On 12 June 2018, the National Assembly of Vietnam passed the new Competition Law ("New Law"), which comes into effect on 1 July 2019. The official version has recently been made public. The New Law introduces, among other things, an expansion in scope of applicability, different approach to anti-competitive agreements, new concept of assessing dominance, and new merger control thresholds. We set out these notable changes below:
1. Expansion of Scope
The New Law shall apply to all anti-competitive acts and economic concentrations that impact or potentially impact competition in the Vietnamese market, regardless of where the acts occur. This includes acts made by both domestic and foreign individuals, agencies, and organizations. Moving forward, entities engaging in activities inside or outside of Vietnam which may have an impact on competition in the Vietnamese market will need to take into account the extraterritorial reach of the New Law.
2. Changes to the approach on analyzing anticompetitive agreements
The New Law has removed the previous 30% combined market share threshold in the determination of whether an agreement is anti-competitive. Under the New Law, horizontal agreements including price fixing, customer allocation, restriction of output, bid rigging, prevention of market entry, and exclusion of market participation, are now considered hard-core agreements and per se illegal. Other horizontal agreements are prohibited if they cause or potentially cause a "significant anti-competitive effect" in the market.
With regards to vertical agreements, agreements on bid rigging, prevention of market entry, and exclusion of market participants are prohibited. Other vertical agreements are prohibited if they cause or potentially cause a "significant anti-competitive effect" in the market. Notably, this is the first time that Vietnam's Competition Law has recognized a distinction between horizontal and vertical agreements.
The factors to assess whether an agreement causes or potentially causes a significant anti-competitive effect in the market are broad. These factors include, but are not limited to, the following:
- market share of the parties to the agreement;
- barriers to entry, market expansion;
- limitations on research, development, and technological innovations;
- limitations on technological capabilities.
Such move away from the current market share assessment towards an effect-based assessment leaves more discretion in the hands of the National Competition Commission in handling anti-competitive agreement cases.
Another key change with regards to the regulation of anti-competitive agreements includes the introduction of a leniency program. Accordingly, a company that has engaged in an anti-competitive agreement may be entitled to leniency (i.e., exemption or reduction of penalties) if the company voluntarily reports their participation to the competent authority prior to the authority's decision to investigate. This is made available to only the first three successful applicants. The establishment of a leniency program is in line with international practices and will hopefully encourage more reporting of anti-competitive agreements.
3. Introduction of "Significant Market Power" criteria for determining market-dominant position
In addition to the 30% market share threshold, the New Law introduces the new concept of "significant market power" to determine whether a company is in a market-dominant position. Factors to determine the significant market power of a company include, but are not limited to, the following:
- the capability of accessing and controlling the consumption/supply market;
- the size and financial capacity of the company;
- the advantages to technology or infrastructure;
- the company's rights, ownerships, use of intellectual properties.
As mentioned, the market share threshold continues to serve as the primary test to determine whether a company holds a market-dominant position in the relevant market. As compared to international standards, this 30% market share threshold remains relatively low.
4. Changes to the approach on economic concentrations
The New Law now prohibits all economic concentrations which have or may have a "significant anti-competitive effect" in the market. This is a move away from the former approach based solely on the combined market shares of the participating enterprises. The shift in focus towards an economic concertation's anti-competitive effects is in line with anti-trust laws in other major jurisdictions.
Regarding the notification threshold for merger notifications, the New Law provides for more concrete standards based on:
- either participating enterprises' total assets in the Vietnamese market;
- either participating enterprises' revenues in the Vietnamese market;
- the total value of the transaction; and/or
- the participating enterprises combined market share in the relevant market.
The New Law currently does not provide clarifications as to the actual monetary value or market share percentage which would trigger these notification thresholds. It is in the discretion of the Vietnamese Government to provide further guidance.
In addition to this change in approach for prohibited economic concentrations and notification thresholds, the New Law also removed regulations on exemption for prohibited economic concentrations. Moving forward, entities engaging in a merger, consolidation, acquisition, or joint venture will no longer be able to seek exemption if such contemplated transaction is prohibited under the New Law.
5. Restructuring of the regulatory bodies
Under the New Law, the Ministry of Industry and Trade ("MOIT") will remain responsible for the administration of competition law. The previous regulatory bodies, Vietnam Competition Authority ("VCA") and the Vietnam Competition Council ("VCC") are consolidated into a new regulatory body, the National Competition Commission ("NCC"). The NCC will be tasked with assisting the MOIT in the administration of competition, organize investigations, handle competition cases, reviewing exemption requests and economic concentrations.
6. Publication of the National Competition Commission's Decisions
Moving forward, the main decisions rendered by the NCC in relation to a competition case (e.g., decision on grant of exemption, decision on handling a competition case), after taking effect, will be published on the NCC's website for a period of 90 days. Information regarded as State secret and business secret in such decisions will be redacted before publication.
It remains unclear whether those prior decisions will have any precedential value on future cases. Of course, such publications may serve as a good indicator of the approach that the NCC may take with regards to future cases.