Cambodia’s First Law on Competition: What Investors Need to Know

Posted by Written by Alexander Chipman Koty Reading Time: 5 minutes

In October 2021, Cambodia issued its first-ever anti-trust law after 15 years of delays. The law lays out the prohibited activities that can distort market competition. Before the Competition Law was issued, businesses used a variety of laws such as the Law Concerning Marks to stay compliant.

The Law will be regulated by the Cambodia Competition Commission which was established in February 2022.


 

In October 2021, Cambodia’s Law on Competition (the “Law”) came into effect, marking the first-ever consolidated anti-trust law in the country following 15 years of deliberations and delays.

Prior to the Law, which had been in development since 2006, fair competition measures were found in disparate laws and regulations, such as the Law Concerning Marks, Trade Names and Acts of Unfair Competition, and the Circular on Preventing Measures Against Unfair Competition in Telecommunication Sector.

Cambodia is obligated to have a fair competition law under its commitments to the World Trade Organization and ASEAN Economic Community Blueprint by 2025. Cambodia was the last country in ASEAN to adopt such a law.

Most importantly, the Law lays out the activities that are prohibited in Cambodia because they prevent, restrict, or distort market competition. These are delineated in three major categories: horizontal and vertical agreements, abuses of dominant market position, and business combinations.

Agreements preventing, restricting, or distorting competition

Chapter III of the Law describes the prohibited activities that prevent, restrict, or distort competition. The Law defines this as the extent or degree of impact on competition for goods or services as determined by the Cambodia Competition Commission through economic analysis or any other means of analysis.

The first section of this chapter lays out the types of horizontal and vertical agreements that prevent, restrict, or distort competition. A horizontal agreement is an agreement between persons who operate or are likely to operate, at the same level in the production or distribution chain.

Article 7 of the Law prevents persons from making or implementing a horizontal agreement that directly or indirectly affects competition relating to:

  1. Agreement on fixing, controlling, or maintaining the price of goods or services;
  2. Agreement on preventing, restricting, or limiting:
    1. the number of goods or services that are made available for sale;
    2. the type of goods or services that are made available for sale;
    3. the development of new goods or services;
  3. Agreement on allocating geographic areas between competitors;
  4. Agreement on allocating customers between competitors; or
  5. Favoring one bidder in bids for a contract in private procurement.

A vertical agreement is an agreement between persons who operate or are likely to operate, at different levels in the production or distribution chain. Article 8 stipulates that a person is prohibited from making or implementing a vertical agreement that directly or indirectly requires a purchaser to resell purchased goods or services at a minimum price set by the seller or to accept any conditions of this nature set by the seller.

Further, Article 8 also prevents persons from making or implementing a vertical agreement that directly or indirectly affects competition relating to:

  1. Requiring a purchaser to resell purchased goods or services only within a defined geographic area;
  2. Requiring a purchaser to resell purchased goods or services only to specified customers or specified categories of customers;
  3. Requiring a purchaser to purchase all or nearly all of its requirements for particular goods or services exclusively from the seller;
  4. Preventing a seller from selling goods or services to another purchaser; or
  5. Requiring a purchaser to purchase unrelated goods or services in addition to the goods and services that the purchaser wants to purchase.

Abuses of dominant market position

The second section of Chapter III describes the activities considered abuses of dominant market position. According to the Law, a dominant market position means a situation in which a person has the power to act in a market significantly without any effective constraint from other competitors.

According to Article 9, the following activities are prohibited by a person with a dominant market position if they significantly prevent, restrict, or distort competition:

  1. Requiring or inducing a supplier or customer not to deal with a competitor;
  2. Refusing to supply goods or services to a competitor;
  3. Selling goods or services on the condition that the purchaser needs to purchase other goods or services separately, which are unrelated to the object of the contract;
  4. Selling goods or services below the cost of production; or
  5. Refusing to give a competitor access to an essential facility.

However, Article 10 states that a person with a dominant market position can undertake the activities listed in Article 9, if they are deemed by the Cambodia Competition Commission to meet the following two conditions:

  1. The person establishes a reasonable reason to legally perform those activities for the benefit of its business; and
  2. Those activities do not significantly prevent, restrict, or distort competition in a market.

Business combinations

Section three of Chapter III relates to business combinations. The Law defines business combinations as the acquisition of the right of control or voting rights through the purchase of shares or assets by one person from any other persons, or the combination of two or more persons to acquire joint ownership of an existing legal person or a new legal person.

Article 11 prohibits any business combination that has the effect of significantly preventing, restricting, or distorting market competition. Further, business combinations will be subject to examination, inspection, and evaluation by the Cambodia Competition Commission.

Further details on business combination regulations will be announced in future sub-decrees.

Exemptions

Section four of Chapter III states a number of exemptions for the prohibited activities relating to horizontal and vertical agreements, abuses of dominant market position, and business combinations. Article 12 states that activities or agreements can gain an exemption if they meet the following four conditions:

  1. There are significant identifiable technological, economic, or social benefits;
  2. Such benefits would not exist without those agreements or activities;
  3. Those benefits significantly outweigh the effects caused by preventing, restricting, and distorting of competition; and
  4. They do not eliminate competition in any important aspects of goods or services.

Additionally, Article 13 and Article 14 describe the possibility of other avenues for exemptions, such as the ability to apply to the Cambodia Competition Commission for an exemption or for the Cambodia Competition Commission to grant a collective exemption.

The new Cambodia Competition Commission

The Law will be regulated by the Cambodia Competition Commission (CCC), an entirely new body created, under the auspices of the Ministry of Commerce. According to Article 1, the Cambodia Competition Commission’s role is to encourage fair and honest business relations, increase economic efficiency, encourage new businesses, and help consumers to access high-quality, low-cost, diverse, and versatile products and services. Further, the CCC can impose fines on activities that violate the competition law.

Although the Law is already in effect, the Cambodia Competition Commission was established in February 2022. The CCC is to hold ordinary meetings at least four times per year and can hold an extraordinary meeting upon the request of the CCC chairman.

Further Reading


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