Logo of Phnom Penh Post newspaper Phnom Penh Post - Competition law up for love



Competition law up for love

Content image - Phnom Penh Post
Cambodia’s Ministry of Commerce. The Law on Competition was endorsed by the King for immediate promulgation on October 5 after the Senate reviewed and approved in on September 20. Heng Chivoan

Competition law up for love

Happy are those who love to go to court. If the pre-existing standards on unfair competition have been unable to do the job, the newly adopted Law on Competition will and must do the job. But what kind of job?

Fundamentally speaking, this law seeks to ensure that businesses play by the rules and strive to make money in the most decent manner possible. You may ask, is it wrong to want the biggest market power possible? Is it wrong to drive competitors out of business? More bluntly, didn’t people go into business to make money in the first place?

Before even trying to answer to any of these questions, it may be worth remembering that “it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest”. Can’t quite argue with Adam Smith there. What he famously called the invisible hand, we now simply call market.

Many entrepreneurs would have to endure numerous painful lessons before they learn to price their product/service correctly. The ongoing art of finetuning the price may inevitably move the market upside down and around. In other words, the market is moved by what we routinely call competition.

As it now stands, our fresh Law on Competition is well aligned with the global trend as it prohibits four known types of agreements which would restrain trade, namely, horizontal agreements, vertical agreements, dominant market power, and mergers which could cause a major adverse competitive effect.

The limited length of this article does not permit explanations of these agreements but rest assured that if none of these exists, it is fair to assume that consumers would be best served thanks to two noble attributes – equality and honesty – which shall dictate the way corporations do business. At least that is what the law says.

Since our short law (only 41 short articles) has just been enacted, only broad principles and standards have been expounded, leaving all the juicy details to be later determined by the powerful Competition Commission of Cambodia.

If experience elsewhere is of any guide, such detailed rules could take years to come by before we can fully grasp the true meaning and impact of this new law. Such a long time? Yes, and you may quit reading right here and go back to whatever you were doing. But before you go, here is what you might want to know.

Competition isn’t necessarily a bad thing. It pushes people to think creatively, to innovate, to be more efficient. We can all agree on that. Good competition on the merits, theoretically, shall drive the prices down to the competitive price. Bad things may happen when major companies make agreements, often secretly, to diminish competition among themselves (collusion) or when one tries so hard to eliminate its competitor from the market completely (exclusion) or when two major competitors agree to permanently combine (merger) in order to become one awesome single economic entity, almost a monopolist.

Our law provides some exceptions. But we would only know what is permissible and what is not when this law starts to receive interpretations through court decisions as well as rules and reasonings of the Commission in the future.

Since the Law on Competition uses a lot of economic jargons, we can first expect to go through a fairly high number of cases before we can hope to have some clarity to help us argue whether a particular or relevant market exists or whether the defendant (the bad guy) has that sort of market power that is troublesome … et cetera.

For starters, definitions given in the law are sure to call for intense debates that will perhaps never end. Thus, competition refers to “actions by persons doing business in the market, aimed at getting many customers to use their product/service, gaining a big market share, and a dominant market position.” Competitors refer to “those currently competing in a particular market or those with a potential to enter into such market”, while market itself is defined as “market of products or services that are in the competition.”

If you ever find these definitions not entirely clear, you are not alone. They (like many others) seem to require more elaborated definitions of their own. Market share, market power, big, dominant, particular market are all such concepts and adjectives which, to become clearer, would require years and years of implementing this law through many more detailed rules and interpretations.

Just before you go, if you love clarity, note finally that for two products to be legally competing with one another, they would, at least as far as theory can tell us, need to be interchangeable, ones which customers perceive as substitutable. One may, therefore, perhaps say that the best Ferragamo shoes are substitutes for Gucci shoes, a broad all-shoes market. But then, there can also be three relevant submarkets – men’s, women’s, and children’s shoes.

Defining a relevant market is hard enough, plus, many things that you and I know today will certainly evolve as new economic activities emerge. The only thing that won’t change is the fact that this law will inevitably bring about claims and lawsuits. So, in order for this law to do its job, you must practice it often enough whether you love it or not.

Virak Prum, LLB, LLM, PhD (2006 Nagoya University) teaches law at CamEd Business School. The views expressed are solely his own.

MOST VIEWED

  • Prince Norodom Ranariddh passes away at 77

    Prince Norodom Ranariddh, the second son of the late King Father Norodom Sihanouk and former First Prime Minister of Cambodia, has passed away in France at the age of 77. “Samdech Krom Preah Norodom Ranariddh has passed away this morning in France just after 9am Paris-time,”

  • Cambodia purchases 4 million Molnupiravir tablets

    Cambodia has arranged for the purchase of four million US-made Molnupiravir pills – enough to treat 100,000 Covid-19 patients – even though the current rate of daily infections in Cambodia remains low. The medicine will be distributed to state hospitals, pharmacies and private clinics, according to the Samdech

  • Rise in planned flights lifts travel hopes

    Six airlines have applied to resume flights in December, while two others have put in for additional flights and routes, according to State Secretariat of Civil Aviation (SSCA) head Mao Havannall on November 29. These account for 43 new weekly domestic and international flights in December, up 16

  • Is Cambodia’s travel sector in for another cheerless holiday season?

    The travel and tourism sector was heaving back to life as borders started to reopen, promising a festive vibe for the holidays and New Year. But Omicron and other Covid-related issues are threatening to close the year on a bleak note ‘Seems [like] Covid-19 won’

  • Cambodia, Thailand to discuss border reopening

    Cambodian authorities from provinces along the Cambodia-Thailand border will meet with Thai counterparts to discuss reopening border checkpoints to facilitate travel, transfer of products and cross-border trade between the two countries. Banteay Meanchey provincial deputy governor Ly Sary said on November 22 that the provincial administration

  • Cambodia planning new border checkpoint at Thma Da

    Cambodia is looking into the possibility of opening a new Thma Da Border Checkpoint with Thailand to boost trade and tourism. The Ministry of Public Works and Transport said on December 4 that Minister of Public Works and Transport Sun Chanthol led a technical working group