CAT refuses warrant for CMA to search domestic premises

On 7 December 2023 the Competition Appeal Tribunal (CAT) published its judgment of 12 October 2023 in which it refused to grant a warrant for the CMA to enter and search the domestic premises of an individual for the purposes of an investigation under the Competition Act 1998. The judgment sets a higher threshold for justifying a warrant in relation to domestic premises than for searching business premises and could potentially curb the CMA's powers for searching domestic premises more widely.

This would go against the current global trend we are seeing with competition authorities increasingly making use of their powers to carry out dawn raids at domestic premises of employees, as a result of the new ways of working post-Covid. The EU Commission carried out its first dawn raid at the home of an employee in 2022 and the CMA has publicly stated that it is now more likely to conduct dawn raids of domestic premises.  The CMA is also due to obtain new powers to "seize and sift" when carrying out dawn raids at domestic premises, under the Digital Markets, Competition and Consumers Bill which is expected to receive Royal Assent next spring. This will allow investigators to take away all potentially relevant material and examine this at a later date to determine whether it is within the scope of the search warrant.  But the CMA will now first need to overcome the increased hurdle for obtaining a warrant, and it will be interesting to see whether we see this replicated in other jurisdictions.  Most competition authorities need to obtain a court warrant before they can carry out dawn raids at domestic premises, and other courts may also start looking more closely at the protection of individuals under their relevant human rights legislation.

The CMA had applied to the CAT for the judgment not to be published, citing as one of its reasons that it would make it more difficult for the CMA to obtain warrants for domestic premises.  The CAT refused to grant the application on the basis that the CMA had failed to identify any part of the judgment that could prejudice its investigation or any further execution of warrants. The CAT considered that the judgment would provide guidance for future cases and as a "guideline judgment" should be available more widely.

Summary of the CAT's ruling

On 12 October 2023 the CMA applied to the CAT for four warrants to enter and search business premises and the domestic premises of an individual in Scotland. This was the first time an application was made for a UK-wide warrant and the application was therefore heard and determined by a full panel of the CAT, selected to include a Justice of the High Court of England and Wales and a Senator of the College of Justice and Judge of the Court of Session in Scotland.

Under section 28 and 28A of the Competition Act 1998 the CAT or the High Court may issue a warrant if it is satisfied that there are reasonable grounds for suspecting:

(i) that there are on the premises (business or domestic, as the case may be) documents which the CMA has the power to require to be produced; and

(ii) where, if those documents were required to be produced, they would not be produced, but would be concealed, removed, tampered with or destroyed.

The CAT was satisfied that the first requirement was met in this case.  As for the second requirement the CAT was sympathetic that in the case, as here, of an alleged secret cartel, the CMA will have concerns that documents may be concealed, removed, tampered with or destroyed, and that it is difficult to envisage what further evidence the CMA could produce in support of this concern.  As far as business premises are concerned the CAT was therefore satisfied that the second requirement was met.

A warrant in relation to domestic premises however requires a higher level of scrutiny under the European Convention on Human Rights/Human Rights Act 1998 and generally.  The CAT did not consider that the inference from the suspected existence of a secret cartel of destruction of documents is in itself enough to justify the issue of a warrant in that case.  According to the CAT "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".  The CAT concluded there was no such evidence in this case and refused to grant the warrant for the CMA to search the domestic premises.

The CAT also considered the adverse effects of no warrant being issued for the domestic premises as low. If the devices were to disappear or produced with deletions, inferences will be drawn against the individual and his company which will be hard to rebut.  Also, permanent deletion of electronic material is difficult.  It may mean that the CMA will have to incur additional costs and effort to restore such material, but the full economic cost for this should fall on the parties having caused the deletion.

The CAT made a final point around the protection of legal privilege for electronic documents, which is inevitably different from that for hard copy documents. It is much more likely that privileged material will be found in electronic documents downloaded by the CMA and the CAT considers that the CMA should have processes in place providing for appropriate safeguards (in line with what was envisaged by the Court of Appeal in TBD Owen Holland Limited v Simons).  The CAT concluded that it was satisfied with the CMA's process that had been put forward in this regard.

Marc van der Woude, President of the EU's General Court, also made a statement recently in relation to legal privilege for digital documents in the context of a dawn raid.  Whereas he said he does not see the need to change the rules on legal privilege, he recognises that there is an increased risk that some documents will be absorbed by digital searches, which are carried out by 'machines'. It is therefore important for lawyers to clearly mark their digital documents as legally privileged, as once a document is disclosed to the prosecuting authority this cannot be undone.

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