Philippine Competition Commission Issues Rules of Procedure

Following its issuance of the Interim Ruleson Preliminary Inquiry and Full Administrative Investigation in August 2017,the Philippine Competition Commission (Commission) has issued its morecomprehensive Rules of Procedure (Rules). The Rules will take effect on 30September 2017.

Applicability

The Rules apply to investigations,hearings, and proceedings of the Commission, except matters involving mergersand acquisitions.

The Commission is expected to issue aseparate set of rules of procedure for mergers and acquisitions in the comingmonths.

Investigation and Adjudication

Under the Rules, administrative proceedingsfor alleged violations of the Philippine Competition Act (PCA) or otherexisting competition laws consist of two stages: investigation andadjudication.

An investigation is initiated by a verifiedcomplaint, a referral by another regulatory agency, or a motu proprio directivefrom the Commission. Its Enforcement Office conducts the investigation, whichconsists of (i) a Preliminary Inquiry and (ii) a Full AdministrativeInvestigation.

The Preliminary Inquiry, which is a summaryproceeding to determine whether or not the Enforcement Office shall conduct afull administrative investigation, must be completed within 90-days from itscommencement. If the Enforcement Office decides to conduct a FullAdministrative Investigation into the alleged violation, the entity(ies) underinvestigation (Entity) will be notified, and the commencement of the FullAdministrative Investigation will be published on the Commission’s website. Thepublication will contain a general description of the industry involved and thepossible violations. The Rules do not provide for the duration of the FullAdministrative Investigation.

During the investigation, the EnforcementOffice may require the submission of testimony and documents through subpoenas.It may also apply for “inspection orders” from a court, to conduct a search ofbusiness premises. Notably, the Commission’s power to conduct inspections uponorder of the court is also expressly recognized in the PCA. Currently, thereare no procedural rules for court-issuance of such “inspection orders”. Thecourts might apply the rules on the issuance of search warrants pending theissuance of specific rules on “inspection orders.”

If the Enforcement Office files anadministrative charge or issues a Statement of Objections (SO) after the FullAdministrative Investigation, the Commission will publish the issuance of theSO and commence the adjudication phase of the proceedings (Adjudication). Atthis stage, the Commission shall determine whether there exists substantialevidence of a violation of the PCA and its Rules, to justify the imposition ofpenalties and remedies. The Rules also authorize the Commission to file relatedcriminal complaints with the Department of Justice “at any time aftertermination of the Preliminary Inquiry” – or even before Adjudication has beencompleted.

The Rules provide timelines for key phasesin Adjudication (e.g., responding to the charge; conduct of preliminaryconference; submission of position papers), but do not fix the durationthereof. Final orders or decisions of the Commission are appealable to theCourt of Appeals.

The Rules allow an Entity to propose asettlement before the Full Administrative Investigation is terminated. AnEntity and the Enforcement Office are also allowed to jointly proposesettlement during Adjudication. In both situations, the Commission has fulldiscretion to accept or reject the proposal.

Penalties

The Commission may impose:

1. An administrative fine of up to Php 250million, depending on:

frequency of violation

“Relevant Turnover”, or sales in the relevant market affected by theviolation for the applicable financial year

aggravating factors, such as the Entityleading the violation; and

mitigating factors, such as the Entity’svoluntary desistance from the anti-competitive act

The fine is tripled if the violationinvolves the trade or movement of basic necessities or prime commodities, and

2. The following remedies:

Behavioral – obliging the Entity to engagein, or refrain from, specific conduct;

Structural – changing the structure of themarket;

Injunction – directing the Entity performor refrain from performing an act or acts;

Disgorgement – requiring the Entity todisgorge excess profits or other benefits connected with the violation; and/or

Divestiture – requiring the Entity tochange its structure, through disposal of businesses, shareholdings, businessunits or assets. This is only imposed where there is no equally effectivebehavioral remedy, or such behavioral remedy would be more burdensome.

Responsible officers, directors, trusteesand partners are solidarily liable with the Entity.

Other Prohibited Acts

The Rules also penalize the following actsof an Entity:

Failing to notify the Commission of adisposition or transfer during Adjudication.

Failing or refusing to comply with aruling, order or decision of the Commission.

Supplying incorrect or misleadinginformation to the Commission.

Committing any act of reprisal ordiscrimination against anyone cooperating with or furnishing information to theCommission in connection with an Investigation or proceeding.

Without the authority of the Commission,directly or indirectly disclosing Confidential Information (as so determined bythe Commission).

Non-adversarial Remedies

The Rules set out the mechanics for thefollowing non-adversarial remedies:

By a verified written request, a BindingRuling may be obtained when there is doubt as to whether a contemplated act,course of conduct, agreement, or decision is in compliance with, exempt from,or in violation of any of the provisions of the PCA, its implementing rules, orother competition laws.

In response to a “Show Cause Order” by theEnforcement Office, the anti-competitive act or conduct may be admitted and theEntity may provide a written proposal for addressing the same.

Upon a verified application at any timebefore the investigation stage is terminated, an Entity may seek a “ConsentOrder”, specifying the terms and conditions to address the anti-competitiveconduct or agreement.

Notably, the Rules do not includeprovisions to implement the leniency program that is provided in the PCA. TheCommission is expected to issue a separate set of rules to develop the leniencyprogram.

Why it affects you?

With the end of the two-year transitoryperiod under the PCA, the Commission will now fully implement the PCA,including the prohibitions against anti-competitive agreements and abuse ofdominance, and enforce penalties for violations of the PCA. It is important forbusinesses that may be exposed to competition law risks to be familiar with theprocedure for investigations by the Commission, and be apprised of their rightsand remedies in the process. Meanwhile, those planning to lodge complaints foranti-competitive acts will have to acquaint themselves with the relevantrequirements, timelines and procedures for the resolution of such complaints. 

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