An agreement which by its nature can be anti-competitive under the Competition Law 2018. That is, it is not necessary to prove anti-competitive conduct. This concept will be clearer in our discussion in the Third paragraph. The definition of anti-competitive is broad, but it is similar to the definition used by the Organization for Economic Co-operation and Development (OECD). The OECD refers to such agreements as “severe anti-competitive agreements” or “hard-core cartels”. They are concerted practices deemed to be anti-competitive. They include horizontal agreements (hard-core cartels) and vertical agreements. Horizontal agreements are agreements among parties at the same level of the supply chain (for example, competing manufacturers, distributors, or retailers). Vertical agreements are among parties at different levels of the supply chain (for example, between a manufacturer and a distributor). The Competition Law 2018 demonstrates the features of an anti-competitive agreement:
First, the Competition Law does not use the terms “horizontal agreement” or “vertical agreement.” Instead, the phrase “agreements to restrict competition between enterprises in the same relevant market” describes horizontal agreements. “Agreements to restrict competition between enterprises doing business at different stages in the same chain of production, distribution, and supply for a certain type of goods or services” are vertical agreements. The separate regulations which underly the Competition Law explicitly provide for these two possibilities. Prohibited acts are classified into six groups: agreements to use price tools to limit competition; agreements to divide the market; agreements to limit or control the quantity and volume of production; purchase and sale of goods or services; agreements to favor certain parties in winning supply contracts through tender participation; agreements to prevent or exclude other enterprises from the market; and agreements to abolish from the market enterprises other than the parties to the agreements. Except for those horizontal agreements, which are allowed because the combined market share of the participating enterprises is less than 5%, horizontal agreements are considered explicitly illegal, ie, there’s no need to consider the agreement’s ability significantly to restrict competition. Vertical agreements are different. An analysis is important, and many factors must be taken into account.
Second, an agreement to limit competition can be entered into by a wide variety of entities. They include Vietnamese business organizations, individual business households, and professional associations. They also include foreign agencies, organizations that operate within Vietnam or, if any of them are entities located abroad, then whether their agreement is likely to have a harmful impact on the market in Vietnam. State monopolies and private entities are equally subject to the Competition Law.
Third, when two parties come together to act in a way that limits competition, the agreement can take any form. An agreement can be reached through a writing, in meeting minutes, by an exchange of correspondence, in a conversation, or by any other means of communication. The important aspect is that an agreement exists whereby all parties agree to act in a way that prevents, limits, or distorts competition in the market. The Competition Law examines the meaning and effect, not the precise language of an agreement and permits agreements to be interpreted broadly. An agreement can include a series of documents, which, when pieced together, show consent. In certain situations, an agreement between two parties may be deemed anti-competitive if both parties agree to take specific actions to restrict competition, even if neither party actually engages in such behavior. This point is important. A party challenging an anti-competitive agreement need not prove that the parties actually engaged in anti-competitive behavior. The violation arises with the agreement, not the conduct.
The Competition Law 2018 only requires an “agreement” for parties to work together, but it doesn’t require “cooperative behavior.” It is an interesting concept called “working together” in which businesses cooperate but do so without a formal agreement. The objective is for the parties to diminish competition through cooperation. Unlike an “agreement,” “cooperative behavior” does not require a consensus of will or commitment by the parties involved. A tacit understanding that leads to similar business behaviors is sufficient. If businesses engage in “cooperative behavior”, one or both parties may be responsible if it can be shown that the agreement, they entered into was part of a larger scheme aimed at distorting competition. But “cooperative behavior” is not specifically regulated. That is, it is likely that an agreement that permits “cooperative behavior” is not per se in violation of the Competition Law.
Fourth, when evaluating whether an agreement is anti-competitive, the first step is to consider whether it has an actual or even a potential possibility to hinder competition in a significant way. When determining whether “an arrangement significantly hinders competition” and so, should be avoided, one can use a legal test. This test considers and measures various potential impediments which might limit or eliminate competition. The impediments are specified and measured in Decree 35/ND-CP dated March 24, 2020. Negative impact can be measured in many ways. Impact may be to exclude, reduce, distort, or hinder competition. If an agreement actually or potentially can result in changes to competitive conditions in a way that favors the parties to the agreements or limits the competitive opportunities of other parties, then such an agreement is considered to restrict competition and can be considered to have negative consequences in the market. It is important to evaluate the agreements that parties enter into to ensure that they do not negatively impact or even have the potential to significantly hinder competition. A horizontal agreement, including price fixing agreements, market sharing, or boycott agreements as stipulated in articles 11.1 to 11.6 of the Competition Law are considered to be per se illegal. Therefore, proof that these “agreements significantly restrict competition” is unnecessary. Stated differently, if an agreement appears to permit any of the conduct specified above, it will be seen to be inherently illegal. The legal scrutiny of specific cases will evaluate vertical agreements, as specified in articles 11.7 to 11.10 to determine their potential prohibition or permissibility.
Vietnam is dedicated to fostering equal opportunities in the market. Though there are presently only broad directives concerning anti-competitive agreements, further and more specific regulations are anticipated. As we anticipate the creation and implementation of these comprehensive regulations, we can envision a future where competition is promoted, and ethical standards are followed.
For further information, please contact:
Lu Lam Uyen, Russin & Vecchi
lluyen@russinvecchi.com.vn
