In February, Parliament passed the Myanmar Competition Law. The new law establishes the Myanmar Competition Commission to administer and enforce its provisions. The law will only come into force on the day stipulated by the President in a commencement order.
The new law establishes various new rules designed to promote competition and it is worth highlighting that criminal sanctions apply to individuals for infringements of some of its provisions. Some of the key rules are set out below.
- A general prohibition on acts restricting competition. The type of conduct prohibited under this chapter includes price fixing, bid rigging and market allocation. Consistent with established competition law regimes, there is a recognition that certain arrangements which may restrict competition will be exempt for a specified period of time - to be determined by the Commission on a case-by-case basis - insofar as the arrangements, (i) “reduce costs for consumers”, and (ii) give rise to efficiencies including, among others, the enhancement of technology and improvements to the distribution of goods. We expect the exemption to be applied narrowly.
- A prohibition on “creating monopolies” through various practices.While the law does not prohibit monopolies per se, the “creation” of monopolies through certain prohibited practices such as, among others, obstructing market access or “unfairly interfering in the business activities of other persons”, is not permitted. “Monopolies” is not a defined term and it is left to the Commission to specify what may amount to a “monopoly” by reference to such factors as market shares and sales volumes.
- A prohibition of practices of unfair competition. The term “Unfair competition” is very broadly defined as “any act of competition…which affects or has the potential to affect the rights and benefits to which consumers or other businesses are entitled or the well-being of the state”. Furthermore, the law also provides that any act which is specified as an act of unfair competition can be prohibited “in order to protect the interests of consumers”. This prohibition therefore has the potential to be of very broad application and the discretion of the Commission appears extensive.
- The regulation of certain M&A activity. Under the law, certain mergers, acquisitions, establishment of joint ventures or other forms of “collaboration” as specified by the Commission will be prohibited if the “collaboration” is established with an intent to exercise “excessive market influence” or “lessen competition in order to have only one business or only a small market” or if the collaboration results in a market share which exceeds a cap set by the Commission (yet to be determined). Exemptions from the prohibition can be obtained if the collaboration, among other things, promotes imports, supports the improvement of technology or establishes businesses with “stronger entrepreneurial acumen”. There is no further guidance yet as to how this will be interpreted or how collaborations will be reviewed by the Commission. The current drafting creates considerable uncertainty as to how the merger control regime will be applied.
Given the numerous uncertainties as to the interpretation of many of the provisions of the new law and the very wide margin of discretion of the Commission, it is concerning that there are criminal sanctions for individuals for infringements of the provisions on “acts restricting competition”, the creation of monopolies, collaboration between businesses and some of the practices relating to unfair competition. The penalties may involve imprisonment for a term not exceeding three years or a fine of up to Ks 15,000,000 (approximately US$15,000).
Although the new law is not yet in force, businesses will be concerned as to the competition risks they may face from investing or carrying out business in Myanmar and the potential criminal sanctions. It is to be hoped that before the law comes into force, greater clarity will be provided around some of the key provisions.
(Freshfields Spotlight on Myanmar , march 2015)
