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Vietnam's competition and antitrust laws and their impact on foreign companies
Vietnam's Competition Law came into effect on 1 July 2019, amending the law from one issued in 2004. In June 2018, Vietnam passed new regulations focusing on anti-competitive agreements, market dominance, economic concentration and unfair practices.
Vietnam Competition Law ｜ Scope of Law
The new Vietnam competition law covers Vietnamese and foreign companies and individuals who may limit the scope of the law and limit competition in the domestic market. We promote proper competition by eliminating factors that hinder market competition.
The Vietnamese government has the authority to regulate offshore activities, even if they affect the domestic market. The law is applicable even in the case of a foreign entity that does not have a subsidiary in Vietnam, if unfair market competition, concentration of economic power, or some other unfair conduct is confirmed.
In addition, public service departments such as hospitals and schools have also been covered by this revision.
Vietnam Competition Law ｜ Regulatory Organization
Under the new law, the existing Vietnam Competition Authority and the Vietnam Competition Council have been merged to form the National Competition Committee (NCC) under the Ministry of Industry and Trade of Vietnam. A Competition Investigation Agency has also been established under the NCC, responsible for monitoring and investigating compliance with the competition law.
Vietnam Competition Law | Cartels / Prohibition of agreements against market competition
The new law prohibits contracts that are anti-competitive if contracts between companies in the same market affect proper market competition.
Cartels / Prohibition of anti-competitive agreements
- Same fixed price
- Sharing customers, markets and suppliers
- Same management of production quantity, sales quantity, purchase quantity, etc.
Contracts that adversely affect market competition are prohibited
- Suppression of investment and technical ability
- Regarding the matters that have nothing to do with the content of the transaction contract, the contract content to bind them
Previously, the above contracts were prohibited only if the total market share of the parties was 30% or more.
The new law bans the above contracts, so the Government of Vietnam offers generous measures to the target companies. Before the Vietnamese authorities find out in the investigation, the company that voluntarily conflicts with the contract contents is disclosed, the party in the contract contents, the first one is 100% fine exemption, the second and third applicants Are exempt from 60% and 40% respectively.
Vietnam Competition Law ｜ Economic and Capital Concentration
Previously, activities that concentrated capital and economic power, such as mergers, acquisitions, mergers and joint ventures, that prohibited the company's total market share from exceeding 50% were prohibited.
Today, market share conditions are removed, but activities that negatively impact market competition may be banned. The NCC makes its final decision based on the following factors:
Antitrust elements under competition law
- market share
- Relationships between companies in the production, distribution and supply of goods and services
- Competitive advantage due to concentration of economic and capital power
- Possibility of significantly increasing selling price and profit margin due to concentration of economic power and capital
- Ability to block or prevent new companies entering the market
The old law required the authorities to be notified of economic and capital concentrations that would lead to a market share of over 30%. Under the new law, you should report to NCC based on the following factors:
Obligation to report under competition law
- Total of corporate assets and sales in the domestic market
- Transaction value
- market share
Violations of these regulations will result in a fine of 5% of the total sales of the offending company (fiscal year last year). The previous penalty was 10%.
Vietnam Competition Law ｜ Mergers and Acquisitions
Prior to mergers, acquisitions and joint ventures, companies must notify Vietnamese authorities if they exceed certain thresholds such as assets or sales under the 2018 competition law. Although not required, pre-merger consultations with the entities involved, the Vietnamese authorities, will help identify any issues that may conflict with competition law.
Once the company notifies the Vietnamese authorities of the above information, the preliminary examination will take 30 days. The examination period may be extended at the discretion of the NCC. An extension of 60 days may be granted for complex issues, or 90 days for review.
Vietnam Competition Law ｜ Market status and power
A company with a market share of 30% or more and significant market power is considered to have a dominant position in the market. Market power is determined by the following factors:
Factors of market power
- Company financial strength
- Technology base and level
- Ownership or access to infrastructure and intellectual property
- market share
- Other peculiar factors
The new law of Vietnam competition law builds on the previous regulations and provides clear guidelines for companies and investors. This move is the government's policy to make Vietnam's law comply with international standards, and more and more transparent laws of international standards will be put in place.
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