Supreme Court Issues Rules for Inspections for Administrative Investigations by Philippine Competition Commission

Issuance of Inspection Order

An Inspection Order may be issued if there is reasonable ground to suspect that:

1. 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.

The Inspection Order will be effective for the period determined by the court, which will not exceed 14 days from its issuance. It may be extended for another 14-day period.

The phrase “reasonable ground to suspect” is not clearly defined in the Rules. This may give rise to future legal challenges, as the “reasonable ground to suspect” standard appears to be lesser than the “probable cause” search and seizure standard under the Philippine Constitution.

Enforcement of Inspection Order

The Inspection Order must be served and implemented in the presence of a duly designated officer of the court during business hours, or at any time on any day as may be determined by the court for compelling reasons.

The premises must be inspected by the officials enforcing the Inspection Order (Enforcing Officials), (i.e., PCC officials and law enforcement agents authorized by the PCC to assist in the enforcement) in the presence of the person designated by the entity subject of inspection, who is either a compliance officer or a legal counsel (Designated Representative). The Designated Representative will be given the opportunity to read the Inspection Order before its enforcement. The Designated Representative is required to disclose the location where the information subject of the Inspection Order is stored, and provide the Enforcing Officials with all reasonable assistance for the conduct of the inspection. The unreasonable delay, failure, or refusal to appoint a Designated Representative will not prevent the implementation of the Inspection Order.

The Enforcing Officials may (a) enter, search and inspect the premises and (b) examine, copy, photograph, record, or print information described in the Inspection Order. If the Enforcing Officials are refused admission to the premises after giving notice of their purpose and authority, they may use reasonable force to gain entry to the premises, to enforce the Inspection Order or to liberate themselves when unlawfully detained.

If the Enforcing Officials inadvertently discover other relevant information in plain view that may be evidence of a violation of competition laws, the Enforcing Officials may examine, copy, photograph, record, or print such information and use the same as evidence of the violation.

Electronic Information and Databases

Electronically stored information, databases, and means of accessing information contained in databases that are or may be accessed in the premises, may be examined and copied by forensic imaging or other means. Such copies will be treated as original documents, which are admissible under Philippine rules of evidence.

Interviews

The Enforcing Officials may also ask individuals to explain facts or documents relating to the inspection and record their answers. An individual may be assisted by counsel. The individual must answer the questions, although the answer may tend to establish a claim against him/her. However, the individual has the right not to give an answer if this will tend to subject him/her to a criminal penalty.

Sealing

The Enforcing Officials may secure or seal the area and equipment, gadgets or devices where the information is located or stored. They may attach to them a tag or label warning against tampering until the examination, copying, photographing, recording, or printing is completed. Tampering with, breaking or removing the seal affixed is punishable by contempt of court.

Inventory

The Enforcing Officers must prepare a list of the information copied, photographed, recorded, or printed (Copied Information). A copy must be given to the Designated Representative, who will have the opportunity to check the Copied Information. The Designated Representative may acknowledge receipt by affixing his/her signature. The Designated Representative may also certify that the Copied Information are faithful reproductions of their respective originals. Once certified, they will be admissible as evidence in the relevant administrative proceedings.

Within 3 days from the enforcement of the Inspection Order or after the expiration of the Inspection Order (whichever comes earlier), the PCC’s authorized officer must submit a verified return to the issuing court. The return must be accompanied by the inventory of the Copied Information.

Remedies against Improper Inspection Order

Before a return is filed, the person or entity whose premises were inspected may file a written motion with the issuing court to quash the Inspection Order on the ground that it was improperly issued or implemented. The motion will be resolved summarily after due notice to the PCC.

Sanctions for Non-Compliance

Any person or entity who fails or refuses to comply with an Inspection Order or any provision of the Rules may be cited for contempt of court. The entity may be penalized with a fine not exceeding PhP 30,000, and the responsible officer or employee of the entity cited for contempt may be fined or imprisoned, for a period not exceeding 6 months or both. In addition, a contempt citation may adversely affect the entity’s reputation and its relationship with the PCC.

Exercise of Other Remedies

Applying for an Inspection Order under this Rule will not prevent the PCC from exercising its powers under existing laws and rules, including applying for search warrants under relevant rules for criminal cases.

Privilege

The Rules do not expressly provide that companies may withhold documents that are subject of legal privilege. Since the Rules are silent and until the Supreme Court clarifies the matter, privileged documents may still have to be surrendered to the Enforcing Officers. Given the penalties for non-compliance with the Inspection Order (i.e., contempt), it may be impractical and futile to argue with the Enforcing Officers during the inspection, especially as they may not be familiar with the concept of privilege. Nevertheless, this should not prevent the entity from raising the defense of privilege subsequently before the issuing court.

How it affects you

The Rules signal the PCC’s intention to further strengthen and give effect to its mandate to enforce Philippine competition laws. As shown by the experience in other jurisdictions, dawn raids have proven to be effective and powerful tools in enforcing competition laws and gathering evidence necessary to prosecute violations.

Businesses must familiarize themselves with the Rules so that they can be apprised of their rights and obligations during an inspection or search done by the PCC. An inspection or search is not only unannounced and disruptive to a company’s operations, but may also expose the company and its officers and employees to administrative liability for violation of Philippine competition laws as well as liability for contempt in case of non-compliance with the Inspection Order

Businesses may want to put in place dawn raid or inspection protocols and guidelines at the soonest possible time, in order to ensure that its personnel, and, in particular, its Designated Representative, are prepared in the event of a dawn raid or inspection. Businesses should also be mindful of its internal records and communications, as these may be subject of the inspection. For instance, internal documents should avoid references or statements which may suggest that the business may be engaged in anti-competitive conduct. In discussions, meetings, or exchanges which may be considered anti-competitive, the business should ensure that its objections to the discussions or exchanges are recorded. Quisumbing Torres may assist in the formulation and review of dawn raid / inspection and communication protocols and guidelines, and in the training of company personnel who will be tasked to interface with the authorities during a dawn raid / inspection.