CAT wrongly refused warrant for CMA to raid domestic premises

On 22 April 2024 the High Court published its ruling in the CMA's appeal against the CAT's refusal to grant a dawn raid warrant to search domestic premises. It held that the CAT had erred in its reasoning in relation to warrants to search domestic premises, by setting a higher threshold for justifying a warrant in relation to domestic premises than for searching business premises.

The CAT had erred in law in finding that additional evidence will always be required for domestic premises warrants, in order to justify the risk that physical or electronic documents held on the premises may be destroyed, as the individual's suspected involvement in the cartel is not enough in itself to justify that risk.

The CMA has welcomed the ruling as the CAT's analysis seriously risked undermining its ability to effectively enforce against cartels.  According to the CMA:  "With the increase in remote working and electronic communication, it is essential that we are able to search domestic premises to secure evidence of potential breaches of competition law where appropriate to do so".

This is in line with the current global trend we are seeing with competition authorities increasingly making use of their powers to carry out dawn raids at domestic premises, 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 had previously stated that it would be 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 shortly. 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.

Background

In 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.

Under sections 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:

1. 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
2. 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 the business premises are concerned the CAT was therefore satisfied that the second requirement was met.

In relation to the domestic premises warrant, 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.  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".  The CAT concluded that there was no such evidence in this case and refused to grant the warrant for the CMA to search the domestic premises.

High Court ruling

Requirements for domestic premises warrant

The CMA argued that the CAT had erred in law in imposing an additional requirement for the domestic premises warrant, on the basis that the two requirements in sections 28 and 28A of the Competition Act 1998 are identically worded and should therefore be given the same meaning and effect.

The High Court agreed that the CAT's statement that "the inference from the suspected existence of a secret cartel of destruction of documents which is sufficient to justify the issue of a warrant in respect of business premises is never enough to justify the issue of a warrant in respect of domestic premises, but something more to suggest a propensity to destroy is always required" (emphasis added) does go too far.

The Court accepts that there may very well be cases where the position of the individual in the undertaking or the extent of their involvement in the cartel will mean that the inference is enough to justify the issue of the warrant without additional evidence of propensity.  Whether or not the inference is enough will depend on the facts and circumstances of each case, and the CAT therefore erred in law in seeking to lay down the principle that 'something more to evidence a propensity to destroy beyond inference' is always required.

Guideline judgment

The CAT had declared that its judgment should be available more widely as a "guideline judgment" that could be cited and followed in any court as it considered that it did provide helpful guidance for future cases.

Unsurprisingly, given the High Court's conclusion that the CAT had erred in law regarding its assessment of the requirements for a domestic premises warrant, the High Court concluded that the CAT's ruling should not be treated as a guideline judgment and should not be followed in future cases by the CAT. The Court also held that the CAT had exceeded its powers as it could not dictate the status of its judgment in any court or tribunal other than in the CAT itself.

Public access to supporting material

The CMA also challenged an Order of the CAT proposing to make supporting material publicly available, in the absence of any indication of an intention to challenge the warrants by the interested parties.  The CAT's reasoning for this was that the warrants judgment could not be fully understood and challenged without the disclosure of the supporting material.

The High Court held that the only two circumstances in which the CMA may need to disclose further information to the subject of the warrant are:

• where the subject makes and application for further information, and
• where the subject makes an application to vary or discharge the warrant.

Where neither of these circumstances arise, the CAT does not have the power of its own accord to order the CMA to disclose further information to the subject of the warrant.  The CAT therefore exceeded its powers and the Order should not have been made.