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17 October, 2017
The Philippine Competition Commission (PCC) recently promulgated its Rules of Procedure (Rules) in its investigation and prosecution of “anti-competitive agreements” and “anti-competitive conduct.” This marks another milestone for the PCC, the agency given original and exclusive jurisdiction to enforce and implement the provisions of the Philippine Competition Act (PCA). The promulgation of the Rules is a welcome development insofar as implementation of the PCA is concerned given that the transitional period of two years to comply with the law has already lapsed on Aug. 9 of this year.
The transitional period was given to allow business entities time to renegotiate existing agreements or restructure their business so as to be PCA-compliant. Entities that failed to comply within the period and those that will engage in anti-competitive agreements or behavior thereafter may be investigated under the Rules. Violators may be subjected to administrative fines of up to P100 million for the first offense and up to P250 million for the third and successive offenses. The fine is trebled if the violation involves prime commodities or basic necessities.
Aside from fines and penalties, the PCC may also impose “Behavioral Remedies,” “Structural Remedies,” “Disgorgement,” “Injunction” and/or “Divestiture.” These may be imposed on the entity to rectify the violation by, for instance, compelling it to behave in certain way or refrain from a particular conduct, disgorge excess profits or gains, or, having the entity forcibly dispose of its businesses, shareholdings or assets. Suffice it to say that these are hard corrective measures for an entity that runs afoul of the law.
Under the PCA, the PCC has the power to investigate any entity engaged in any trade, industry or commerce in the Philippines, as well as to international trade having direct, substantial and reasonably foreseeable effects in the country. The rules provides that an investigation shall commence upon filing by any person of a verified complaint, referral by a regulatory agency, or motu proprio directive by the PCC.
Upon commencement, the Enforcement Officer (EO) in charge first conducts a “Preliminary Inquiry” — a fact-finding process to determine if there are “reasonable grounds” to proceed to a “Full Administrative Investigation” (FAI). The EO may terminate the same if he does not have sufficient evidence to establish a violation. If reasonable grounds are found, the case may proceed to FAI after notifying of the findings to the concerned parties. The commencement of the FAI shall be published on PCC’s Web site.
During FAI, the EO may call for a conference with the entity being investigated for purposes of clarifying certain facts or issues. The Rules allows a counsel to accompany the entity being investigated but is not permitted to answer or argue on his client’s behalf.
If the EO finds “sufficient basis” of a violation, he shall file with the Commission a “Statement of Objections” (SO) charging the entity with the PCA violation. “Sufficient basis” as used in the Rules is “the existence of such facts and circumstances that would engender reasonable belief that there is a violation of the Act, its implementing rules, or other competition laws, and that the Entity subject of the SO probably committed it.” Filing of an SO with the Commission commences the adjudication process.
However, adjudication is not the only course available to the entity as the Rules allows it the opportunity to voluntarily address the infraction instead.
For example, the rules permit the EO to issue a “Show-Cause Order” to the entity instead, informing the latter of the violation on his part and requiring the said entity to file an explanation within the given period. The entity may take this opportunity to either deny or dispute the charges, or to agree to the charges and provide a written proposal to address the same.
The entity may also decide to submit to the Commission an application for a “Consent Order.” With this, the entity, without admitting any violation, may propose terms and conditions for addressing the anti-competitive agreement or conduct. This allows the entity some flexibility and control on addressing perceived violations.
Should the case proceed to adjudication, the manner in which it is conducted is typical of most quasi-judicial proceedings and is conducted by the Commission en banc. The rules also allow the entity to enter into a settlement during this stage. However, should adjudication proceed, the Commission shall issue a decision, which, if adverse, may be appealed to the Court of Appeals under Rule 43 of the Rules of Court.
Other than laying down the process of investigation for existing violations, the rules also provide a remedy to eschew potential infractions. An entity contemplating a future act or agreement, if unsure whether the same would violate the PCA, may request a “Binding Ruling” from the Commission, provided that the act or agreement has not yet been implemented and no complaint or investigation is under way. However, this request comes at a hefty fee of one to three percent (1-3%) of the value of the entity’s assets or annual revenues, whichever is higher.
With the promulgation of the rules, the public now has better insight on the process by which PCA violations shall be addressed.
As a final note, the rules only apply to investigations of anti-competitive agreements and anti-competitive conduct. It does not cover “compulsory notification of mergers and acquisitions” which shall be governed by a different set of procedures to be issued by the PCC, unless otherwise provided in the issuances and guidelines governing the same.
For further information, please contact:
Bernard Joseph V. Tumaru, Angara Abello Concepcion Regala & Cruz (ACCRALAW)
bvtumaru@accralaw.com
