On April 2, 2024, the Cambodian Competition Commission (CCC) issued Decision No. 087 on Requirements and Procedures of Exemptions under the Law on Competition, outlining the requirements and procedures for requesting exemptions for agreements or activities that could prevent, restrict, or distort competition in Cambodia.

Franchise agreements often include clauses such as price fixing, exclusive supply arrangements, or territorial restrictions, which could potentially raise concerns under the Law on Competition. Therefore, it is necessary for both franchisors and franchisees to understand how the law applies to their agreements and whether an exemption request may be required.

Some arrangements under franchise agreements may fall within the scope of prohibited practices under the Law on Competition. These include horizontal and vertical agreements, abuse of dominant position, and anti-competitive business combination. If a business owner contemplates that their franchise agreement could be interpreted as anti-competitive, they must assess whether to apply for an exemption.

Key Criteria for Exemption

Under Decision No. 087, the CCC may grant an exemption if the applicant can demonstrate that the proposed agreement or activity meets all four of the following conditions:

1. Significant and identifiable benefits: The agreement must provide clear technological, social, or economic benefits such as cost efficiencies, qualitative efficiencies, initiations of new technologies, or environmental and sustainable benefits.
2. Necessity of the agreement/activities: These benefits must not be achievable without the proposed agreement or activity. The applicant must show that prevention, restriction, or distortion of competition are essential to realizing the benefits.
3. Benefits outweigh harm: The positive impacts must significantly outweigh any adverse effects caused by the prevention, restriction, or distortion of competition, and the benefits should be likely to materialize within one year.
4. No elimination of competition: The agreement must not eliminate competition in any substantial aspect of goods or services.

Application and Supporting Documents

Applicants must submit the application form and provide evidence to support their exemption request. This typically includes submitting the franchise agreement and any other relevant supporting documents that demonstrate how the agreement or activities meet the above criteria for exemption.

Pre-Application Consultation

Decision No. 087 also allows a request for a consultation with the Consumer Protection Competition and Fraud Repression (CCF) Directorate-General before submitting a formal application. This step can help clarify the requirements and ensure that the application is complete and well-supported.

As many franchise agreements may contain provisions that are considered prohibited under competition law, it is essential to stay informed about the latest regulatory developments and the authorities’ interpretation of such agreements and arrangements.