Amendments to the Federal Law on Economic Competition, which were approved by Congress in 2011, enhanced the powers of the Federal Competition Commission (FCC) to conduct inspection visits. Companies should be aware of these increased powers and should prepare for the possibility of dawn raids - or face the threat of significant fines and criminal liability. However, the FCC has carried out only one dawn raid based on its new powers.

The new provisions allow FCC agents to arrive at the premises of an economic agent and perform an inspection visit without prior notice, in search of information and other material indicators that may constitute evidence of the existence of monopolistic practices. Dawn raids are a potentially valuable tool in the FCC's investigations, but they pose significant risks for corporations.

Economic agents must allow the FCC's authorised agents - potentially assisted by law enforcement officers - to gain access to their offices or premises; otherwise, they may be fined.(1) Economic agents may not disrupt the dawn raid and, at the authority's request, must provide all information and documents that are relevant to its investigation and directly related to the object of its order. Moreover, the law authorises FCC personnel to access a company's offices and its computers, electronic devices, files or other media that may contain evidence. In the course of a dawn raid, duly authorised agents may request copies or reproductions of papers, books, documents, files or any other information.

Although necessary to the FCC's investigative functions, these robust powers raise a number of problems. The powers in question must be considered as an exception to the inviolability of private domicile - a principle established in the Constitution. As such, the FCC should exercise these powers restrictively and subject to strict scrutiny.

The new dawn raid provisions raise concerns in respect of their scope and application, as certain key issues have been left unaddressed.

For example, it is debatable whether FCC agents who carry out dawn raids should address themselves to the company's legal representative, or whether it is sufficient to carry out such operations in the presence of any person on the premises. The following questions also raise concerns for companies:

  • Which criteria will the FCC apply in distinguishing between relevant and irrelevant documents?
  • Do the amendments give the FCC unlimited access to any place, file or electronic device in a company's offices?
  • What will happen to privileged information and private communications that are filed together with evidence relevant to the investigation?
  • May the FCC search and seize electronic devices or other property belonging to individuals, rather than to the company?
  • Are FCC agents entitled to question individuals about the substance of the investigation during a dawn raid?
  • Is the FCC authorised to perform a second, subsequent dawn raid?
  • Do the new investigative powers apply to investigations initiated under the previous law?

Companies must hope that these questions are answered in practice, as the authorities address problems that arise on a case-by-case basis.

The amendments undoubtedly strengthen the FCC's hand, but they also impose considerable responsibility on the regulator. Companies would be well advised to consider investing in compliance programmes and specialised training, including guidelines for dealing with a dawn raid, as part of their approach to understanding the full implications of the amendments, the FCC's new powers and the obligations imposed on its agents. In so doing, companies can minimise the risks arising from a dawn raid. Programmes and training courses can be an effective way of ensuring that all personnel are aware of:

  • the consequences of a breach of competition law;
  • preventive measures to avoid competition violations;
  • the actions to take (and avoid) during a dawn raid; and
  • the role that specialist counsel can play in handling investigation proceedings until their completion.

For further information on this topic please contact Lucia Ojeda Cardenas at SAI Law & Economics by telephone (+52 55 59 85 6618 ), fax (+52 55 59 85 6628) or email ([email protected]).

Endnotes

(1) Failure to comply carries a fine of up to 1,500 times the minimum wage (equal to Ps93,495 in 2012) for each day that access is denied, plus between 15 to 200 days' community service.