By Jenina P. Ibañez

A CARTEL, by nature, is clandestine. It’s a secret agreement between companies to cut competition by fixing prices.

Because of this covert nature, a cartel is also hard to catch.

Starting Nov. 12, however, deputized agents in the Philippines can now inspect business premises uninvited, after the Supreme Court upheld the inspection powers of the Philippine Competition Commission (PCC) through a court order.

Global regulators such as the European Commission use dawn raids — so called because surprise visits are usually done in the early morning — to check cartels’ anti-competitive behavior.

Inspections and searches are needed given the clandestine nature of cartels, which are expected to conceal, tamper with or destroy evidence of their anti-competitive conduct, Orlando P. Polinar, PCC Competition Enforcement Office director, said in an e-mail. “Inspections are resorted to when the element of surprise is determined to be an important factor in obtaining evidence.”

The high court on Sept. 10 said the PCC may apply for inspection orders, which may be issued by special commercial courts in the cities of Quezon, Manila, Makati, Pasig, Cebu, Iloilo, Davao and Cagayan De Oro.

The orders may be enforced nationwide.

Under the rules on administrative search and inspection of the Philippine Competition Act, a court must act on the commission’s application within 24 hours.

“That period of 24 hours is reasonable and will not cause undue delay,” Supreme Court spokesman Brian Keith F. Hosaka said in an e-mailed response to questions.

The court order will be effective for up to 14 days and may be extended for another 14 days.

PCC agents can search business premises and land vehicles for books, tax records, documents, papers, accounts, letters, photographs, databases and other electronic information.

Business chambers support the PCC’s inspection powers.

The European Chamber of Commerce of the Philippines (ECCP) trusts the judgment of the high court to take the steps needed to ensure competition measures are faithfully implemented, ECCP President Nabil Francis said in a mobile-phone message. “If properly enforced, this is expected to promote consumer welfare and ensure a level playing field among enterprises,” he said.

The agriculture sector also does not see anything wrong with the commission’s search powers especially after recent concerns about rice middlemen operating cartels to boost retail prices. “We will give the PCC the authority to investigate especially traders, millers and importers who might have benefited from the lifting of the quantitative restriction on rice imports at the expense of farmers,” Philippine Chamber of Agriculture and Food, Inc. President Danilo V. Fausto said.

PCC Chairman Arsenio Balisacan told reporters on Wednesday last week that companies in the food, manufacturing, agriculture and pharmaceutical industries were being investigated.

But some companies are concerned about privacy. While the law allows the PCC to gather evidence, the scope of the probe must be adequately defined, Philippine Chamber of Commerce and Industry (PCCI) President Alegria Sibal Limjoco said.

“Companies should have an effective judicial remedy to seek the removal of privileged documents or intellectual properties that are out of the scope of the investigation order from the seized documents,” she said.

But PCC’s Mr. Polinar said the rules balance due process and strong public interest. “Safeguards have been placed in the rules to ensure that the PCC will only examine, copy, photograph, record or print out information that relate to any matters relevant to an investigation,” he said.

Companies also have a remedy when an inspection order has been improperly implemented, he added.

The agency said a nationwide training program would ensure that inspection orders are properly carried out. It will also coordinate with the Philippine Judiciary Academy in training judges. Seminars for companies and stakeholders will also be held, PCC said.

“The inspections will greatly assist in the conduct of PCC’s investigations, particularly during the covert stage, or when there is a risk that the information being sought will be destroyed or altered,” Mr. Polinar said.

The 1987 Constitution provides that a search or arrest warrant may be issued only once a judge finds probable cause.

Under the PCC’s rules, a search application must describe the subject of the investigation and the premises or offices that it seeks to examine. The commission must also explain to the court how an information being sought is relevant to the investigation of a company for anti-competitive behavior.

“Conducting inspections will send a strong message to the erring entities that the PCC is serious in enforcing its mandate and that entities are better off cooperating,” Mr. Polinar said.