Dawn Raids? No problem. The Rule on Administrative Search and Inspection under the Philippine Competition Act

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search and seizure under PCA

Enforcement of the Philippine Competition Act

Republic Act No. 10667, otherwise known as the Philippine Competition Act (“PCA”), generally prohibits three acts namely: anticompetitive agreements, abuse of dominant position and anticompetitive mergers and acquisitions. Pursuant to the law, the Philippine Competition Commission (“PCC”) is tasked with investigation, prosecution and adjudication of cases involving violations of the PCA.  To successfully prosecute violators of the PCA, it is necessary for the PCC to be armed with the proper investigative tools.  To perform such tasks, the competition authority must be equipped with investigative tools that enable it to obtain the relevant information such that it should be empowered to enter into business premises to collect information, to investigate managers and employees of firms and to demand information from business entities, where there is suspicion of violation.[i] A controversial tool utilized by competition agencies worldwide is what is termed as a dawn raid or an investigation done at the premises of the party being investigated.

Supreme Court Rule on Administrative Search and Inspection

Pursuant to the power of the PCC to conduct dawn raids, the Philippine Supreme Court issued A.M. 19-08-06-SC or the Rule on Administrative Search and Inspection under the Philippine Competition Act (“Rules”).  Said Rules will govern the application, issuance and enforcement of inspection orders for administrative violations of the PCA and will be effective on 16 November 2019.

The Rules state that the PCC may apply for an inspection order before the Special Commercial Court where the place to be inspected is located.  In addition, the Special Commercial Courts in Quezon City, Manila, Makati, Pasig, Cebu, Iloilo, Davao and Cagayan de Oro shall have authority to act on applications for the issuance of inspection orders, which can be enforceable throughout the Philippines.

Judge to Issue Inspection Order

Like a search warrant, the judge must, before issuing the inspection order, examine in the form of searching questions and answers, in writing and under oath or affirmation, the applicant and the witnesses he may produce on facts personally known to them.  However, the Rules further added that the facts can be based on ( 1) the applicant’s or witnesses’ training and/or experience; (2) authentic records; (3) verifiable data; or ( 4) economic analysis.

The Judge must act on the application within 24 hours and the hearing thereon shall be conducted ex parte.

Pursuant to Sec. 6 of the Rules, the inspection order shall be issued if the court finds that there is a reasonable ground to suspect: (1) that the information is kept, found, stored, or accessible at the premises indicated in the application; (2) the information relates to any matter relevant to the investigation; and (3) the issuance of the order is necessary to prevent the removal, concealment, tampering with, or destruction of the books, records, or other documents to be inspected.

Enforcement by the Philippine Competition Commission of the Inspection Order

Once an inspection order is issued, it shall be served in the presence of a duly designated officer of the court, during business hours of the premises, or at any time on any day, as may be determined by the court for compelling reasons. The premises shall be inspected in the presence of the person designated by the entity, either a compliance officer or a legal counsel, who shall be given the opportunity to read the order before its enforcement.

During the inspection, the PCC shall enter, search and inspect the premises indicated in the order, and examine, copy, photograph, record, or print information described therein. Electronically stored information may be examined and copied by copying the information, whether through forensic imaging or other means of copying, photographing or recording the electronically stored information, or by printing out its contents.

As may be reasonably necessary for the conduct of the inspection, the PCC may secure or seal the area and equipment, gadgets or devices where the information is located or stored, and attach to them a tag or label warning all persons from tampering with them, until the examination, copying, photographing, recording, or printing is completed, but in no case beyond the effectivity of the inspection order.

In addition, the PCC may ask explanations on facts or documents relating to the subject and purpose of the inspection and record the answers. An individual, who may be assisted by counsel, must answer questions, although the answer may tend to establish a claim against him/her. However, such individual has the right not to give an answer which will tend to subject him/her to a criminal penalty for an offense, unless otherwise provided by law. This is unlike the practice in Germany whereby inspected parties cannot be compelled to answer.

Thereafter, the PCC shall prepare a list of the information copied, photographed, recorded, or printed. He/she shall give a copy of the same to the person designated by the entity. Such person shall have the opportunity to check the information against those described in the list and shall acknowledge receipt by affixing his/her signature. He shall likewise certify that the copies, photographs, recordings, or printouts made by the PCC officers, deputies or agents are faithful reproductions of their respective originals. Once certified, the copies, photographs, recordings, or printouts shall be admissible as evidence for the purpose of the administrative proceedings.

Any person or entity who fails or refuses to comply with an inspection order or any provision of this Rule shall be cited for contempt of court.

Limitations of the Inspection Order

It bears noting that unlike a search warrant, an inspection order only gives authority for the PCC to enter, search and inspect the premises indicated in the order, and examine, copy, photograph, record, or print information described therein.  Nowhere can it be seen in the Rules that the PCC can seize and confiscate these documents.  This is the common trend amongst competition agencies worldwide.  Furthermore, unlike a search warrant which is good for only ten (10) days, an inspection order shall be effective for fourteen (14) days from its issuance akin to the practice in the United States and New Zealand.  The order may be extended by a court, upon an ex parte motion, for another fourteen (14) days.

New Rule on Administrative Search and Inspection is a Welcome Development

The issuance of these Rules is a pleasant development in the field of competition law.  Through these Rules, dawn raids can be done by the PCC to aid in its investigation.  After all, cartel operations are clandestinely done.  Thus, the element of surprise is oftentimes necessary to secure the pertinent information sufficient to hold the person liable.  Nevertheless, it is suggested that the Supreme Court include in the rules certain protected information that cannot be covered within the scope of the inspection order.

In a majority of jurisdictions (e.g. Australia, Botswana, Canada, Chile, Colombia, Croatia, France, the EU (EC), Germany, Hungary, Israel, Italy, Jersey, Kenya, Norway, New Zealand, Poland, Sweden, Slovakia, Spain, Switzerland, the UK, the United States), the competition authorities respect well-founded claims for the protection of Legal Professional Privilege (LPP) (or attorney-client privilege), subject to certain conditions.[i]  The attorney-client privilege also finds application in Philippine soil.  Thus, it may be prudent for the Supreme Court to acknowledge such protected information.

About Nicolas and De Vega Law Offices

Nicolas and De Vega Law Offices is a full-service law firm in the Philippines.  You may visit us at the 16th Flr., Suite 1607 AIC Burgundy Empire Tower, ADB Ave., Ortigas Center, 1605 Pasig City, Metro Manila, Philippines.  You may also call us at +632 84706126, +632 84706130, +632 84016392 or e-mail us at info@ndvlaw.com.


[i] International Competition Network, Investigative Tools Report (ICN Agency Effectiveness Project on Investigative Process, 15 April 2013) 14.


ENDNOTES

[i] Michael Gal, ‘The Ecology of Antitrust Preconditions for Competition law Enforcement in Developing Countries’ (2004) Working Paper No. 02-03 New York University Law and Economics Research Paper Series 31.

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