In competition law, dawn raids are powerful tools for competition authorities to investigate possible violations of antitrust laws.
Dawn raids are unannounced visits by competition authorities seeking information on potentially anti-competitive conduct and practices. They typically involve searching computers, servers, and filing cabinets for documents and information relevant to the antitrust investigation. Employees may also be questioned.
In other jurisdictions with similar competition laws, dawn raids have enabled authorities to gather evidence to support large fines and jail sentences.
There are several notable examples of dawn raids all over the world.
In Asia, China’s National Development and Reform Commission fined Qualcomm the equivalent of over $975 million for antitrust and intellectual property law violations substantiated by evidence gathered during dawn raids of Qualcomm’s China headquarters and its Shanghai office.
Dawn raids appear to be authorized under the Philippine Competition Act. Section 12(g) expressly provides that the Commission may “[u]pon order of the court, undertake inspections of business premises and other offices, land and vehicles, as used by the entity, where it reasonably suspects that relevant books, tax records, or other documents which relate to any matter relevant to the investigation are kept, in order to prevent the removal, concealment, tampering with, or destruction of the books, records, or other documents.”
The matter may not be as simple as it appears to be. For example, can the court issue the court order ex parte or without notice to the target party? This question calls to mind the case of Republic vs. Eugenio (G.R. No. 174629, Feb. 14, 2008), where our Supreme Court held that because the Anti-Money Laundering Act (AMLA) did not specifically provide that the court may issue ex parte an order for the AMLC to inquire into bank deposits, the owner must be notified before the court can issue the order. Congress had to intervene and amend the AMLA to expressly authorize ex parte application.
Of course, the PCC will say that the Eugenio case should not apply and adopting it will unnecessarily curtail its enforcement powers. As PCC Commissioner Cid Butuyan had said, the PCC is envisioned by the law as a “muscular agency, not a paper-pushing, rubber-stamping agency.”
Dawn raids have recently attracted judicial scrutiny for trampling upon rights of target entities.
An example is a June 2014 case in France where the French Cour de Cassation annulled a dawn raid at the premises of a French bank, finding a violation of the bank’s right to a fair trial due to denial of access to legal counsel during the dawn raid.
In Spain, in April 2015, the National Court annulled fines of euro 61 million imposed in 2011 by the Spanish competition authority on five major electricity companies and their industry association (Unesa). The Court annulled the dawn raids at Unesa because the inspection order failed to adequately define the investigation’s scope.
Dawn raids have also be scrutinized in the context of human rights.
Quite recently, the European Court of Human Rights (ECtHR) ruled that dawn raids carried out at the premises of two French construction companies by the French Department for Competition, Consumer Protection and Fraud (DGCCRF) violated both the rights of defense and the right to privacy, due to inadequate judicial review of both the decision authorizing the raids and the scope of documents seized. The ECtHR held that if, during a dawn raid, companies are unable to halt the seizure of out-of-scope or privileged documents, then they should at least have an effective judicial remedy to seek the removal of such documents from the file.
Our competition law is new. Let’s see how the PCC will enforce its dawn raid provision and how the parties and our courts of law will react to onsite investigations by the PCC.