Tag Archives: Competition Law

M&A for Company in Dominant Market Position



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The legal entity in dominant position shall be obliged to file a request to the Authority of Fair Competition and Consumer Protection in case of reorganization by acquiring or merging with other legal entity or by purchasing more than 20 percent of the common shares or more than 15 percent of the preferred shares of a competing company selling or serving similar products, or by merging with a related party.

The Government of Mongolia approved the Resolution No. 118, “Procedure for reorganization of a dominant legal entity through merger or acquisition with other legal entities, and conclusion on the purchase of competitor’s shares” in 2012.

In accordance with this regulation, the Authority of Fair Competition and Consumer Protection shall review the applications and related materials submitted by legal entities and monitor whether competition, mergers and acquisitions result would be the restriction of competition in the market.

The Authority of Fair Competition and Consumer Protection shall review or approve the application within 30 days upon the receipt of the application. This period may be extended by up to 30 days and additional information may be requested to the applicant if necessary.

If the Authority for Fair Competition and Consumer Protection considers that there are conditions to restrict competition upon the reviewing the application, the refusal on reorganization of the dominant legal entity by acquiring or merging with other legal entities will be issued in accordance with above-mentioned procedure.

This refusal by the Authority for Fair Competition and Consumer Protection is a ground for not registering the legal entity reorganized through merger or acquisition, and for not registering the charter of the legal entities that sells or buys the shares.

If it is proved that the benefits to the national economy outweigh the disadvantages to competition in the market, the dominant legal entity will be allowed to register the reorganization by acquiring or merging with other legal entities.

What is a Natural Monopoly in Mongolian Competition Law?



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In our previous post, we looked at the legal regulation of business entity in “Dominant Position” from a competition law perspective. In today’s post we will review background and legal regulation of business entity in a “Natural Monopoly.”

The legal entity in natural monopoly defined as legitimate monopoly entrepreneurs exists when a single entity alone accounts for the total supply of particular goods to the market at the lowest minimum social cost.

A business entity in natural monopoly shall be determined in accordance with the methodology set forth in the Procedures for Identifying Business Entity in Natural Monopoly and Dominant position. If an entrepreneur is identified as natural monopoly, the Authority of Fair Competition and Consumer Protection issues a decision confirming that the business entity is a legitimate monopoly.

The Authority for Fair Competition and Consumer Protection shall regulate the activities of of naturally monopolistic business entities as follows:

  • Regulating/monitoring changes in the amount and size of products supplied to the market in connection with its capacity;
  • upon considering the actual costs, controlling and granting a permission to change of the selling price of particular products;

A business entity in natural monopoly is obliged to submit its annual financial statement, market research, survey, proposal and other required documents to the Authority of Fair Competition and Consumer Protection the within first quarter of each year.

According to such report, research and proposal comparing with sources, such as news, information, reports, research and analysis conclusions issued by the Customs Authority, Tax Authorities, the Central Statistical Office and other government agencies, the business entity shall be decided to exclude from the “Registration of a legitimate monopoly entrepreneurs”.

It is strictly prohibited to conduct the dominant activities for the business entity in natural monopoly by using their monopolies illegally, restricting the number, quantity, and price of goods sold in the market in order to block other entrepreneurs from entering into the market, restricting the fair competition and blocking consumers’ rights and interest.

What is a Dominant Position in Mongolia Competition Law



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We have already posted a brief introduction about the Competition Law of Mongolia earlier. This time, we would like to address this blog on issues related to the legal regulation of business entities in dominant position.

The legal regulation of the business entities in dominant position is currently governed by the Competition Law, the Procedure for Determining Legal Monopolies and Dominant Entrepreneurs, and the Procedure for Reorganizing a Dominant Legal Entity by Acquiring and Merging with Other Legal Entities and Concluding the Purchase of a Competitor’s Shares.

A business entity in dominant position is an entrepreneur who solo or in association with other persons in a particular product market accounts for one-third or more of the production, sales, or purchases of the product in that market. In addition, the business entity accounts for less than one-third of the production, sales or purchases of the product in the market, but the ability to block other entrepreneurs from entering the market or to push them out of the market, could be considered as business entity in dominant position based on its range of products, market geographical boundaries and market concentration.

The dominance of any business entity shall be determined in accordance with the procedure set forth in the Regulation for the Determination of Natural Monopolies and Dominant Entrepreneurs. If a dominant entity is identified in accordance with such regulation, the Authority of Fair Competition and Consumer Protection issue a decision confirming the dominant entity and register it in the list with “Dominant Enterpreneur Registration”.

The dominant business entity shall be ogliged to submit its audited financial statements of the previous year, market research, proposals and other necessary documents to the Authority of Fair Competition and Consumer Protection within the first quarter of each year.

Based on sources, such as the information, reports, research and analysis conclusions issued by the Customs authority, Tax authorities, the Central Statistical Office and other government organizations, plus the report, research and proposal submitted by the legal entity, Authority of Fair Competition and Consumer Protection shall make a decision excluding the business entity from the list with“Dominant Entrepreneur Registration”.

It is strictly forbidden that the business entity in dominant position use their dominance illegally in the market by restricting the number, quantity and price of goods sold in the market in order to block other entrepreneurs from entering the market, restricting competition and sabotaging consumers.

Issues with Mongolian Competition Law



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Our Mongolian lawyers have encountered an unusual number of inquiries regarding Mongolian competition and anti-monopoly issues in the past few months. The scenario below takes a looks a common situation found in Mongolian trade.

Let’s assume that multinational company A currently sells to several Mongolian counterparties (Supplier Customers) who have a product import permit. Under the terms of sale, title passes to the Mongolian counterparty before the product is imported on either the Russian or Chinese border.

Mongolian wholesale client (Company B) proposes a profit-sharing agreement whereby Company B will Purchase products from Company A for purposes of:

  • storing product in Company B’s facilities and reselling to the other Supplier Customers within Mongolia; and
  • selling to wholesale clients provided that they are not already existing customers of the Supplier Customers.

In this scenario Mongolian Competition Law does not apply to the company A.  The Mongolian Competition Law does not apply to business entities which are not registered in Mongolia and are operating outside of its borders. Since the proposed transaction contemplated by the agreement would have company A deliver the products to the purchaser outside of Mongolian territory, the provisions of the Competition Law would not be applicable.

In our view, Company A and B would not be forming a monopoly because the transaction is cross-border, and A is not a “business entity” within the meaning of the Competition Law.

Company B only occupies approximately 1% of the domestic market for sale and supply of certain products. Accordingly, since it does not occupy a “dominant position” in Mongolia’s market (defined as a party which sells or produces 1/3 or more of a certain type of goods), the prohibitions in Mongolia’s Competition Law with regard to monopolistic activities would not be relevant to its operations.

With regard entering into agreements and monopolies, the following activities are prohibited under the Mongolian Competition Law:

  • mutually agreeing to fix prices of products;
  • dividing markets by location, production, services, sales, name or type of products or consumers;
  • restricting the production, supply, sale, shipping, transportation and market accessibility of products, investment, technical and technological renovation;
  • participating in competitive tender or bid auction or activities procuring goods, works or services by state and local funds having in advance agreed on the price, other conditions and criteria of products;

In addition, the following agreements or entered between business entities shall be prohibited where they contradict the public interests or create circumstances restricting competition:

  •  refusing to establish economic relations without economic or technical justifications;
  • restricting sales to or purchase by third parties of products;
  • collectively refusing to enter into agreements or negotiations which have significance for competition;
  • preventing competitors from joining organizations with the purpose of running their businesses profitably;

Mongolian business entities are prohibited to enter into agreements with effects as described above.