Navigating the regulatory landscape: The powers of the Competition and Markets Authority to search homes

In this special blog mini-series, Fieldfisher Competition and Regulatory Partner Jessica Gardner will, with the help of competition specialists from her team, take you through key insights relating to the UK's Competition and Markets Authority's (CMA) activities.

In this second edition, Jessica and Associate Asfand Gulzar take a look at the recent judgment of the UK Competition Appeal Tribunal (CAT) in which it denied a warrant request made by the CMA to enter and search the domestic premises of an individual. In its judgment, the CAT established a higher threshold for authorising a warrant for domestic premises, as compared to business premises.

Background

CMA officials have the power to enter any business premises with or without a warrant to investigate cases of suspected infringement of competition law. This is the case whether or not the premises are occupied by a party to a suspected infringement or any other person who may have useful information.

CMA officials also have the power to enter domestic premises in connection with such an investigation, although only if a warrant has first been obtained from a High Court judge (or, in Scotland, a judge of the Court of Session) or the CAT. The CAT or High Court can issue a warrant if they have reasonable grounds to suspect that:

1. there are documents on the premises (business or domestic) that the CMA has the authority to demand; and
2. if those documents were requested, they would not be produced and would instead be concealed, removed, tampered with or destroyed.

The CAT's judgment focuses on the second part of the above test (i.e., whether the requirement in relation to the risk of concealment, removal, tampering with or destruction was met).

The facts

The CMA applied, ex parte and without notice, for four warrants to enter and search business and domestic premises for the purposes of an investigation. The CMA argued that, as the investigation involved a "secret" cartel, the documents may be concealed, removed, tampered with or destroyed.

Alongside their application for a warrant, the CMA also applied to the CAT for the judgment not to be published, stating that it would make it more difficult for the CMA to obtain warrants for domestic premises.

The CAT's judgment

So far as the business premises were concerned, the CAT was satisfied that the requirement in relation to the risk of concealment, removal, tampering with or destruction was met. However, in the case of domestic premises, the CAT applied a higher standard in accordance with Article 8 of the European Convention on Human Rights (the right to respect for private and family life and the home). The CAT did not consider that an inference, arising from the suspected existence of a secret cartel, that documents would, if requested, be destroyed was enough in and of itself to justify the issue of a warrant. The CMA had to provide additional evidence indicating a propensity to destroy documents. This was especially important when the premises were occupied by others, and the scope of the warrant was extensive. The CAT therefore refused to grant the warrant for the CMA to search the domestic premises.

The CAT also considered the adverse effects of not issuing a warrant for domestic premises as low. If documents were to disappear or be produced with deletions, inferences would be drawn against the relevant individual and their company, which would be "very hard to rebut".  The CAT also highlighted that permanent deletion of electronic documents is difficult in the "modern electronic world".  The CAT acknowledged that the CMA may have to incur additional expense and effort to track down and restore such material, but the total economic cost for this ought to fall on the party or parties having caused the deletion.

The CAT also refused the CMA’s application to keep the judgment confidential on the basis that the CMA failed to identify any part of the judgment that could prejudice its investigation or any further execution of warrants.

Our comment

The CMA has indicated in the past that it is willing to use its powers to conduct dawn raids at domestic premises to reflect current flexible and home working practices. However, the recent judgment from the CAT has undoubtedly raised the bar for the CMA's exercise of its powers. It will now be more challenging for the CMA to obtain a warrant to search domestic premises without specific evidence indicating why the individual or individuals in question would have a "propensity" for destroying, tampering with or concealing documents.

Our next edition in this mini-series will be published in March and will consider the CMA's housebuilding market study report. You can find our first edition of the series, in which we made some predictions for the CMA's enforcement agenda in 2024, here.

If you would like to discuss any of the issues raised in this series, please get in touch with our team.