21 April, 2016
What is the main piece of legislation of general application which regulates anti-competitive behaviour? What are the main prohibitions in the legislation?
The Vietnamese Competition Law 2004 (Competition Law). The Competition Law prohibits agreements in restraint of competition; abuse of dominant or monopoly position; economic concentration; and unfair competition practices.
Which regulator is responsible for administering and enforcing competition laws?
Vietnam Competition Authority (VCA), which investigates issues relating to practices in restraint of competition and Vietnam Competition Council, which is responsible for the enforcement of the Competition Law in respect of practices in restraint of competition which have been investigated by the VCA.
Are there any exclusions from the competition legislation of general application? Are there any sector-speci c competition laws or regulations?
No. The Competition Law applies to all business organizations and business people, including enterprises producing or supplying products or services in the public interest, state monopolies, foreign enterprises and trade associations operating in Vietnam.
Does the competition legislation apply extraterritorially to persons, behaviour or action outside the jurisdiction?
The Competition Law applies to all “foreign organizations operating in Vietnam”. However, it is unclear whether this includes offshore entities that have no commercial presence in Vietnam.
What penalties and liabilities may be imposed for a breach of the competition law?
The main penalties for a violation of the Competition Law include warnings or monetary fines of up to 10% of the enterprise’s total revenue. Supplementary penalties include revocation of business licences, sub-licences and/or professional practising certificate and/or confiscation of materials and facilities used to commit a breach of the Competition Law.
In addition, violators may also be subject to the following remedial measures:
(a) restructuring of the enterprise that abuses its dominant position;
(b) division or split of the enterprise that has merged or consolidated, or compulsory sale back of the acquired enterprise;
(c) public retraction;
(d) preclusion of terms in violation of the Competition Law from the relevant contract or business transactions; and/or
(e) other necessary measures in order to remedy the anti-competitive effects caused by the violating act.
Prohibition on anti-competitive agreements
What kinds of agreement or conduct is illegal under the prohibition?
The Competition Law identifies eight specific agreements which are prohibited including, among others, price fixing, market sharing, output restriction, preventing others from entering the market, boycotting and bid rigging.
What types of agreements or conduct are illegal by object? And which are illegal only if they are signi cantly anti-competitive in effect?
Preventing others from entering the market, boycotting and bid rigging are prohibited regardless of market share. All other agreements are only prohibited if the parties have a combined market share of 30% or more.
Is there regulation of vertical agreements and if so, what type of vertical restraints or provisions in such agreements are typically examined?
There is no distinction between horizontal and vertical agreements under the Competition Law. However, the prohibition against agreements in restraint of competition will typically cover horizontal agreements while vertical agreements, such as resale price maintenance and single branding, are generally addressed as conduct in abuse of dominant or monopoly position.
Is resale price maintenance allowed? Are recommended resale prices or maximum resale prices permitted?
Minimum resale price maintenance causing losses to customers is considered as an abuse of dominance under the Competition Law. Maximum resale price maintenance and recommended resale price are permissible.
Are there any defences or relief from liability provided by the legislation?
Yes. Certain anti-competitive agreements might be exempted for a de nite term if they meet any one of the following conditions for exemption:
(a) rationalizing the organizational structure or business scale, raising business ef ciency;
(b) promoting technical and technological progress, improving goods and services quality;
(c) promoting the uniform application of quality standards or technical ratings of products of different kinds;
(d) harmonizing business, terms for trading and delivery of goods and payment but does not relate to price or pricing factors;
(e) increasing the competitiveness of small to medium-sized enterprises; and
(f) increasing the competitiveness of Vietnamese enterprises in the international market.
Is there a leniency regime? If there is, please describe the extent of and process in seeking leniency?
No. However, the VCA is considering introducing a leniency regime in the near future.
Abuse of Dominance or Market Power
How is “dominance” or “market power” determined? Is there a market share test?
Under the Competition Law, an enterprise is dominant if it has market share of 30% or more in the relevant market or if it is capable of signi cantly restraining competition. Some of the factors taken into account in determining the ability of an enterprise to signi cantly restrain competition are the nancial capacity of the enterprise and its parents, technologies, intellectual property rights and/or the distribution network.
What type of conduct constitutes abuse of dominance or abuse of market power?
Conduct such as selling / providing products below total prime cost to exclude competitors; fixing an unreasonable selling or purchasing price or fixing a minimum re-selling price causing losses to customers; restraining production or distribution; limiting the market, or impeding technical or technological development; applying different commercial conditions to the same transactions; imposing / forcing conditions or unrelated obligations on other enterprises; preventing market participation by new competitors.
Are there any defences or relief from liability or exclusions applicable for abusive conduct?
Is there a merger control regime? What is considered a “merger”?
Yes. The merger regime applies to an economic concentration which may take the form of a merger, a consolidation, an acquisition or a joint venture.
Is the merger notification a mandatory or voluntary process?
Mandatory if the transaction meets the notification threshold.
When must the merger be notified to the regulator?
Where an economic concentration meets the ling threshold, parties to the economic concentration have to le the noti cation and seek a clearance con rmation of the VCA before implementing the economic concentration, i.e., proceeding with licensing procedures to amend the licenses at the competent authorities.
What are the filing thresholds and are there any exemptions from notification requirements?
A transaction is deemed to be noti able if the combined market share of the parties is between 30% and 50% in the relevant market, unless the post- transaction entity is a small or medium enterprise.
A transaction will be prohibited when the combined market share exceeds 50%. In such circumstances, the parties may seek exemption if the transaction meets certain criteria.
Please provide a brief description of the merger clearance process and the typical timeline for merger clearance.
The official review time for a merger notification is 45 days from the date of receipt of a complete notification le. For complicated cases, this review period may be extended twice for up to 30 days each time.
What are the consequences of failing to notify the regulator when required?
The statutory penalty for failure to notify is up to 10% of the total turnover of the previous year of each of the parties. A fine of up to 10% of the total turnover of the previous year is applied to each party if the economic concentration is prohibited by law (i.e. combined market share exceeds 50%) and the parties to such concentration will also be required to reverse (i.e. divest) the transaction. A fine of up to VND 200 million is applied if the parties (eligible for exemption) proceed with the transaction before receiving a confirmation on exemption.
For further information, please contact:
Yee Chung Seck, Partner, Baker & McKenzie