Belaws Home ›› Cambodia ›› Blog ›› Cambodia enacts their first competition law
legal
Cambodia enacts their first competition law
Legal instruments to regulate competition are essential aspects of a healthy business environment. Whether it is to satisfy customers by maintaining value for money, to facilitate market access and transparency by encouraging firms to stimulate their competitors, or to protect them from anti-competitive practices, a clear and well-developed competition law is essential to market economies.
Following its accession to the WTO and its commitments to ASEAN, Cambodia was required to have a competition law. In order to comply with its obligations Cambodia enacted their first-ever antitrust law in October 2021.
While the law was ready and in force last year, the new Competition Commission of Cambodia (CCC) charged with implementing it was only established in February 2022. With a competent authority now up and running, a new chapter is opening for the business environment in Cambodia.
Here’s what investors and businesses need to know about the changes it could bring to the market.
Key takeaways :
- A law structured around three classic competition themes: anti-competitive agreements, abuse of dominance and anti-competitive business combinations.
- Establishes a framework for investigations.
- Defines the competent authority responsible for implementation and enforcement.
- Defines penalties for breaches of the provisions.
- An initial text that is not intended to cover the entire field and that will be supplemented by other legal instruments.
Prohibited business practices
The core of Cambodia’s new competition law is the prohibition of three business practices aimed at avoiding market disruption, namely anti-competitive agreements, business combinations and abuse of dominance. The law does, however, does provide certain exemptions to these activities.
Anti-competitive agreements
The text provides a framework for contracts in any form which, in general, would have the effect of influencing the course of action of one or more persons involved in the business. Two types of practices are targeted here :
Horizontal agreements
Agreements defined as horizontal are those concluded between two persons operating at the same level on a given market and which are intended to affect competition, whether by controlling prices, types or quantities of products available on the market or by allocating areas of activity, etc.
It is important to note that the market effects of such agreements, whether direct or indirect, will be assessed in the same way and the infringement characterised.
Vertical agreements
The situation referred to here is that of agreements made by persons operating at different levels for a given market, but which are primarily aimed at influencing resale prices by imposing a minimum obligation. This means in practice that producers cannot impose fixed resale prices on distributors anymore.
Prohibitions of these agreements are a major improvement for all distributors as it will help them prevent erosion of their margins.
Business combinations
The “business combination” assumption corresponds to takeovers in general, as found in the field of mergers and acquisitions. This does not mean that takeovers are now prohibited under Cambodian law, but rather that the effects of business combinations will be monitored by the CCC to prevent anti-competitive takeovers.
It is also an important improvement as it defines a new form of control over the M&A sector, with major implications for hostile takeovers through a new dynamic in the fight against monopolistic competition.
Abuse of dominance
Dominance is a position of economic strength held by a person or a company which gives it the power to prevent effective competition being maintained in the relevant market. Cambodian law now provides for a number of prohibitions on certain types of behaviour that will apply to those in a dominant position.
Such prohibited conduct includes refusing to supply goods or services to a competitor, selling goods or services below the cost of production, or attempting to influence a customer’s or supplier’s decision not to do business with a competitor.
Though, it has been provided that the CCC may grant exceptions, on a case-by-case basis, if the anti-competitive effect is not proven and if there is a valid reason for the continuation of the behaviour in question.
Exemptions
Although not yet established by a procedure, the Cambodian Competition Law provides a criteria which, if met, may allow a person or company to benefit from exceptions to the above rules.
First, to qualify for an exception, the conduct in question must be of significant and identifiable technological, economic or social interest.
Second, these benefits will have to be produced exclusively by the behaviour, in a sense that they could not exist without it. Then the balance between the effects produced by these benefits and the negative effects of the anti-competitive practice must be clearly and decisively in favour of the benefits.
Finally, the practice must not have too great an impact on competition, by not creating a risk for the presence of goods and services on the market.
Investigations
The creation of an investigation procedure is an important step in the law; the powers in this area have been attributed to the CCC, which will therefore be able, in the context of a complaint or on its own initiative, to start an investigation aimed at characterising one of the anti-competitive practices mentioned above.
Investigators have extensive powers and can use all legal means set out in the Code of Criminal Procedure to accomplish their task. Furthermore, the investigation may become joint if the CCC decides to call on experts from other departments to shed light on the facts.
Penalties
The new competition law also empowers the CCC to impose a wide range of sanctions for violations of the provisions, from warnings to suspension or revocation of licences and imprisonment.
The common sanctions for the violation of prohibitions on abuse of dominance, anti-competitive business combinations or vertical-agreements would be a pecuniary fine on the turnover of the fraudulent person or company. These fines currently range from 3% to 10% of the turnover.
Repeated violations will lead to heavier penalties as mentioned above.
With regard to the violation of the prohibitions of horizontal agreements, the sanction will depend on the nature of the person who has engaged in the behaviour:
- For natural persons, the sanction will consist of imprisonment (up to 2 years) and a pecuniary fine (up to USD 24,500).
- For legal persons, the penalty will consist of a monetary fine only, but the ceiling is much higher, up to USD 489 000 (approx).
In conclusion
The new competition law in Cambodia is long overdue and is a powerful tool for investors and businesses to understand. The impact it will have on the market is still unknown as the enforcement authority has only recently been established, but significant changes can already be expected in the assessment of many business practices and for the mergers and acquisition industry.
Whether your business is already in Cambodia or you are considering moving there, it is important to ensure that your activities are compliant with the new law.
To ensure full compliance and peace of mind, feel free to book a consultation with one of our experts at Belaws.
Please note that this article is for information purposes only and does not constitute legal advice.
Up to 1 hour consultation on general legal and business matters in Cambodia.
If some research is necessary to reply to your questions, our expert will check and revert to you with any complementary elements by email.
This consultation is only for new cases.
Legal consultations are handled by expert lawyers in the relevant field of practice in fluent in English.
Up to 1 hour
Web conferencing details provided upon confirmation
$150 USD
We are open:
Monday – Friday
9 am – 6 pm (UTC+7)
Belaws 2017 - 2023 | Belaws provides information and software only. Belaws is not a "lawyer referral service" and does not provide legal service or participate in any legal representation. Belaws is not a law firm or a substitute for an attorney or a law firm. The use of Belaws is subject to our Terms of Use.