concurrences.

1  R (CMA) -v- The Competition Appeal Tribunal (judiciary.uk)

2  Sarah Cardell, Chief Executive Officer of the CMA, quoted in a press release on 22 April 2024: CMA wins legal challenge against CAT on home search warrants - GOV.UK (www.gov.uk)

3  Suspected anti-competitive conduct in relation to the supply of chemicals for use in the construction industry - GOV.UK (www.gov.uk)

4  Warrant Applications (1611-1614) - Judgment (Application for Warrants) | 12 Oct 2023 (catribunal.org.uk)

5  Other grounds of appeal related principally to procedural issues.  These included: (1) the precedential value of the CAT ruling, with the CAT asserting its ruling was a 'guideline judgment' to be followed by other courts; and (ii) a court's power to order the CMA to disclose material it has relied on to support a warrant application or to identify information that is subject to public interest immunity.

6  See further: The fundamental importance of gathering sufficient evidence to carry out competition dawn raids | Insights | Mayer Brown

7  CMA wins appeal on legal challenge to overseas information requests

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