2018 18 December

Cambodia Legal Alert: Cambodia’s Latest Draft Competition Law

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Earlier this year, Cambodia issued an English version of its Competition Law entitled Version 5.7 stated to be “based on the Draft Khmer Version as of 13 FEB 2018” (“Law”).  Below we describe some of the key features of the Law.  We have been informed that this is a final version and that it is expected to be enacted by mid-2019.  We further understand the draft is under review by the Council of Ministers and Council of Jurists as part of the enactment process and may be revised prior to enactment.  In this regard, we note that the implemented Khmer language legislation may differ in important ways from the Law described below.

Scope

The Law will apply to any person whose Cambodian or extra-territorial business activities or related actions significantly prevent, restrict or distort competition in a Cambodian market.  A person includes both natural and juristic persons regardless of whether the person is for profit or non-profit; registered or unregistered; privately owned or wholly or partly state owned.

Regulatory Authorities

The Law effectively contemplates two regulatory entities: the Competition Commission and the Directorate.  The Commission is to be composed of up to fifteen members with representatives from:

  • Six listed Ministries;
  • The National Bank of Cambodia;
  • A former judge;
  • Two individuals with legal knowledge; and
  • Two individuals with economic knowledge.

The latter three categories of Commissioners are to be selected by the Ministry of Commerce (“MOC”) and the Chairman shall be the Minister of Commerce.

The Commission’s key responsibilities include issuing decisions, orders, interim measures and fines to restore and promote competition and establishing various rules and procedures.

The Directorate will be the Directorate General of Cambodia Import Export Inspection and Fraud Repression (otherwise known as CAMCONTROL) which is organized under the MOC and is tasked to act as Secretariat to the Commission as well as investigating violations and making recommendations to the Commission.   

Prohibited Activities

1. Horizontal Agreements

The Law prohibits making and implementing horizontal agreements that directly or indirectly affect competition by:

  1. Fixing, controlling or maintaining prices;
  2. Preventing, restricting or limiting quantity, types or development of goods or services;
  3. Allocating geographic territories or customers among competitors; or
  4. Bid rigging.

The Commission may also prohibit any horizontal agreement that has or could have the object or effect of significantly preventing, restricting or distorting competition.

The Law contemplates a leniency policy for horizontal anti-competitive agreements with details to be determined by the Commission.

2. Vertical Agreements

The Law prohibits, on a per se basis, vertical minimum resale price maintenance whether directly or indirectly imposed as well as conditions of this nature set by the seller.   The Law prohibits other vertical agreements which have or could have the object or effect of significantly preventing, restricting or distorting competition by:

  1. Restricting resale within a defined geographic area or to specified customers or categories of customers;
  2. Requiring purchase of all or nearly all of a purchaser’s requirements from the seller;
  3. Prohibiting resale; or
  4. Tied selling.

The Commission may also prohibit any vertical agreement that has or could have the object or effect of significantly preventing, restricting or distorting competition.

3. Abuse of a Dominant Position

The Law prohibits dominant persons from conducting the below listed activities where they have the object or effect of significantly preventing, restricting or distorting competition:

  1. Requiring or inducing suppliers or customers to not deal with a competitor;
  2. Refusing to supply goods or services to a competitor;
  3. Tied selling;
  4. Selling goods or services below the cost of production; and
  5. Refusing to give a competitor or potential competitor access to an essential facility.

The Commission may also prohibit any conduct by dominant persons that has the object or effect of significantly preventing, restricting or distorting competition.

An exemption is provided for conduct that would otherwise be prohibited as an abuse of dominance if the Commission determines that both a reasonable reason exists to legally perform the relevant activity for the benefit of the business and that such activity does not significantly prevent, restrict or distort competition.

The Law defines dominance to exist where a person, either individually or collectively, has the power to act in a market significantly without effective constraint from other competitors.

4. Mergers

The Law defines business combinations to mean the acquisition of the right of control, voting rights, shares or assets by one person from any other persons or the combination of two or more persons which were previously independent from each other in order to acquire joint ownership of that combined person.

Business combinations that significantly prevent, restrict or distort competition or that may have that effect are prohibited.   The Law provides that business combinations shall be subject to review by the Commission with rules and procedures to be determined by Sub-Decree.

5. Exemptions

Individual or collective exemptions may be granted by the Commission in relation to otherwise prohibited activity where:

  1. There are significant identifiable technological, efficiency or social benefits directly attributable to the impugned conduct that would not arise without the anti-competitive impact;
  2. The identified relevant benefits outweigh the anticompetitive effects; and
  3. The conduct does not allow the elimination of competition in a substantial part of a market.
Final Commission Orders

While other resolutions and interim orders are contemplated under the Law, where an infringement of the substantive prohibitions are established, the Commission may issue a final order including civil fines of up to 10% of the total revenues of any natural or legal person (including any related legal persons that engaged in the relevant activity) over the period that the violations took place.

Additionally, the Commission may incorporate potential remedial actions including:

  1. Prohibiting continuation of infringing conduct;
  2. Requiring sale of specified assets or parts of business;
  3. Mandating the license or transfer of intellectual property;
  4. Requiring payment of compensation to damaged parties;
  5. Taking other specified actions necessary to restore competition;
  6. Returning unlawfully obtained profits to identifiable victims, private organizations representing victims and, if any unlawful profits are not otherwise distributed, to the Cambodian treasury;
  7. Filing compliance reports; and
  8. Paying for the Directorate’s experts retained in relation to the remedies.
Timing

Other than as described below, the provisions of the Law will take effect immediately on the effective date of the Law.  The abuse of dominance and anti-competitive agreement prohibitions will take effect one year after the effective date and the merger regime will take effect three years after the effective date.

If you would like further information regarding the above or would like to discuss these issues, please contact either Chris Robinson (Chris.Robinson@dfdl.com) or David Fruitman (David.Fruitman@dfdl.com).

The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.


DFDL Contacts

Chris Robinson

Partner & Head of Cambodia Corporate & Commercial Practice Group

DFDL Cambodia

chris.robinson@dfdl.com

David Fruitman

Regional Competition Counsel & Senior Consultant

DFDL Cambodia

david.fruitman@dfdl.com


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