7 February 2022

What Cambodia can expect from RCEP Competition Provisions?

This is the sixth article on the Regional Comprehensive Economic Partnership Agreement (RCEP), part of a series of articles covering its economic, trade and investment impacts on Cambodia. This article covers the provisions related to competition. Historically, Cartels have existed for the last one thousand years in the form of guilds. Laissez-faire liberal economic conditions dominating Europe and North America in the XVIII and the XIX centuries led to the formation of cartels under free-market conditions. It was only after 1945 when American-promoted market liberalism led to a worldwide cartel ban. Presently, cartels continue to be obstructed in an increasing number of countries and circumstances.

Nowadays market competition has become a driving force of any market economy. Effective competition law and policy are a positive contribution to the development of the economy when it comes to attracting more FDI through a fair level playing field for businesses. A strong and well-established competition policy provide greater opportunity for businesses to compete in terms of price, quality, and differentiated goods and services with greater protection from anti-competitive behaviour. For Cambodia where a large percentage of businesses are SMEs, a good competition policy and law enhance their ability to compete when challenged by larger national and international competitors who may be in a position to exercise market power or engage in anti-competitive conduct.

Competition law prohibits certain types of anti-competitive behaviour that would otherwise distort a market. It clarifies the “rules of the game” and establish codes of conduct to create a level playing field for both foreign and domestic firms, be they small, medium or large entities, to compete in the Cambodian market. It also creates an enforcement regime to prevent and correct anti-competitive conduct and abuses. In sum it set the framework within which a competitive market economy can develop and operate.

Chapter 13 of the RCEP and its related Annexes aim to establish open and competitive markets that promote competition, and enhance economic efficiency and consumer welfare. It does so through the adoption and maintenance of laws and regulations that proscribe anti-competitive activities. The Agreement includes obligations to maintain an independent competition authority. In that context, Cambodia is required to establish an authority to effectively implement its competition laws and regulations and ensure that their decision-making in relation to the enforcement of anti-competitive activities are independent and non discriminatory. Anti-competitive activities may include anti-competitive agreements, abuses of a dominant position, and anti-competitive mergers and acquisitions. Art 13.2 recognises however the sovereign rights of Cambodia to develop, set, administer, and enforce its competition laws, regulations, and policies in the area of competition law and policy.

Chapter 13 does not require sharing of any confidential information that is contrary to that an RCEP Party’s laws, regulations, and important interests. It does provide however a process for requesting confidential information and restricting their use. The importance of consumer protection law is recognized in Art 13.7, which requires Cambodia to maintain laws or regulations to proscribe misleading practices or false or misleading descriptions. It stresses as well the importance of improving access and awareness of consumer redress mechanisms.

Cambodia’s Competition Law and Policy – With respect to the substantive prohibitions, Cambodia’s Competition Law adopted last year largely accords with international practice and compares favourably with ASEAN and other RCEP countries. However, enforcing an effective competition law and policy is a complex matter. On the government side, there are significant efforts and cost to set up and operate a competition authority including developing expertise, undertaking market studies and advocacy activities, and conducting investigations and enforcing administrative decisions. While the Cambodia Competition Commission (CCC) has the power to issue interim measure and/or administrative decision, it may seek assistance from a competent court to enforce these measures.

In such eventuality, hearing economically complex competition cases in appeal would need to be done by specialized commercial courts. The sophisticated concepts behind horizontal and vertical agreements would be difficult to grasp for most of judges handling general civil cases. Even to a seasoned judge, it remains a challenge as competition cases are highly specialised subject matters that require special market knowledge and skills, in particular with regards to the evaluation of the impact assessment and other economic analysis that form the basis of competition cases. The recent decision of the Ministry of Justice to set up a committee to prepare for the establishment of a Commercial Court should consider having commercial judges trained in competition matters as well.

For RCEP to be a competitive and innovative region with well-functioning markets, rules on competition will need to be operational and effective across all RCEP Member States. Increasingly, many competition problems have a cross border component, requiring regional collaboration to enforce competition rules. Many of the most significant competition investigations have international implications,  for example conducts may have been committed outside Cambodia that affects markets within Cambodia. Cambodia will thus be required to cooperate and coordinate with competition regulators in other jurisdictions.

Moving forward there are several steps to overcome gradually these challenges. Public advocacy is one with active promotion of competition law education at law schools, the court, and businesses to build acceptability of the new concept. Strengthening the capacity of the regulator, the judiciary, and the judicial police is another. Selective enforcement of small local cases that are less complex is also a good start: enforcement of anti-competitive horizontal agreements are less difficult in terms of analysis of market conditions and are more focused on investigative techniques. It will gradually bring attention to market participants to change their behaviours. Enforcement of the prohibitions against abuse of dominance and anti-competitive mergers can start after the capacity of the regulator is enhanced. In sum, the lack of a competition culture in Cambodia is probably the most daunting task to reverse. Inadequate economic and business data, the limited expertise and resources constraints in the regulatory agency and a weak judiciary system are just compounding the difficulties further.