22 May, 2015
On 24 February 2015, the Parliament of Myanmar signed off on the long-awaited new Myanmar Competition Law (2015, Pyitaungsu Hluttaw Law No. 9) (the "Act") which establishes a framework for competition policy in Myanmar. There is now a statutory 90-day waiting period, during which it is understood that the Parliament should introduce rules and regulations to implement the Act.
The Act introduces provisions which appear similar to the prohibitions on anti-competitive agreements and abuse of dominance under EU law and common to other countries in Asia such as Singapore, Malaysia and China. It also introduces a merger control regime.
Although the Act is yet to come into force, it is expected to impact on a wide range of businesses and provides for both administrative and criminal penalties (including imprisonment) for breach of its provisions. It is therefore prudent for businesses to make sure they are in full compliance with the new law (for instance, by carrying out internal audits and implementing compliance regimes) well in advance of the actual coming into force of the Act.
Myanmar joins Singapore, Malaysia, Indonesia, Thailand and Vietnam as member states of ASEAN with competition laws, an important step towards the establishment of the ASEAN Economic Community. The remaining ASEAN member states which currently do not have consolidated competition frameworks (Brunei, Cambodia, Laos and Philippines) are likely to face increased pressure to introduce a nationwide competition policy by 2015, as envisaged under the ASEAN Economic Community Blueprint.
Key Bodies
The Act establishes the Myanmar Competition Commission ("Commission"), which will be the principal regulator responsible for enforcement. Various committees (including an Investigations Committee to investigate conduct that may infringe the Act) will conduct specific functions.
The Commission is given a broad range of powers, including exempting any enterprises from the Act for the interests of the State, instructing a business to reduce its market share as it considers necessary and procuring immunity for any person who has fully admitted to breaches under the Act.
Controlling Competition Acts And Market Monopoly
Similar to other jurisdictions, the Act prohibits anti-competitive agreements and the abuse of a dominant position. However, the Act at times seems to conflate these concepts e.g. the prohibition against abuse of a dominant position is also contained in the part of the Act which seems, primarily, to prohibit anti-competitive agreements (and it also appears in the prohibition of unfair competition). Further clarification on this in the forthcoming rules and regulations would be helpful.
The relevant sections in the Act are the prohibitions against "Controlling Competition Acts" and "Market Monopoly".
Controlling Competition Acts
The definition of Controlling Competition Acts is somewhat similar to the concept of anti-competitive agreements under Article 101 of the Treaty on the Functioning of the European Union ("TFEU"). It preventsinter alia agreements to fix prices, control or limit production and bid-rigging. However, Controlling Competition Acts also expressly includes abuse of a dominant market position and monopoly by an individual or group. It is unclear how this interacts with the prohibition on Market Monopoly (discussed below). The provision applies to "any person". However, it should be noted that, in contrast to similar legislations in Thailand or Vietnam, not all provisions of the Act apply to the same persons.
While the Act deals with anti-competitive agreements, it fails to draw a distinction between (i) horizontal and vertical agreements or (ii) per se anti-competitive agreements and violations of the rule of reason. This differs from similar legislation in Indonesia, for example, which specifies whether the 'per se illegal' or 'rule of reason' approach should apply to each type of agreement. Where the former approach applies, it is considered sufficient for the regulators to establish the existence of the prohibited agreement without having to analyse its effect on the market.
Certain activities relating to anti-competitive agreements may be exempted if they relate to cost-reduction measures for the interests of consumers by, for example, improving overall business performance, promoting technological advancement or improving the quality of products or services. These exemptions mirror those of the Vietnam Competition Law. Such exemptions may be given only for an exact period of time as determined by the Commission.
Market Monopoly
The Act also introduces a prohibition on activities which lead to market monopoly. This appears similar to the prohibition against abuse of a dominant position under Article 102 TFEU. These activities include: controlling prices, limiting availability to control prices, lowering the quality of a good to reduce market demand, controlling the geographic market for sales to prevent entry and control market share and interfering in another business' operations in an unfair manner. This prohibition applies only to "a business person", defined as “any person undertaking a business activity or service enterprises" which includes an organisation that undertakes a business activity or provides a service. It is again unclear whether this section applies only to unilateral conduct or also applies to joint conduct. Although the definition does not make express reference to State-owned enterprises, such enterprises appear to fall under its scope.
An exemption may be permitted with the permission of the Commission for the merger with a manufacturer, distributor or facilitator of another business, or to buy assets or shares of another business in order to sustain a business or to acquire a new business.
No Concept Of "Dominant Market Position" Or "Relevant Market"
No market threshold has yet been provided for "dominant market position". It is also interesting to note that, in contrast with some jurisdictions such as, for instance, Malaysia, the Act fails to draw a distinction between relevant product market and relevant geographic market. The term "market" is merely defined as "a location where dealings of goods and services take place". It is to be hoped that the implementing rules will introduce a more comprehensive definition.
Geographic Scope Of The Act
It is currently unclear whether the Act will apply to businesses or activities outside of Myanmar or whether an anti-competitive effect within Myanmar is required. By comparison, competition laws in Malaysia and Singapore make express provisions to regulate activities that take place outside of the country where they have an anti-competitive effect within the country.
Unfair Competition
The Act also prohibits a broad array of conduct under the umbrella of "unfair competition". This includes practices such as misleading consumers, disclosing trade secrets, intimidating other business persons and defaming the reputation of another business.
However, the prohibition on unfair competition also includes an explicit prohibition on abuse of a dominant position and forbids conduct which would traditionally fall within the concept of anti-competitive agreements e.g. preventing membership of a trade association where membership criteria are met. It is unclear how this interacts in practice with the prohibitions on "Controlling Competition Acts" and "Market Monopoly" described above.
Merger Control Regime
The Act also introduces a merger control regime which will cover mergers, affiliations, acquisitions, joint ventures, or other mergers as determined by the Commission.
Mergers will be prohibited where they (i) would result in a market share that would exceed a level prescribed by the Commission; (ii) are intended to result in excessive market dominance (again no thresholds have been defined); or (iii) will reduce competition with the intention of creating a market with only a few competitors.
Exemptions may be available for otherwise prohibited mergers where the resulting business remains as an SME, where the merger will prevent insolvency or bankruptcy or will promote exports or the development of technology or entrepreneurship.
The Commission is empowered under the Act to determine the form, procedures and conditions for merger control. Therefore, we would expect further guidance to follow from the Commission.
Practical Steps
Companies carrying on business in Myanmar will soon be subject to additional domestic competition laws similar to those of other ASEAN jurisdictions, on top of the already existing long arm jurisdiction of the competition laws of other jurisdictions. This development is consistent with the spread of competition law generally and, in particular, the increase in regulatory action in Asia: the Hong Kong Competition Ordinance is anticipated to come into effect later this year, new regimes are on the cards in the Philippines and Brunei and hefty penalties continue to be imposed by regional regulatory authorities on a regular basis.
This week in fact, the Philippines House of Representatives has passed the third and final reading of the proposed Philippines Fair Competition Act which includes significant penalties for breach of its provisions. The Senate already passed its version of the bill in December 2014. The next step in the process is the convening of a bicameral conference committee, which is expected to take place next month.
Businesses should therefore take steps to identify potential infringements and ensure compliance with the ever-changing landscape of competition laws in Asia. Businesses should be auditing their existing agreements and practice and make sure that business staff are aware of the latest competition developments in order to ensure compliance.
For further information, please contact:
Mark Jephcott, Partner, Herbert Smith Freehills
mark.jephcott@hsf.com
Adelaide Luke, Herbert Smith Freehills
adelaide.luke@hsf.com
Daniel Waldek, Herbert Smith Freehills
daniel.waldek@hsf.com
Lisa Geary, Hebert Smith Freehills
lisa.geary@hsf.com
