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Article Cambodia: Country's First Antitrust Law Enacted

On October 5, 2021, Cambodia passed its first antitrust legislation, officially named the Law on Competition (unofficial English draft dated June 7, 2021). In accordance with the country’s Constitution, which provides that urgent laws are to come into force immediately after promulgation, the new law became effective the next day. (Law on Competition art. 41; Constitution art. 93, ¶ 2.) The Law on Competition, which contains seven chapters and 41 articles, aims 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.” (Law on Competition art. 1.)

Background to the Law’s Adoption

The Ministry of Commerce was the primary body that prepared the draft law, joined by other relevant institutions, stakeholders, and international experts. Cambodia began working on its competition law in 2006, but the process was delayed for several reasons. One of them was that many experts from different jurisdictions were involved at different drafting stages. Other reasons included the complexity of the law and Cambodia’s aim to have its competition law consistent with similar laws of other countries. Adopting this competition law was one of Cambodia’s key commitments to the Association of Southeast Asian Nations (ASEAN) and the World Trade Organization. With the passage of Cambodia’s law after several years of discussions and development, all ten members of ASEAN now have competition laws in place.

Scope of the Competition Law

The new competition law applies to any person conducting any business activity or supporting such activity that is anticompetitive (i.e., it significantly prevents, restricts, or distorts competition in Cambodian markets, regardless of whether the activity takes place inside or outside Cambodia). (Art. 2.) The law does not explicitly address its application to state-owned enterprises. (Art. 3, ¶ 11.)

Competition Regulator

The law establishes the Competition Commission of Cambodia (CCC) as the regulator of competition in the country. The CCC is to be led by the minister of commerce with the involvement of relevant ministries and government institutions. (Art. 4.) The law also lists the CCC’s functions and duties, including, among others, (1) establishing competition policies and plans, (2) issuing decisions, orders, and interim measures, and (3) imposing fines and receiving complaints. (Art. 6.)

Prohibited Anticompetitive Practices

Horizontal Agreements

A horizontal agreement is defined as an agreement between those operating “at the same level of production or distribution chain.” (Art. 3, ¶ 8.) Making or implementing a horizontal agreement affecting the competition is illegal. Horizontal agreements include price-fixing, output-control, market-allocation, and bid-rigging agreements. (Art. 7.)

Vertical Agreements

A vertical agreement is defined as an agreement between those operating “at different levels in the production or distribution chain.” (Art. 3, ¶ 9.) Vertical agreements having minimum resale price maintenance (RPM) or setting any condition on buyers are illegal per se. The law is silent on maximum RPM. It is also unlawful to make or implement other vertical agreements with anticompetitive intent or effect. Examples include agreements containing customer or territorial restraints on resale, exclusive dealing, exclusive distributorships, and tying arrangements. (Art. 8.)

Abuse of Dominant Market Position

Any person with a dominant market position is prohibited from conducting various activities with anticompetitive intent or effect on a market. Those activities include exclusive dealing, refusal to deal, tying arrangements, predatory pricing, and denial of access to essential facilities. (Art. 9.) However, any of these activities may otherwise be lawful if the CCC determines that there is a reasonable justification to perform the activity for legitimate business interests and the activity does not have an anticompetitive effect on a market. (Art. 10.)

Business Combinations

A business combination, such as a merger, that has or may have an anticompetitive intent or effect is prohibited. The CCC determines, inspects, and evaluates how a business combination affects competition. The government is to issue a sub-decree on the requirements and procedures for business combinations. (Art. 11.)

Exemptions from the Law

Any of the above anticompetitive practices may be exempted if four elements are met: (1) the activity provides significant identifiable technological, economic, or social benefits, (2) those benefits would not otherwise exist, (3) those benefits outweigh the activity’s anticompetitive effects, and (4) the activity does not eliminate competition in any important aspect of goods or services. (Art. 12.) However, an application for an exemption must be made to the CCC before an anticompetitive activity is conducted. (Art. 13.)

Enforcements and Penalties

A person participating in or assisting with an unlawful horizontal agreement may apply to the CCC for leniency from the pecuniary fine by providing evidence or important information regarding the agreement. Such leniency does not apply to other anticompetitive practices, however. The CCC is to issue more details about the leniency program. (Art. 15.)

The CCC is empowered to commence investigations by its own initiative or after receiving a complaint from a competent regulator or any individual. (Art. 16.) The law sets forth detailed procedures for the investigations and the CCC’s powers during the investigations, as well as the conditions for the CCC to issue interim measures or decisions imposing pecuniary fines or penalties for any violation. (Arts. 17–33.)

Violation of the competition law is subject to a range of penalties, including (1) written warnings, (2) suspension, revocation, or withdrawal of registration certificates, business licenses, or business permits, (3) pecuniary fines, (4) financial penalties, and (5) imprisonment. (Art. 34.) Under the law, the fine may be up to 10% of the total annual turnover for three years (art. 35), and the maximum financial penalty is 2 billion Cambodian riels (about US$500,000), while the maximum term of imprisonment is two years (art. 38). The CCC may also order additional measures, including the forced sale of shares or some parts of the business. (Art. 37.)

Prepared by Pichrotanak Bunthan, Legal Research Fellow, under the supervision of Sayuri Umeda, Senior Foreign Law Specialist

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