One Asia Lawyers Compliance News Letter (November 2021)
We published One Asia Lawyers Compliance News Letter (November 2021). To view the PDF version, please click the following link.
→One Asia Lawyers Compliance News Letter (November 2021)
One Asia Lawyers Compliance News Letter(November 2021)
Cambodia Enacts New Law on Competition
On 5th October 2021, Cambodia passed its new Law on Competition (the “Law”), becoming the last (10th) ASEAN Member State to enact its competition law as envisioned under the ASEAN Economic Community Blueprint 2025.[1] The enactment of this Law fulfils Cambodia’s commitment to ASEAN and the World Trade Organization.[2] The Law consists of 7 chapters and 41 articles, with the aim of preventing anticompetitive practices and to “encourage fair and honest business relations, increase economic efficiency, encourage new businesses, and help consumers access high-quality, low-cost, diverse and versatile products and services”.[3] The Law is centred around three main pillars, namely (1) anticompetitive agreements, (2) abuse of dominance, and (3) anticompetitive business combinations.
Scope and Regulatory Authority
The Law applies to any person conducting any business activity, or any action supporting such an activity that is anticompetitive (i.e. which significantly prevents, restricts or distorts competition in Cambodian markets), regardless of whether such activities take place within or outside of Cambodia.[4]
The Competition Commission of Cambodia (“CCC”) has been established as the regulatory authority responsible for enforcing this Law.[5] The CCC is to be led by the Minister of Commerce, with the involvement of relevant ministries and institutions, and the Consumer Protection, Competition and Fraud Repression (“CCF”) Directorate General will act as its Secretariat.[6]
The Law provides a list of principal functions and duties of the CCC, which includes responsibilities such as establishing policies and plans; advising on draft legislation and regulations; issuing decisions, orders and fines; and receiving complaints.[7] The CCC is also empowered to commence investigations on its own initiative, or after receiving a complaint from a competent regulator or any individual.[8]
Anticompetitive agreements
The Law prohibits both horizontal and vertical agreements. Horizontal agreements are defined as agreements between persons who operate at the same level of a production or distribution chain, whilst vertical agreements are those between persons who operate at different levels.[9]
Horizontal agreements:
The making and implementation of horizontal agreements that directly or indirectly affect competition are prohibited. These include agreements which (i) fix, control or maintain prices, (ii) prevent, restrict or limit the quantity, type or new developments of goods or services, (iii) allocate markets by geography and/or customers, and (iv) bid-rigging agreements.[10]
Individuals may be subject to a term of imprisonment between 1 month to 2 years, and a fine between 5 million to 100 million Cambodian Riels (approximately 1,230 -24,600 USD) if they are in violation of this provision prohibiting horizontal agreements. Legal entities may be subject to a fine between 100 million to 2 billion Cambodian Riels (approximately 24,600 – 492,000 USD).[11]
Vertical agreements:
The Law also prohibits the making and implementation of vertical agreements that directly or indirectly require any purchaser to resell goods or services at a minimum price set by the seller, as well as those which have anticompetitive intent or effect. These include agreements which impose requirements on purchasers to (i) resell purchased goods or services only within a defined geographic area or only to specified customers or specified categories of customers, (ii) purchase particular goods or services exclusively from the seller, or (iii) purchase unrelated goods or services in addition to the goods and services that the purchaser wishes to purchase. Vertical agreements which prevent sellers from selling goods or services to other purchasers are also prohibited.[12]
An entity in violation of this provision may be subject to a written warning and a fine of 3% to 10% of its total turnover, up to 3 years of the years of infringement. If violations continue to occur even after these fines, business registration certificates, permits, and licenses may be revoked or withdrawn.[13]
Abuse of Dominant Market Position
The Law prohibits persons in dominant market positions[14] from performing activities with anticompetitive intent or effect.[15] These activities include (i) requiring or inducing a supplier or customer not to deal with a competitor, (ii) refusing to supply goods or services to a competitor, (iii) 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, (iv) selling goods or services below the cost of production, and (v) refusing to give a competitor access to an essential facility.[16]
However, there are certain situations in which these activities may be lawfully conducted. In order for this exemption to apply, the CCC must be satisfied that there are reasonable grounds which justify performance of the activity for legitimate business interests, and that the activity does not significantly prevent, restrict or distort competition in the market.[17]
The penalties for violating this provision (if the exemption does not apply) are the same as those mentioned above for vertical agreements. Namely, a written warning and a fine of 3% to 10% of its total turnover, up to 3 years of the years of infringement, and revocation of business registration certificates, permits, and licenses if violations continue.
Anticompetitive Business Combinations
Lastly, the Law prohibits business combinations (such as mergers) that have or may have the effect of significantly preventing, restricting or distorting competition in a market.[18] Business combinations are defined as the acquisition of right of control or voting rights through the purchase of shares or assets by one person from any other person, or the combination of two or more persons to acquire joint ownership of an existing or a new legal entity.[19]
The CCC is responsible for evaluating and inspecting business combinations to determine their effects on competition. The government will issue a sub-decree to stipulate the requirements and procedures for business combinations. The penalties for violating this provision are the same as those mentioned above, for vertical agreements and abuse of dominant market positions.[20]
Exemptions for Prohibitions
The Law provides exemptions for prohibitions against horizontal and vertical agreements, abuse of dominant market positions and anticompetitive business combinations. These exemptions may apply where the following four requirements are met: (i) there are significant identifiable technological, economic or social benefits, (ii) such benefits would not exist without those agreements or activities, (iii) those benefits significantly outweigh the anticompetitive effects, and (iv) they do not eliminate competition in any important aspects of goods or services.[21]
Applications for exemptions must be made to the CCC prior to the agreement or activity taking effect. The CCC will grant the exemption upon its determination of the above four requirements being fulfilled. The requirements and procedures which apply to applications for exemption will be established by the CCC.[22] Similarly, the CCC may grant a collective exemption if certain categories of Agreements or activities fulfil the above four requirements.[23]
In addition to these exemptions, the Law provides a leniency policy for horizontal agreements. Under this policy, the CCC may grant leniency from the pecuniary fine imposed on a person who participates in or assists with an unlawful horizontal agreement (as explained above). In order for leniency to be granted, the person subject to the fine must provide evidence or important information related to the agreement.[24]
[1] The ASEAN Economic Community Blueprint 2025 is available at the following address:
https://aseandse.org/wp-content/uploads/2021/02/AEC-Blueprint-2025-FINAL.pdf
[2] ASEAN Experts Group on Competition (AEGC). Cambodia Adopts the Law on Competition to Curb Anti-Competitive Practices and Promote Competitive Markets. (19th Oct 2021)
[3] Article 1 of the Law on Competition. An unofficial English draft translation of the Law on Competition by the Library of Congress is available at the following address: https://perma.cc/9H88-JN52
[4] Article 2 of the Law on Competition.
[5] Article 4 of the Law on Competition.
[6] ASEAN Experts Group on Competition (AEGC). Cambodia Adopts the Law on Competition to Curb Anti-Competitive Practices and Promote Competitive Markets. (19th Oct 2021)
[7] Article 6 of the Law on Competition.
[8] Article 16 of the Law on Competition.
[9] Article 3 of the Law on Competition.
[10] Article 7 of the Law on Competition.
[11] Article 38 of the Law on Competition.
[12] Article 8 of the Law on Competition.
[13] Article 35 of the Law on Competition.
[14] ’Dominant position’ means a situation in which a person has the power to act in a market significantly without any effective constraint from other competitors (as defined under Article 3 of the Law on Competition).
[15] Article 9 of the Law on Competition.
[16] An ‘essential facility’ means infrastructure or resources which cannot be duplicated and, without access to which, competitors cannot reasonably provide goods or services to their customers (as defined under Article 3 of the Law on Competition).
[17] Article 10 of the Law on Competition.
[18] Article 11 of the Law on Competition.
[19] Article 3 of the Law on Competition.
[20] Namely, a written warning and a fine of 3% to 10% of its total turnover, up to 3 years of the years of infringement, and revocation of business registration certificates, permits, and licenses if violations continue.
[21] Article 12 of the Law on Competition.
[22] Article 13 of the Law on Competition.
[23] Article 14 of the Law on Competition.
[24] Article 15 of the Law on Competition.
