Cambodia’s long-awaited Competition Law (“Law”) was signed into law by the King on 5 October 2021. While the Law has been enacted, the principal regulator, the Cambodia Competition Commission (“CCC”) has not yet been appointed and it is not clear how the Law will be enforced prior to a) such appointment and b) the issue of required regulatory instruments and decisions.
Summary
The Law addresses the basic three pillars of traditional competition law (being anti-competitive agreements, abuses of dominance and anti-competitive business combinations) and sets the framework for investigations, decisions, penalties and the regulatory authorities. Unlike its neighbours, Cambodia has chosen not to address unfair trade practices in the Law and regulates these solely through other legislation. However, a degree of uncertainty remains as numerous details have been left for future regulatory instruments and decisions and significant guidance will be required on how the relevant provisions will be interpreted and implemented by the regulatory authorities and judiciary. Overall, while a number of areas need to be clarified and may need to be reviewed once Cambodia has some experience with its competition regime, this is solid start as Cambodia moves to join its fellow ASEAN members with competition regimes in place.
Scope
The Law will govern any activities that prevent, restrict or distort competition (“Requisite Anti-Competitive”) and apply to all ‘Persons’ conducting business activities, or any actions supporting business activities, which have the Requisite Anti-Competitive effect in a Cambodian market. The Law explicitly applies to conduct occurring outside of Cambodia which affects competition in the Kingdom of Cambodia. The Law defines ‘Persons’ to mean natural or legal persons carrying on business activities regardless of whether for profit or non-profit, registered or unregistered.
Substantive Prohibitions
The Law prohibits anti-competitive agreements, abuses of dominance and anti-competitive business combinations.
Anti-competitive Agreements
The Law broadly defines agreements to mean any form of contract, agreement, arrangement or understanding between Persons, regardless of whether it is written, verbal or implied, including direct or indirect coordination that has the object or effect of:
- influencing the conduct of one or more Persons; or
- disclosing a course of conduct which a Person has decided to adopt or is contemplating.
The Law prohibits the following agreements between Persons that operate, or are likely to operate, at the same level in the production or distribution chain (“Horizontal Agreements”) where they directly or indirectly affect competition:
- fixing, controlling or maintaining the price of goods or services;
- preventing, restricting or limiting:
- the quantity of goods or services which are made available for sale;
- the type of goods or services which are made available for sale; or
- the development of new goods or services;
- allocating geographic areas between competitors;
- allocating customers between competitors; or
- favoring one bidder in bids for a contract in private procurement.
The Law prohibits agreements between Persons who operate, or are likely to operate, at different levels in the production or distribution chain (“Vertical Agreements”) that directly or indirectly impose minimum resale price obligations.
In contrast, the following Vertical Agreements are only prohibited where they have or could have the Requisite Anti-Competitive object or effect:
- requiring a purchaser to resell purchased goods or services only within a defined geographic area;
- requiring a purchaser to resell purchased goods or services only to specified customers or specified categories of customers;
- requiring a purchaser to purchase all or nearly all of its requirements for particular goods or services exclusively from the seller;
- preventing a seller from selling goods or services to another purchaser; or
- requiring a purchaser to purchase unrelated goods or services in addition to the goods and services that the purchaser wants to purchase.
Abuse of Dominance
Where a Person has the power to act without any effective constraint from other competitors, such Person is prohibited from the following specified conduct that has the Requisite Anti-Competitive object or effect:
- requiring or inducing a supplier or customer not to deal with a competitor;
- refusing to supply goods or services to a competitor;
- selling goods or services on the condition that the purchaser needs to purchase other goods or services separately, which are unrelated to the object of the contract;
- selling goods or services below the cost of production; or
- refusing to give a competitor access to an essential facility.
Otherwise prohibited conduct may be permitted if the CCC determines that there is a reasonable reason to legally perform the activities and that the conduct does not have the Requisite Anti-Competitive effect.
Business Combinations
A ‘Business Combination’ is defined as the acquisition of the right of control or voting rights through the purchase of shares or assets by one Person from any other Persons or the combination of two or more Persons to acquire joint ownership of an existing legal Person or a new legal Person.
Any Business Combination which has or may have the Requisite Anti-Competitive effect is prohibited. Details on the merger regime under the Law are to be determined by Sub-Decree.
Exemptions
Individual or block exemptions are contemplated for otherwise prohibited anti-competitive conduct or agreements if the following conditions are satisfied:
- There are significant identifiable technological, economic or social benefits;
- Such benefits would not exist without those agreements or activities;
- Those benefits significantly outweigh any determined Requisite Anti-Competitive effect; and
- The conduct or agreement does not eliminate competition in any important aspect of goods or services.
The procedures for exemptions will be established by the CCC.
Leniency
Leniency from pecuniary fines relating to Horizontal Agreements may be granted where a Person gives evidence or important information. The details of the leniency policy will be established by the CCC.
Regulatory Authorities
The Law provides for the establishment of the two regulatory authorities: the CCC and the Directorate.
CCC
The CCC will be led by the Minister of Commerce as Chairman with members from relevant ministries and government institutions as well as a former judge, two individuals with legal backgrounds and two individuals with economic backgrounds.
The responsibilities of the CCC will include:
- issuing decisions, orders, interim measures and imposing fines;
- advising the government on laws and regulations relating to competition;
- establishing policies and plans regarding competition;
- cooperating with national ministries, institutions, or regulators, foreign states, and international agencies related to competition; and
- receiving complaints.
The organization and functioning of the CCC is to be determined by Sub-Decree. At the time of writing, this Sub-Decree has not been issued nor have the CCC members been appointed.
Directorate
The Directorate General in charge of competition is appointed as the implementing body to perform duties and functions in relation to competition issues in accordance with the Law. The Consumer Protection Competition and Fraud Repression Directorate-General of the Ministry of Commerce (“CCF”) will be acting in this role.
Investigations
The CCC has the authority to commence investigations on its own initiative or by complaint from any Person with investigations conducted by investigating officers from the CCF. Investigating officers have statutory powers to investigate, search, collect evidence, and question any individuals concerned to provide information, documents, or objects for the assessment of competition activities in the market and conduct searches related to any violation of the Law in accordance with the Code of Criminal Procedure. Further, the CCC may request assistance from other authorities to perform these functions.
Interim Measures, Settlements and Orders
An investigating officer may request the CCC to issue an interim measure during the course of an investigation. The CCC may issue an interim measure where it considers it necessary as a matter of urgency to prevent serious and irreparable damage to the economy or any Person or to protect the public interest in cases of emergency.
An interim measure may include an order to:
- suspend the effect of, or desist from acting on, any agreement or engaging in any conduct that is suspected of violating the substantive prohibitions of the Law; or
- do or refrain from doing any act.
An investigating officer may also request the CCC to decide on negotiated settlements and such decision will be publicly available.
Once an investigation is complete, the CCC may issue a decision which will include details of the violation and reasons of the CCC as well as any fines, penalties and other measures. The decision will be publicly available.
An appeal right with respect to any interim measure or decision is first available as a petition for re-consideration to the CCC. A further appeal is available to a competent court.
Penalties
The Law provides for the following penalties: written warning, suspension, revocation or withdrawal of business registration certificates, business licenses, or business permits, pecuniary fine, financial penalty and imprisonment. The CCC has the authority to issue written warnings and impose pecuniary fines.
Persons who violate the prohibitions on anti-competitive Vertical Agreements, abuse of dominance or competitive business combinations shall be subject to a written warning and a fine of 3% to 10% of total turnover in the year of the infringement up to 3 years. Repeated violations after these penalties have been imposed may lead to revocation or withdrawal of business registration certificates or permits, or business licenses.
A natural Person violating the prohibition on anti-competitive Horizontal Agreements shall be subject to a term of imprisonment from 1 month to 2 years, and a fine from 5,000,000 to 100,000,000 Riels (approximately 1,220-24,500 USD); whereas a legal Person shall be subject to a fine from 100,000,000 to 2,000,000,000 Riels (approximately 24,500-489,000 USD).
The CCC may also order additional measures including:
- prohibiting continuation of unlawful actions;
- requiring sale of shares or assets at market price;
- requiring licensing of intellectual property rights;
- compensating for damages or disgorging unlawfully obtained profits; or
- taking other necessary measures to restore the competition.
If you have any questions with respect to this update or any other issue in relation to Cambodia’s competition regime and its implications for your business, please feel free to contact Chris Robinson, Partner, (Chris.Robinson@dfdl.com), Vansok Khem, Partner, (Vansok.Khem@dfdl.com) or David Fruitman, Regional Competition Counsel, (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.
