COMPETITION

The Competition Law deal with two specific issues: practices in restraint of competition and unfair competitive practices. Companies familiar with Western antitrust laws and trade regulations will find that Vietnamese Competition Law draws on some similar concepts.


COMPETITION LAW

(April 2007 Update)



The Competition Law deals with two specific issues: practices in restraint of competition and unfair competitive practices. Companies familiar with Western antitrust laws and trade regulations will find that Vietnamese Competition Law draws on some similar concepts.

1. Unfair Competition

Vietnamese Competition Law broadly defines "unfair competition activities" as activities which contravene normal standards of business ethics to customers, other companies, or the State. The Law enumerates specific activities that are considered "unfair competition activities", including:

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infringement of an owner's business secrets, including breaches of confidential agreements;
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coercion of customers or other business counterparts;
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misleading information an other companies;
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misrepresentation in relation to trade name, slogan, symbol, packaging design, geographic indications and other factors;
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deceptive advertising and promotion;
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discrimination against enterprises by professional associations;
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illegal multi-level selling or pyramid schemes

2. Practices in Restraint of Competition

Under the Law, activities in restraint of competition are defined as those which will reduce, deviate or restrain competition in the market including agreements in restraint of competition, abuse of a dominant or monopoly position in the market and economic concentration.

All enterprises are prohibited from entering into agreements which restrict the entry or development of other businesses, exclude other enterprises from the market or collaborate to manipulate bids. Other agreements restraining competition are prohibited only where the parties to the agreement have a combined market share of 30% or more of the relevant market. It is not clear how subsidiaries of parent companies count towards market share.

Parties with a combined market share of 30% or more are prohibited from entering into:

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agreements fixing prices directly or indirectly;
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agreements dividing markets or distribution of supplies;
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agreements limiting or controlling the volume of products or services in production or supply;
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agreement for the restraint of technical or technological development or for the restraint of investment;
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agreements imposing conditions on other businesses to enter into contracts for the sale of goods or services, or forcing other businesses to accept contractual obligations which are not related to the subject matter of the contract.

Exemptions are generally available where a prohibited agreement provides economic benefits to consumers that outweigh the restriction on competition, these exemptions are specified by the MOT upon recommendation by the Competition Commission. An exemption must be obtained before execution of the agreement and lasts for the duration of time the exemption granted for only. These exemptions include:

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rationalising organisation structure, business model, raising business efficiency;
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promoting technical and technological advances, raising goods and service quality;
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promoting the uniform application of quality standards and technical norms of different kinds of products;
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harmonising business, goods delivery and payment conditions, which have no connection with prices and price factors;
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enhancing the competitiveness of small-and medium-sized enterprises;
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enhancing the competitiveness of Vietnamese enterprises on the international market.

3. Monopolies and Market Dominance

The Competition Law defines a monopoly as a company holding a position in the market with no competitor of the same goods or services. A company is deemed to be in a dominant position in the market if it holds a share of 30% or more or is capable of restricting competition significantly. A group of companies is considered holding a dominant position in the market if they attempt to restrain competition in one of the following circumstances:

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two companies hold a combined market share of 50% or more in the market in question;
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three companies hold a combined market share of 65% or more in the market in question; or
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four companies hold a combined market share of 75% or more in the market in question.

Market dominance and monopolies are not prohibited by the Law, it is the abuse of these positions that is unlawful. A dominant company or group of companies is prohibited from the following activities considered to be an abuse of dominance or monopoly position:

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artificially lowering prices to exclude competitors;
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fixing prices unreasonably ("unreasonably" is defined in Article 27 of Decree 116 dated 15 September 2005) or setting minimum prices which cause damage to customers;
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limiting production, distribution, market scale or obstructing technological improvements which, in each case, cause damage to customers;
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imposing discriminatory condition for similar transactions to cause inequality in competition;
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imposing conditions precedent before signing the contract on contractual parties or imposing conditions on other enterprises unrelated to the purpose of the contract; and
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preventing new competitors from entering the market.

Monopolies are subject to the same prohibitions for parties in a dominant position listed above. They are also prohibited from imposing unfavourable conditions on customers and abusing the monopoly position to unilaterally unreasonably modify or cancel a contract.

The Law defines a relevant market of products as a "market of goods or services which are interchangeable in terms of characteristics, user purposes and prices”. A geographical market is a "specific geographical area in which goods or services which exist are interchangeable under similar conditions of competition, and which are considerably differentiated from neighbouring areas" determined by the Competition Commission.

4. Economic Concentration

When a merger, consolidation, acquisition (with some exceptions), joint venture, or other type of "economic concentration" results in a market share of between 30% to 50%, the Competition Commission must be notified, unless the concentration results in a small or medium enterprise.

An economic concentration resulting in a market share of 50% or above is prohibited, unless the concentration results in a small or medium sized enterprise or an exemption is granted. Exemptions are available when one of the parties is at risk of being dissolved or insolvent or where economic concentration enhances export, socio-economic development or technical progress. So far, enhancement of export, technical progress, and socio-economic development interpretation remains at the discretion of the Competition Commission and MOT.

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