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On 22 April, the UK’s High Court issued a landmark decision, providing insights on what the CMA needs to show when seeking a search warrant for raiding an individual’s home.
Its decision overturned a finding by the UK’s Competition Appeal Tribunal that a higher standard of evidence is required for a warrant for a home raid. The CAT had previously found that the CMA must show that the occupier had a “propensity” to destroy physical or electronic documents held on their property, in order to obtain a warrant for a domestic raid (unlike a raid on business premises).
The High Court found that this was not a requirement to issue a warrant to search domestic premises. It noted that this evidence could be very difficult to obtain, given that raids often take place at the start of an investigation, where little such information is available.
In a world with increased remote working, and examples of searches of private homes in numerous jurisdictions, the decision marks an important victory for the CMA, emboldening them to continue using domestic raids to obtain relevant evidence.
Under the Competition Act 1998, the CMA may apply to the CAT for the issue of a warrant to enter and search business or domestic premises. The CAT may issue a warrant (for either business or domestic premises) if it is satisfied that there are reasonable grounds for suspecting:
Where the case relates to a suspected “secret cartel”, it can usually be inferred that there is a risk of destruction - given the parties involved would have a strong motive to conceal evidence of their activities - such that the second of these conditions is satisfied.
Here, the CMA originally applied to the CAT in October 2023 for four warrants. The CAT rejected the CMA’s application for a warrant to raid a domestic premise (while accepting the three relating to business premises). It highlighted the protection of privacy under Article 8 ECHR as justifying a higher level of scrutiny for domestic search warrants. It emphasised in particular the presence of others on the premises and the wide-ranging scope of the warrant.
On that basis, it held that a presumption of a propensity to destroy documents could not be inferred in domestic raids relating to secret cartels. The CMA would therefore need to provide additional evidence to show this, in order to obtain a warrant.
The High Court overturned the CAT’s decision, confirming that the risk of destruction of documents inferred from a secret cartel was as applicable to homes as to business premises. It also considered that the nature of secret cartels meant that additional evidence of “propensity” to destroy documents might be very difficult to obtain, based on witness evidence from the CMA enforcement team (in the CMA’s words, “practically impossible”). While it agreed (and the CMA accepted) that a warrant in respect of domestic premises requires additional scrutiny under the ECHR, this was not akin to constructing a different meaning of the law.
However, the court also found that whether a warrant could be justified without additional evidence of document destruction risk was dependent on the facts and circumstances of the case (listing in particular the “position of the individual in the undertaking” or the extent of their involvement in the cartel). And so, while the CMA doesn’t always need to provide extra evidence that documents may be destroyed, this may still be required in some cases. The seniority of the individual being raided and how involved they are believed to be in the cartel, may well be relevant factors in a warrant being granted without such additional proof.
The court’s ruling marks another decision by Sir Marcus Smith’s CAT overturned, following similar fates for judgments in December and June 2023. The decision was welcomed by the CMA - CEO Sarah Cardell noting it was “essential” for the CMA to be able to search domestic premises where appropriate.
Warrants to raid homes are not uncommon in the UK. They have been granted in nine antitrust cases in the UK since 2017 (at least four of which have been in the pharmaceutical sector), although no judgment was published in previous instances.
The Commission is equally able to order an inspection of private homes in the EU, where it has “a reasonable suspicion” of relevant business records being kept on the premises which may prove the infringement. A national court must authorise the raid with a warrant and the Commission must also issue a formal decision authorising it. Although these are relatively rare when contrasted with the CMA’s record, a domestic raid was conducted in April 2022. And more may be expected as the trend towards home working continues.
Authorities in China and much of Asia have the power to conduct a home raid, although these have not yet been publicly used. Authorities (including China’s SAMR) have, however, made use of powers to request access to personal phones, where these have also been used for work purposes.
In the US, the same legal basis applies for both inspections of domestic and business premises. The DoJ must show probable cause to believe a crime has been committed and that evidence of the crime can be found at the relevant location, to get a warrant signed off by a judge or magistrate. However, the DOJ/FBI frequently do so-called “knock and talk” drop-in interviews, showing up unannounced at an executive’s home first thing in the morning, to see if the executive will consent to a “voluntary” interview.
Home raids have become increasingly common in post-Covid years, as antitrust authorities adapt to changes in working practices and increased work-related material on individuals’ devices which may be retained at home.
In its statement following the decision, the CMA made clear the importance of the court’s judgment in the context of remote working and electronic communication. The ruling allows the CMA to retain its flexibility to conduct raids where a cartel is suspected, whether of domestic or business premises.
As a result, it is crucial for companies to establish clear protocols for home dawn raids and train employees accordingly. Individuals may be surprised at any time by officials turning up at their door and can be fined for refusing to cooperate with authorised raids. Employees should also be aware of their privacy rights, particularly in relation to personal documents and images on work or personal devices. See our Dawn Raid App for our quick guide on what to do, in the event of a raid.
The CMA’s confidence boost in conducting home raids as a result of the judgment, will be fortified by the advent of the Digital Markets and Consumer Bill into law later this year, granting it additional powers to “seize and sift” documents in raids on domestic premises. In addition, significant fixed penalties will be possible for businesses that fail to comply with an information request or provide false or misleading information to the CMA. Expect a super-charged CMA in the months to come…
Want more information? Learn more by speaking to your usual Linklaters contact or by downloading our Dawn Raid App.
30 April 2024
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