Vietnam - Amendments On Competition Law.
Legal News & Analysis - Asia Pacific - Vietnam - Competition & Antitrust
4 December, 2018
The National Assembly on June 12 adopted Law on Competition No. 23/2018/QH14 (“Law on Competition 2018”) superseding Law on Competition No. 27/2004/QH11 (“Law on Competition 2004”), incorporating important changes to fulfill the actual requirements on managing competition and ensuring benefits of the enterprises engaged in the market.
Question: What are the changes stipulated in the Law on Competition?
Subjects of application of the Law on Competition Relevant domestic and foreign agencies, organizations or individuals are all subject to the Law on Competition 2018.
Accordingly, the governing scope applies to competition acts both inside and outside the Vietnamese territory where these acts make an anti-competition impact or a possible anti-competition impact in Viet Nam. Concurrently, it covers all the entities which may be in breach of the competition law in order to create a fair business environment for all entities.
Economic concentration is no longer a restriction on competition Pursuant to Article 3.3 on the Law on Competition 2004, anti-competitive acts include agreements on restricting competition, abuse of dominant market positions, abuse of economic concentration and monopoly positions.
The Law on Competition 2018 no longer considers economic concentration a restriction on competition. It recognizes economic concentration as an inevitable right of the enterprises to enhance the efficiency of business activities; however, it does not deny the negative effects of economic concentration on competition in the market in case of an excessive economic concentration.
Rather than identifying the banned cases of economic concentration based on external signs as prescribed previously (the combined market share of the enterprises in economic concentration accounts for over 50% of the relevant market), the Law on Competition 2018 does the same based on their nature. Specifically, any economic concentration will be banned if enterprises create an excessive anti-competition impact on the Vietnamese market.
How to assess the impact or possible impact on considerably restricting competition is equally a landmark of the Law on Competition 2018.
Besides the combined market share of the enterprises engaged in economic concentration, the possibility of making an anti-competition impact is identified based on such other factors as: (i) extent of the concentration in the relevant market before and after economic concentration: (ii) relationships among the enterprises engaged in economic concentration in the chain of production, supply and distribution of a certain type of product or service, which are one another’s inputs or complements; and (iii) competitive advantages in the relevant market thanks to economic concentration, etc.
Before conducting any economic concentration, enterprises must submit a dossier for notice of economic concentration to the National Competition Commission if they fall within the category of an economic concentration notice (the Government will detail this regulation on notification).
The dossier will include the method of remedying any possible anti-competition impact and the assessment report on positive impacts from the economic concentration to enable enterprises to explain their activities of economic concentration.
Pursuant to Law on Competition 2018, an enterprise will be regarded as having a dominant market position if it has considerable market strength. “Considerable market strength” is based on the following factors:
(i) correlation with regard to market shares among the enterprises in the relevant market;
(ii) enterprise's financial strength and size;
(iii) barriers to participation in or expansion of the market by enterprises;
(iv) capability of holding, accessing and controlling the markets where goods and services are distributed and consumed or supplied;
(v) advantages in term of technology, technical infrastructure etc. Agreement on restricting competition Pursuant to Law on Competition 2018, the agreements that relate to any party staying out of any deal or any restriction on the market for product distribution, goods supply of goods, and service provision are considered anti-competition agreements.
These agreements, that take place among enterprises on the same relevant market or amongst enterprises specialized in different portions in the same chain of production, distribution and supply for a given kind of goods or service, are also considered anti-competition agreements and banned. However, they are banned only when they put or possibly create an excessive anti-competition impact on the market. Just like economic concentration, the criteria for assessing any anti-competition impact or possible anti-competition impacts caused by such excessively competition restricting agreements are a novelty of Law on Competition 2018.
Accordingly, besides the market shares of the enterprises engaged in the agreements, barriers to participation in or expansion of the market by other enterprises, higher consuming costs and longer time for customers to buy goods or services of the enterprises not a party to the agreement any switch to purchasing relevant goods and services are considered the factors to assess the impact or likely impact on restricting competition.
Law on Competition 2018 will come into force from July 1, 2019./.
For further information, please contact:
Dang The Duc, Partner, Indochine Counsel