Law on Competition enacted in Cambodia
On 5 October 2021, the Law on Competition which consists of 41 articles (“Competition Law”) was enacted in Cambodia. The primary purposes served by the Competition Law are to govern any activities that prevent, restrict, or distort competition, and to establish the governing regulator, the Cambodia Competition Commission (“CCC”).
The Competition Law is applicable to any natural or legal persons, whose business activities or any actions supporting business activities significantly prevent, restrict, or distort competition in the Cambodian market whether or not the activities take place inside the country.
The Competition Law defines a “horizontal agreement” as an agreement between persons who operate or are likely to operate at the same level in production and distribution chains.
The Competition Law prohibits any persons from making or implementing a horizontal agreement that directly or indirectly affects market competition by:
- fixing, controlling, or maintaining the price of goods or services;
- preventing, restricting, or limiting the quantity, type, or development of goods or services;
- allocating geographic areas between competitors;
- allocating customers between competitors; or
- favouring one bidder in bids for a contract in private procurement.
A “vertical agreement” refers to an agreement between persons who operate or are likely to operate at different levels in the production and distribution chains.
The Competition Law prohibits any persons from making or implementing a vertical agreement that directly or indirectly requires a purchaser to resell the goods or services at a fixed minimum price as determined by the seller or to accept all the conditions of this nature as determined by the seller.
It also prohibits any persons from making or implementing a vertical agreement that has or may have the object or effect to significantly prevent, restrict, or distort the market competition by:
- requiring a purchaser to resell the goods or services only within a specified geographic area(s);
- requiring a purchaser to resell the goods or services only to a specific customer(s) or specified type(s) of customers;
- requiring a purchaser to accept all the conditions or almost all of the conditions for the purchase of specified goods or services exclusively from the seller;
- preventing a seller from selling goods or services to other purchasers; or
- requiring a purchaser to purchase unrelated goods or services in addition to the goods or services that the purchaser intends to purchase.
Abuse of Dominant Market Position
A person with a Dominant Market Position refers to a person who has the power to act in a market for any competing goods or services significantly without any effective constraint from competitors.
The Competition Law prohibits any person with a Dominant Market Position from committing any activity that has the object or effect of significantly preventing, restricting, or distorting market competition by:
- requiring or inducing a supplier or customer not to do business with a competitor;
- refusing to supply goods or services to a competitor; selling goods or services on the condition that the purchaser shall purchase other separate goods or services unrelated to the object of the contract;
- selling goods or services at a cost below the production cost; or
- refusing to give a competitor access to an essential facility.
An exception to the above prohibition applies when CCC determines that the person(s) with a Dominant Market Position establishes a reasonable reason to legally perform those activities for the benefit of the business and all of those activities do not significantly prevent, restrict, or distort market competition.
The Competition Law prohibits any business combination that has or may have the object to significantly prevent, restrict, or distort competition in a market, or the business combination that has or may have such effect. CCC will examine, inspect, evaluate the effect of the business combination on the competition.
An exemption from the prohibition on the above agreements or activities is granted when the following are met:
- the above agreement or activity generates significant identifiable technological, economic, or social benefits.
- without such agreement or activity, the mentioned benefits would not exist.
- the detriment caused by the prevention, restriction, or distortion on the competition is significantly outweighed by the benefits.
- the agreement or activity does not eliminate competition in any important aspects of goods or services.
Any person who violates this law will be subject to sanctions such as written warning, suspension, revocation or withdrawal of business registration certificate, business license or business permit, fine, financial penalty, and imprisonment.
Though it appears that there are some areas needed for further clarification and numerous details left for future regulatory instruments and decisions, this law represents a big step in promoting fair and honest competition in the Cambodian market.
This alert is for general information only and is not a substitute for legal advice.