CMA v CAT: Supreme Court backs search warrants in cartel cases | White & Case LLP

On By Vaseline

On 22 April 2024, the UK Supreme Court ruled that the Competition Appeal Tribunal had erred in law when it previously refused to grant the Competition & Markets Authority a warrant to search a domestic property (the “High Court judgment” ).

Background

In October 2023, the European Commission (the “EC“) and the UK Competition & Markets Authority (“CMA“) launched parallel cartel investigations – one of only a few since Brexit – into the supply of chemicals to the construction sector. As part of this investigation, the CMA, under its powers in the Competition Act 1998, has filed an application (“CA98“), to the Competition Appeal Tribunal (“CAT“) for search warrants to search commercial and residential premises. The CAT granted the former but denied the latter on the grounds that the CMA had to demonstrate that the resident of the residential property had a ‘propensity’ to found in the house, to destroy or hide it.CAT judgment“) (see our coverage of this in our Dawn Raid Analysis Quarterly, here). In November 2023, the CAT later ruled that the CAT’s judgment should be published, which was particularly unpalatable to the CMA given the CAT’s designation of it as a ‘directive judgment’ (i.e. a judgment that can be cited in any court).

Shortly afterwards, the CMA challenged the CAT judgment and its designation as a guideline to serve as ‘guidance in future cases’.1arguing that this would significantly hinder its ability to investigate suspected cartel activity.

The judgment of the Supreme Court

The CMA’s power to enter business and domestic premises under a warrant – if granted by the CAT – is governed by sections 28 and 28A of the CA98 respectively.

Because the CMA has no right of appeal under the CA98, its only remedy was judicial review. The CMA’s main arguments were:

  • it would be ‘very rare’ for the CMA to have evidence of a person’s ‘propensity’ to destroy or conceal documents at the start of an investigation;2
  • since 2017, nine arrest warrants have been approved for residential buildings, which have not led to the publication of the judgment or to a guideline sentence; And
  • By designating the CAT judgment as a guideline judgment, the CAT has exceeded its powers.

The Supreme Court agreed with the CMA on all grounds. Importantly, it concluded that under section 28A, demonstrating an individual’s ‘propensity’ to destroy evidence is not always required (but rather depends on the ‘facts and circumstances of each particular case’).3 It followed from this incorrect view of law that the CAT judgment ‘may not be treated as a guideline judgment or followed by the CAT (or any court) in future cases.4

Implications

Given that the CMA had indicated that it did not intend to search the person(s)’ home after all, some may wonder why the CMA bothered to litigate an ‘academic’ point. What is clear, however, is that the CMA had serious concerns about the precedent-setting nature of the ‘guidance judgment’ and the impact it would have on future CA98 investigations. The CMA was understandably keen to ensure that its powers to conduct searches were not unnecessarily limited in the future, as the CAT judgment would have materially hampered the CMA’s ability to investigate legitimate concerns about anti-competitive behaviour. Indeed, it is possible that individuals involved in such activities may have decided to ensure that any covert conduct occurred from their homes, as the likelihood of a search warrant being issued would have been significantly reduced.

Because the Supreme Court ruling effectively prevents the CAT ruling from being cited again in court, it is an important victory for the CMA. It is likely to encourage the CMA to apply for search warrants – which, given the ubiquity of electronic communications and hybrid working, are often seen by competition authorities as likely material evidence relating to cartel activity.

The Supreme Court’s decision sets the bar again. So homeworkers: beware!

1 Paragraph 10(2) of the CAT judgment, available here.
2 Paragraph 17 of the Supreme Court judgment, available here.
3 Paragraph 58 of the Supreme Court judgment, available here.
4 Paragraph 59 of the Supreme Court judgment, available here.