This article is an extract from Lexology Panoramic Next: Merger Control 2023. Click here for the full guide.
1 What are the key developments in the past year in merger control in your jurisdiction?
The most notable development in the past year in Vietnam is the establishment of the Vietnam Competition Commission (VCC), the official competition regulator under the current Competition Law. The VCC was formally established on 1 April 2023 and assumes the functions of overseeing the merger control regime and imposing penalties formerly discharged by the Vietnam Competition and Consumer Authority (VCCA) and the Vietnam Competition Council, respectively. The VCC’s current Chairperson is Mr Le Trieu Dzung and the Vice Chair in charge of merger control is Ms Nguyen Thi Quynh Nga. Both have experience holding positions related to international trade and commerce, with the former previously working in trade remedies while the latter in multilateral trade policies prior to joining the VCC’s leadership. At the working level, the case team in charge of merger review remains largely unchanged. To date, the authority is focusing its resources on capacity building initiatives while taking over the case review functions previously discharged by the VCCA.
Prior to the VCC’s establishment, the VCCA remained very active with respect to merger review activities. According to its annual reports, the VCCA received a total of 154 notifications in 2022, which is an 18.5 per cent increase compared to 2021 and 146 per cent increase compared to 2020. Among the 154 notifications received in 2022, 38 (approximately 30 per cent) concerned foreign-to-foreign transactions. Notified mergers concern various industries including real estate (most popular); services; manufacturing and trading in motor vehicles and spare parts; construction materials; food and beverage; and energy. The authority completed review of 133 filings in 2022, 131 of which received unconditional clearance in Phase I. There were only two notifications subject to a Phase II review in 2022, which are Maersk’s acquisitions of freight forwarder Senator International and logistics company LF Logistics. The transactions trigger Phase II review because Maersk’s market share on a number of sea container shipping routes were reportedly above the 20 per cent safe harbour. The authority did not publish the decisions in full so their analysis and the conditions imposed are not clear. However, from the authority’s merger control reports, the VCCA viewed the transactions as efforts of Maersk to complete its supply chain.
We expect that the VCC will be equally, if not more, busy than the VCCA, at least on the merger control front. On the one hand, we anticipate the VCC will adopt its predecessor’s established interpretation of the law, such as the view that control for Vietnamese merger filing purposes does not encompass negative control, or that the 20 per cent combined market share jurisdictional threshold only applies to horizontal mergers where the parties have a substantive overlap on the Vietnamese market. On the other hand, we also understand that the establishment of the VCC will pave the way for reforming initiatives, such as the release of an official merger review guideline, the launch of an online submission portal, or perhaps even an expedited review process for no-issue filings such as intra-group restructuring or transactions where the target company is not active on the Vietnamese market. There have also talks that the VCC will take a more proactive approach towards enforcement, including investigating failure to file and gun-jumping violations.
2 Have there been any developments that impact how you advise clients about merger clearance?
Our recent filing experience shows that the VCC is constantly evolving its review practice, which makes it important to stay up to date with the authority to ensure that the merger review process goes as smoothly as possible.
In terms of the scope of review, the regulator is generally more interested in the filing parties’ operations in Vietnam than their overseas business activities. To facilitate the review process, parties should focus on information that demonstrates the extent (or lack) of nexus to the Vietnamese market. The filing should provide a clear picture of the parties’ respective product portfolios in Vietnam, a description of the characteristics and intended use of the products, the parties’ respective local business models and commercial presence. If the filing parties are members of corporate groups, it is also advisable to provide an overview of the respective group’s activities in Vietnam for the authority’s assessment. We have seen a tendency to require a greater level of details on the product portfolio for purposes of identifying potential horizontal overlaps, vertical and conglomerate relationships.
As for no-nexus filings where, for example, the target company does not generate any revenues on the Vietnamese market, it seems to us that the authority still accepts the view that the transaction does not give rise to any relevant market in Vietnam. However, to assist the review, the parties should still discuss the activities outside of Vietnam of the target company and offer a hypothetical relevant market analysis on the assumption that the target might be considered an active player on the Vietnamese market. As for the market share report, in no-nexus filings the authority accepts submission of the parties’ market share estimates with respect to their respective primary business activities in Vietnam.
Insofar as the review timeline is concerned, the regulator does generally keep to the statutory deadlines and issue clearance within 30 days of receiving a full and valid filing dossier if the filing is subject to a Phase I review. This is a very positive track record considering that the merger control division is balancing its limited resources between case review and other internal priorities. There are only a few rare instances where clearance is not issued within this statutory timeframe due to administrative delays (such as where the signatory is on a business trip), although in these cases concentration parties are safe to understand that their transaction has been automatically cleared on the expiry of the 30-day clock.
With respect to Phase II cases, the parties should expect a longer review timeline considering that statutorily the authority has 90 calendar days (for typical mergers) or 150 calendar days (for complex cases) from the date of commencing Phase II review. In addition, the authority has the power to stop the clock by issuing up to two Requests for Information (RFI) during Phase II review. In our experience, the VCC’s Phase II RFIs are significantly more extensive than Phase I RFIs and designed to equip the case team with an in-depth understanding of not only the industry in question but also the parties’ business model, supply chain, and clientele in Vietnam. The VCC may also specifically request the parties to submit templates of commercial contracts with key customers to review the commercial terms such as selling price and quantity, as well as to scan for restrictions as well as exclusivity obligations. If the target company has manufacturing sites in Vietnam, the VCC may also hold a site visit as part of their Phase II review.
In light of the VCC’s review practice, there are a number of measures we often advise our client to consider if they are under a tight timeline. Among those, it is most important to tailor the filing to address the regulator’s substantive as well as formalities requirements. For example, on the formalities side, it is best to start the legalisation process and translation of formalities documents as soon as possible to save time. Engaging an experienced local counsel with an established working relationship with the regulator would also help the parties navigate this constantly evolving merger control regime and ensure the global transaction timetable.
3 Do recent cases or settlements suggest any changes in merger enforcement priorities in your jurisdiction?
The authority has not explicitly expressed concerns about the status quo of any industries, although its activities in the past years suggest a level of interest in certain sectors, such as logistics, e-commerce or the relatively concentrated ride-hailing app market. For instance, the VCCA said in its merger control report that given the importance of logistics services to the country’s economy, the authority will closely monitor activities in the logistics industry to ensure a healthy competitive environment and protect the interests of local export companies and consumers. The authority should also have a relatively comprehensive understanding of and insight into the logistics industry considering their experience in reviewing two Phase II cases in this sector in 2022.
In addition, the authority has produced a research paper on factors relevant to the assessment of dominance in the e-commerce space. The authority also released a documentary on the Vietnam online ride-hailing market, focusing on aspects such as the importance of users’ data, market entry and expansion barriers and proposals to enhance competition in this market.
In addition, as part of their routine monitoring exercise, the authority has also issued post-clearance follow-up requests for information in a number of transactions where the post-merger undertaking is deemed to have a dominant position on the market.
4 Are there any trends in merger challenges, settlements or remedies that have emerged over the past year? Any notable deals that have been blocked or cleared subject to conditions?
There are still no public records of any transaction blocked under the Competition Law 2018. According to the VCCA’s latest tally on reported transactions in 2022, the majority (approximately 98 per cent) of notified transactions are unconditionally cleared in Phase I and only two transactions in the logistics industry were subject to a conditional clearance. There is no further publicly available information on these transactions, the conditions imposed or the authority’s reasonings.
The competition regulator may also consult relevant stakeholders during the review process if they deem necessary. Although the authority conducts their merger review independently, such that negative third-party feedback does not automatically mean the transaction will be blocked or cleared subject to conditions, third-party consultation may delay the review process as not every stakeholder is responsive to the VCC’s consultation request.
Similarly, there are no public records of any sanction imposed on parties for failure to file, gun-jumping or for conducting a prohibited concentration. Moving forward, however, it is expected that the regulator will ramp up their enforcement efforts with respect to both merger review and investigation of alleged violations such as failure to file or gun-jumping. According to its 2022 annual report, one of the VCCA’s focuses is to collect information on concentrations which meet the notification thresholds but are not notified to the authority, as well as monitoring M&A activities on the market. Following its establishment, the VCC is reportedly working on a merger control guideline that would also assist with the enforcement efforts.
5 Have the authorities released any key studies or guidelines or announced other significant changes that impact merger control in your jurisdiction in the past year?
As mentioned above, the VCC is reportedly working on a comprehensive merger review guideline, which is expected to facilitate filing preparation and increase legal certainty during the review process. However, the guideline has not been published for public comments nor there is any official release date. In the meantime, parties are advised to refer to the published materials, including the official notification form, a checklist of required documents, an overview of the review process and expected timeline, and a set of practice notes on issues such as relevant market definition, impact assessment and request for confidential treatment. This is a much welcomed first step from the competition regulator.
In addition, the VCCA has also finished various industry reports, covering from the booming e-commerce market to the real estate and automobile sectors. Together with the sector-specific database the VCCA has been developing, these reports should pave the way for the VCC to develop a more simplified review process for key industries in the future.
6 Do you expect any significant changes to merger control rules? How could that change your client advocacy before the authorities? What changes would you like to see implemented in your jurisdiction?
We currently do not expect any substantive changes to merger control rules considering that the current regime has only been in place since July 2019. However, we do anticipate that the VCC will soon release a comprehensive merger control guideline. Based on informal discussion with the regulator, we understand that the guidelines would be modelled based on the guidelines of the European Commission and the Competition and Consumer Commission of Singapore, although it is unclear which matters the guideline will address as the VCC has not released any draft for public comment. We hope that the document will at least address issues such as the inclusion of seller as a filing party and the treatment of no-nexus transactions such as intra-group restructuring and concentrations where the target company does not generate any revenues on the Vietnamese market. In any event, a full guideline is a welcomed development as it would be tremendously helpful to filing parties as well as practitioners.
The Inside Track
What should a prospective client consider when contemplating a complex, multi-jurisdictional transaction?
A multi-jurisdictional screening should be conducted as soon as possible to identify jurisdictions where the transaction might trigger a filing. It is also useful to obtain an anticipated timeline and a checklist for each ‘triggered’ jurisdiction to facilitate cross-border coordination. Furthermore, having a master briefing note applicable to all jurisdictions would also help ensure consistency and save time.
If FDI filings are also required, it is critical to develop a matrix featuring the timelines of all relevant processes (such as M&A approval, merger clearance and title transfer) to ensure the transaction is completed within the expected timetable.
In your experience, what makes a difference in obtaining clearance quickly?
Maintaining an active communication channel with the regulator has proved instrumental in expediting the review process as it helps the parties promptly address any concern the regulator may have in relation to the transaction. To this end, it would help to engage experienced local counsel with an established working relationship with the authority.
In many cases, compliance with formalities requirements is also a roadblock for obtaining clearance quickly. The parties are advised to start preparation of the formalities (eg, legalisation of incorporation certificates, translation of financial statements and transactional document) as soon as possible to minimise delay.
What merger control issues did you observe in the past year that surprised you?
The authority’s current approach to identifying filing parties is relatively unusual. For instance, sellers – including individual sellers – continue to be treated as filing parties. On the acquirer’s side, there is inconsistency as some case handlers accept that only majority acquirers should be deemed filing parties, whereas some would require inclusion of the minority non-controlling acquirers because they are a party to the transactional document. The inclusion of sellers and minority acquirers creates onerous formalities requirements and may also lead to an anomalous situation where these entities could be held liable for failure to file or gun-jumping.
