It’s just a little over a year until the Myanmar Competition Act comes into force in February 2017. The Act fleshes out the main anti-trust principles, but is arguably muddled in framing their exact scope and the relevant legal tests. Secondary legislation may clarify things but a lot of the work is likely to be left to the new Competition Commission to create a robust anti-trust regime. This bulletin summarises the Act, identifies areas of ambiguity and considers what the Act (in its current form) means for businesses.

Introduction

The Competition Law (2015 Pyidaungsu Hluttaw Law No 9) (the Act) was enacted on 24 February 2015. The President of Myanmar has recently announced that the Act will come into force in its full form in February 2017. This is Myanmar’s bid to move itself into the global anti-trust community which fellow ASEAN members have done or are doing, as antitrust enforcement grows significantly in Asia generally. As in other jurisdictions, creation of the Competition Commission (the Commission) is sanctioned under the Act to implement as well as enforce the anti-trust regime. The next step is for the Ministry of Commerce, who drafted the Act, to publish the relevant rules and regulations (the Rules) supplementing and providing further guidance on, the Act.

Anti-trust notions recognised in the Act

The internationally recognised anti-trust notions of restrictive agreements, abuse of market dominance, unfair competition acts and merger controls are all covered under the Act. Monopoly, a concept not fully defined, is also included in the Act which is applicable to any business or businessperson undertaking a business activity.

It is worth looking at in detail how these notions are fleshed out in the legislation and what they mean for businesses.

Restrictive Agreements

What constitutes an ‘agreement’ is not set out in the Act. In any case the Act already has a wide ambit: it prohibits directly or indirectly negotiating and fixing purchase price, sale price or other conditions as well as any agreements which control or limit competition in the market. International practice recognises that restrictive agreements are generally allowed unless it is an anticompetitive arrangement or agreement, particularly between competitors. The Act currently contains no such qualification, nor does it expressly confirm that the Act could also apply between non-competitors. Therefore the Act, as it stands, may also prohibit suppliers from fixing the resale price of their products to be charged by distributors or resellers (the so-called “Resale Price Maintenance” conduct). These qualifications may be introduced by the implementing Rules.

Businesses, if in doubt of compliance, can see if their agreements fall under the prescribed exemptions – almost identical to the list prescribed, for instance, by Vietnamese anti-trust laws – which can be granted by the Commission but only on a temporary basis. Agreements relating to cost-reduction measures in the interest of consumers or improving technology, for example, may be exempted. But the criteria for these exemptions are unclear and therefore susceptible to broad interpretation. Legally much will remain to be explored even with the implementation of the Rules: can these exemptions be used as a retrospective shield in prosecutions and civil suits or are agreements only exempted with prior approval from the Commission?

Abuse of market dominance

The Act prohibits abusing the dominant position of one’s own business in the relevant market. We hope the Rules or the Commission will elaborate on the words ‘abuse’ and ‘dominant position’.

Controlling or limiting production, market acquisition, technology and development of technology and investment, as well as restricting access to the Market or the supporting resources, are some of the prohibited acts in this group. Internationally, such prohibition is in place only if the acts amount to an abuse of market dominance. The qualification may be introduced in the future but businesses should keep in mind that the Act, as it stands now, lacks this.

However, somewhat confusingly, the Act, in a different chapter, also lists activities which are prohibited if they are going to be conducted by businesses abusing their “power”, not “dominance”. These activities include selling goods and providing services at a price lower than the production cost or at a price lower than their cost at port in order to drive the competitors out of market. Activities such as controlling manufacturing, distributing goods and providing services, limiting the market, hindering the development of science and technology and causing detriment to consumers, are also only prohibited under this heading, if they are conducted by businesses “by abusing their power”. Again, ‘abuse of power’ is not defined and a key question will be whether ‘abuses of market power’ and ‘abuses of dominance’ are interchangeable notions in the mind of the Commission.

Market monopoly

This notion is unique to the Myanmar anti-trust regime. A business or businessperson cannot conduct any of the following activities which cause market monopoly:

• controlling purchase price, sale price or service charges;

• limiting services or production, restricting rights in purchasing or selling goods, directly or indirectly determining mandatory rules for other businesses - all done with the aim of controlling price;
• discontinuing, reducing or limiting provision of services, production, purchase, distribution, transfer or import of goods, without appropriate reason, or destroying goods or causing them to be damaged to downgrade their quality with the aim to reduce market demand;
• restricting the area where goods and services are exchanged, in order to stop other businesses from entering the market, in order to control a market share; and
• interfering unfairly in another’s business.

Strict common law interpretation of the clauses suggests each act must cause ‘market monopoly’, an undefined term, and it is unclear how such a test would work in practice. Most activities listed apparently require proof of intent (or lack thereof), a difficult task for whoever is bearing the burden of proof.

The Act also contains a wide exception to the restriction above: merging with a manufacturer, distributor or facilitator, and acquisition of another business may be permitted by the Commission if it is carried out to create a new business or to sustain the status of a business. As this area is uncommon, and would normally be covered under the merger control review by the Commission (see below), the direction in which the regime will head is rather unknown.

Unfair Competition

This notion is scoped out in the term ‘unfair competition’, defined as any competition-related business activity that causes or can cause detriment to Myanmar, or the legitimate rights and benefits of consumers and other businesses. This is supplemented by a long list of conducts “constituting unfair competition”, which include: misleading consumers; disclosing trade secrets; intimidating other businesspersons; defaming another business; interfering in the activities of another business; advertising and promoting sales that constitute unfair competition; and discriminating amongst businesspersons.

The main question is whether, as in other countries such as Thailand and Japan, each activity needs to have anticompetitive effects to be caught under this notion. This seems to be the case but if no such effect is required, enforcing this notion in a consistent manner will be quite challenging.

As mentioned above, under this heading, falls a list of activities which would have been more fitting under the ‘abuse of market dominance’ section. This creates an overlap between the two notions and further obscures the scope. For example, selling at a price lower than production cost, an act already classed as abuse of market dominance, is also classed as an unfair competition act, but strict interpretation of these different sections means it is an ‘unfair competition’ act only if it is conducted by a business abusing its power. This is certainly one of the muddled areas that could benefit from clarification in the Rules.

Merger Control

All types of M&A activity are caught under the merger control section of the Act. The main tests appear to be whether M&A activities are carried out with the intention to create excessive market domination for a period of time (which is a very unusual test), or the M&A activities have the effect of creating a market where only a single business or a few businesses are active, or such activities exceed market share thresholds (arguably different from notification thresholds) to be prescribed by the Commission. The references to the relevant businessperson’s intent should be noted as this, as a requisite proof, may defang the Commission as it would be hard to prove intention. Mergers are exempted if the merged entity remains as an SME (another undefined term), the merger prevents bankruptcy or insolvency, the merger promotes exports, or the operation is instrumental in advancing technology.

This is another area where much work will be needed from the Commission. In addition to prescribing notification thresholds, businesses would need to see more input from the Commission in order to give an effective legal framework for this notion. The Act currently does not provide any procedure for businesses to seek clearance before carrying out a merger that could potentially cross notification thresholds and lead to market domination. A practice, common in other jurisdictions but not prescribed in the Act, is also offering remedies to businesses to alleviate concerns raised by their deals. This practice would encourage businesses to notify rather than take the risk of prosecution.

The Commission's powers and sanctions

The Commission has a wide range of duties and powers ranging from prescribing merger thresholds to overseeing the Investigations Committee, a body entrusted with a broad range of investigative and prosecution powers. The Commission also has a power to suspend business operations on a temporary or permanent basis.

The chart below sets out the sanctions in detail for each type of breach. The level of punishment including fines of up to 15 million Kyats (approximately USD 11,500 at current exchange rate), which is relatively low, but also imprisonment of up to 3 years, which sends out a strong message that any breach will be taken seriously by the Government. The main concern amongst businesses however could be regarding the Commission’s (and the Committee’s) overly wide discretionary powers coupled with lack of any judicial oversight or right of appeal except in very limited circumstances. Capacity and resources within these bodies to deal with a large caseload is also a concern, at least in the immediate future.

SOEs - the elephant in the room?

How the country’s state-owned enterprises will be treated under the new competition regime is unknown. The Act is silent on existing monopolies but at the same time nothing in the Act suggests that SOEs will not be subject to the anti-trust regime going forward. Some suspect that the Commission might invoke certain prescribed exemptions such as “promoting competitiveness of Myanmar Businesses in international markets” but any such ruling is likely to attract heavy scrutiny from the private sector. Unless expressly exempt, challenges against the SOEs are likely and a blanket exemption is likely to be unpopular inside and outside Myanmar. In the absence of an express provision dealing with the SOEs, how the Commission will deal with them remains to be seen and may even be viewed as a litmus test on its robustness. The experience in China, where after some years of hesitation, the authorities have made crystal clear that SOEs are subject to the Anti-Monopoly Law, may serve as guidance.

Conclusion and Next Steps

We understand that the Competition Policy Working Committee formed under the Ministry of Commerce is currently overseeing the implementation process including publishing the Rules which are long overdue. 

The Rules when published may tackle the current concerns with the Act, but our experience in Myanmar - where legal gaps are closed through consistent practices as much as through laws - suggests that the Commission is likely to have to play a bigger role than its counterparts elsewhere in developing a regime that leads to a free and fair competition in the market. From the Act, we know that the Commission is to be chaired by a senior government official serving at the Union level and therefore it is expected to be stringent. The Commission is also to include technical experts from both inside and outside the Government including individuals from the NGOs which is positive, if it bolsters independence. Finally, the Commission will benefit from rulings and precedents that already exist in jurisdictions near and far.

The challenge, as shown in the neighbouring ASEAN states, is to develop an anti-trust regime that is in line with international standards and do so in the context of domestic nuances and challenges, of which Myanmar has many.

But this must not cloud the overall picture. All in all the Myanmar Competition Act and the country’s desire to implement an anti-trust regime in line with international standards, should be welcomed, as its first step – a bold and decisive one – in the right direction towards creating a level playing field for domestic and foreign businesses.