6 November, 2019
On 26 September 2019, Decree No. 75/2019/ND-CP regulating administrative penalties for acts in violation of competition regulations (Decree 75) was issued by the Vietnam Government, taking effect from 1 December 2019. Aside from changes in sanctioning standards, Decree 75 also provides clearer grounds in the determination of the appropriate level of sanction for each violation. Some notable changes under Decree 75 are set out below:
1. Expansion of Scope
In comparison to the previous decree, Decree 75 expressly extends its scope of application to include "relevant foreign enterprises", bringing it in line with the expansion of scope under the new Competition Law, which came into effect on 1 July 2019. This means that violations of competition regulations that take place outside of Vietnamese territory will be subject to administrative penalties under Decree 75.
2. Administrative fines for acts in violation of competition regulations
While the previous decree imposed administrative fines based on an enterprises' annual revenue from the financial year preceding the violation, Decree 75 narrows the scope of fines to the enterprises' "annual revenue within the relevant market, from the financial year preceding the violation". Specifically:
- The maximum fine for violations of regulations on anti-competitive agreements and abuse of market dominance/monopoly position is 10% of the violating enterprises’ total turnover in the relevant market in the financial year prior to the year in which the violations were committed, but shall be lower than the lowest level of fines applicable to violations of corresponding regulations in the Penal Code;
- The maximum fine for violations of regulations on economic concentration is 5% of the violating enterprises’ total turnover within the relevant market in the financial year prior to the year in which the violations were committed; and
- The maximum fine for violations of regulations on unfair competition is VND 2 billion (approximately USD 86,000).
Where an enterprises' annual revenue within the relevant market is zero, Decree 75 imposes an administrative fine from VND 100 million to VND 200 million for violation (approximately USD 4,350 to USD 8,700).
3. Distinction in regards to administrative fines for horizontal and vertical agreements
Since the new Competition Law recognizes a distinction between horizontal and vertical agreements, a clear distinction concerning administrative fines for horizontal and vertical agreements has also been provided for under Decree 75. While Decree 75 imposes a maximum administrative fine of up to 10% of an enterprises' annual revenue within the relevant market for violations of horizontal agreements, contrastingly, the fine imposed for violations of vertical agreements is limited to 5% of the enterprises' annual revenue within the relevant market.
4. Other changes on administrative penalties for violating competition regulations
There has also been several changes made to administrative fine levels under Decree 75 when compared to the previous decree. Specifically:
- the maximum amount of administrative fines for violations against unfair competitive acts has been increased from VND 200 million (approximately USD 8,700) to VND 2 billion under Decree 75 (approximately USD 86,000);
- with regards to violations of regulations on economic concentration, the maximum fine has been lowered from 10% of an enterprises' annual revenue to 5% of an enterprises' annual revenue within the relevant market.
5. Transfer of power of the regulating bodies
Under the new Competition Law, the previous regulatory bodies, Vietnam Competition Authority (VCA) and the Vietnam Competition Council (VCC) have been consolidated into a new regulatory body, the National Competition Commission (NCC). Consistently, Decree 75 tasks the NCC with handling violations of competition regulations.
For further information, please contact:
Yee Chung Seck, Managing Lawyer, BMVN International LLC,
member of Baker McKenzie International
tmh@bmvn.com.vn
