Three hierarchies of transducers

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VIETNAM COMPETITION LEGISLATION

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CONTENTS

CHAPTER I: OVERVIEW OF VIETNAM COMPETITION LEGISLATION ............. 3

1. Background of Competition Law ..................................................................................................... 3

2. Overview of Vietnam Competition legislation ............................................................................ 4

3. Enforcement of Competition Law in recent years ....................................................................... 9

CHAPTER II: ISSUES EMERGING FROM ENFORCING COMPETITION LAW . 11

1. General provisions ............................................................................................................................. 11

2. Provisions on competition restriction agreement ...................................................................... 17

3. Provisions on abuse of dominant/monopoly position .............................................................. 20

4. Provisions on controlling economic concentration ................................................................... 24

5. Provisions on unfair competition acts ........................................................................................... 29

6. Provisions on competition management agency ........................................................................ 33

CHAPTER III: RECOMMENDATION ............................................................................ 35

1. General provisions of Competition Law ...................................................................................... 35

2. Provisions on competition restriction agreement ...................................................................... 37

3. Provisions on abuse of dominant/monopoly position .............................................................. 41

4. Provisions on economic concentration ......................................................................................... 43

5. Provisions on unfair competition acts ........................................................................................... 45

6. Provisions on the model of competition authority .................................................................... 46

CONCLUSION ..................................................................................................................... 48

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CHAPTER I

OVERVIEW OF VIETNAM COMPETITION LEGISLATION

***

1. Background of Competition Law

1.1. The context of Vietnam

Along with reform and opening-up policy, Vietnam‟s economy has achieved

impressive growth in the 90s of the 20th century and in the early 21

st century. Rapid

developments of many industries and services have created competitive pressure on

enterprises and set out a requirement to build legal framework in order to facilitate the

competition environment. In the course of the transition from central planned economy to

market oriented economy with state management, it has raised a number of unfair

competition acts or anti-competitive acts that may cause negative effects on economic

development. In addition, the economy has been developed from a low starting point and

with the existence of a number of sectors or areas characterized by state monopoly has led

to restriction in development of non-state enterprises and exerted negative impact on

competition environment in general.

Before promulgation of Competition Law, anti-competitive acts or monopoly in

some specific areas are regulated by the provisions separately and scattered stipulated in a

number of legislation such as Ordinance on Price, Ordinance on Telecommunications,

Law on Credit institutions, Commercial Law, Electricity Law...However, implementation

of the above legislation was not effective, partly due to lack of a complete and united legal

framework, lack of state management agency on competition and monopoly control, lack

of sanctions...

In that context, since 2000, the National Assembly and the Government put

Competition Law into legislature program. After 4 years of drafting and soliciting

contribution from domestic and foreign experts, Competition law was adopted by the

National Assembly on December 3, 2004 and came into effect from July 1, 2005.

1.2. The international context

Since the early 1990s, Vietnam started to open up its economy, promoted

external trade and received FDI capital. The admission into ASEAN in 1995 marked

the first important step in the process of Vietnam‟s integration to the international

economy. ASEAN decided to form an ASEAN Economic Community (AEC) in 2015.

According to the commitment among member states, all ASEAN economies shall

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promulgate competition law by 2015 to ensure a healthy and fair competition

environment. On that basis, ASEAN member states will establish a mechanism for

coordination and cooperation among ASEAN competition authorities in order to

effectively implement competition laws and policies in ASEAN area.

In addition, in the negotiation process on the accession to international

organizations, such as APEC and WTO, the partners have required Vietnam to commit

to effectively and transparently implement competition policies and build a legal

framework and independent competition authorities to ensure a level playing field for

both local and foreign enterprises.

2. Overview of Vietnam Competition legislation

After the National Assembly passed Competition Law, the Government also

issued a number of decrees guiding the implementation of Competition Law as

follows:

Government Decree No. 110/2005/ND-CP dated August 24, 2005 on

management of multi-level sale of goods;

Government Decree No. 116/2005/ND-CP, dated September 15, 2005,

detailing the implementation of a number of articles of Competition Law

(Decree No.116);

Government Decree No. 120/2005/ND-CP, dated September 30, 2005 on

dealing with breaches in the competition sector (Decree No. 120);

Government Decree No. 05/2006/ND-CP dated January 09, 2006 on

establishment, functions, duties, powers and organizational structure of

Vietnam Competition Council;

Government Decree No. 06/2006/ND-CP dated January 09, 2006 on

functions, duties, powers and organizational structures of Vietnam

Competition Administration Department (now Vietnam Competition

Authority).

Overview of Competition Law and Decrees guiding the implementation of the

Law can be summarized as follows:

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2.1. Regarding scope of regulation

Competition Law provides for competition restriction acts, unfair competition

acts, order and procedure for settling competition cases, measures to handle violations

of the Law.

2.2. Regarding subjects of application

Competition Law shall be applied to business organizations, individuals and

professional associations operating in Vietnam. Thus, Competition Law does not exclude

any specific type of enterprises; however, it limits their scope of activities within the

territory of Vietnam.

2.3. Regarding competition restriction agreements

Regarding the acts of competition restriction agreement, Article 8 of Competition

Law provides 8 types of agreements, including: (1) agreements on directly or indirectly

fixing goods or services prices; (2) agreements on distributing outlets, sources of supply of

goods, provision of services; (3) agreements on restricting or controlling produced,

purchased or sold quantities or volumes of goods or services; (4) agreements on restricting

technical and technological development, restricting investments; (5) agreements on

imposing on other enterprises conditions on signing of goods or services purchase or sale

contracts or forcing other enterprises to accept obligations which have no direct connection

with the subject of such contracts; (6) agreements on preventing, restraining, disallowing

other enterprises to enter the market or develop business; (7) agreements on abolishing from

the market enterprises other than the parties of the agreements; (8) agreements on conniving

to enable one or all of the parties of the agreement to win bids for supply of goods or

provision of services. Based on the provisions in Article 8 of Competition Law, Decree No.

116 (Articles from 14 to 21) lists the acts of competition restriction agreements with detailed

description about the content and form of these types of agreements.

Regarding prohibitions, Competition Law absolutely prohibits and even does not

allow applying exemptions for agreements prescribed in above Clauses (6), (7) and (8). The

remaining agreements are prohibited only when the parties of which have combined market

share of 30% or more in the relevant market. Also, competition restriction agreements of

these types can be exempted for a definite term if they meet one of the following conditions

in order to reduce costs to benefit consumers: (1) rationalizing the organizational structure,

business model, raising business efficiency; (2) promoting technical and technological

advances, raising goods and service quality; (3) promoting the uniform application of quality

standards and technical norms of products of different kinds; (4) harmonizing business,

goods delivery and payment conditions, which have no connection with prices and price

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factors; (5) enhancing the competitiveness of small- and medium-sized enterprises; (6)

enhancing the competitiveness of Vietnamese enterprises in the international market.

2.4. Regarding abuse of dominant/monopoly position

Competition Law distinguishes an enterprise holding the dominant position

from an enterprise holding the monopoly position in the market to regulate, in which:

Enterprises shall be considered to hold the dominant position in the market if

they have market share of 30% or more in the relevant market or are capable of

restricting competition considerably; groups of enterprises shall be considered to

hold the dominant position in the market if they take concerted action to restrict

competition and fall into one of the following cases: two enterprises having total

market share of 50% or more in the relevant market; three enterprises having

total market share of 65% or more in the relevant market; four enterprises having

total market share of 75% or more in the relevant market.

An enterprise shall be considered to hold the monopoly position if there is

no enterprise competing on the goods or services of such enterprise in the

relevant market.

Regarding the acts of abuse of dominant/monopoly position, Article 13 of

Competition Law lists 06 acts of “abuse of dominant position” and Article 14 lists two

more acts (other than 06 acts specified in Article 13) of “abuse of monopoly position”

to be regulated. Based on these provisions, Decree No. 116 stipulates the acts of “abuse

of dominant position” and “abuse of monopoly position” in a more specific manner

with detailed description on the form of each act showcasing “abuse”.

Regarding prohibitions, Competition Law prohibits all acts of abuse of

dominant position in the market or abuse of monopoly position without exemptions.

2.5. Regarding economic concentration

Economic concentration means the acts of enterprises including (i) merger of

enterprises; (ii) consolidation of enterprises; (iii) acquisition of enterprises; (iv) joint

venture between enterprises; and (v) other acts of economic concentration prescribed

by law.

Prohibited cases of economic concentration: Economic concentration shall be

prohibited if the combined market share of enterprises participating in economic

concentration account for over 50% in the relevant market except for the cases

specified in Article 19 of this Law or the cases where enterprises, after implementing

economic concentration, are still of small or medium size as prescribed by law.

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Cases of exemption from prohibited economic concentration: one or more of

the participants in economic concentration is/are in danger of dissolution or

bankruptcy; the economic concentration has an effect of expanding export or

contributing to socio-economic development, technical and technological advance.

Notification of economic concentration: if enterprises participating in

economic concentration have combined market share of between 30% and 50% in the

relevant market, their lawful representatives must notify the competition managing

agency before implementing economic concentration; in the case where combined

market share of enterprises participating in economic concentration is lower than 30%

in the relevant market or where enterprises, after implementing economic

concentration, are still of small or medium size as prescribed by law, such notification

is not required.

2.6. Regarding unfair competition acts

In most jurisdictions, unfair competition acts are regulated by commercial laws or

laws on consumer protection. However, Vietnam has put these provisions into

Competition Law, under which unfair competition acts include (i) misleading indications;

(ii) infringement upon business secrets; (iii) constraint in business; (iv) discrediting other

enterprises; (v) disturbing business activities of other enterprises; (vi) advertising for the

purpose of unfair competition; (vii) sale promotion for the purpose of unfair competition;

(viii) discrimination by associations; (ix) illicit multi-level sale and (x) other unfair

competition acts prescribed by the Government.

2.7. Regarding competition authorities

2.7.1. Vietnam Competition Authority

Vietnam Competition Authority (VCA) is affiliated to the Ministry of Trade

(now the Ministry of Industry and Trade) and has following tasks and powers: (i)

control the process of economic concentration; (ii) receive exemption application

dossiers; (iii) put forward opinions to the Minister of Industry and Trade or submission

to the Prime Minister for decision; (iv) investigate competition cases related to

competition restriction acts and unfair competition acts; (v) handle and sanction unfair

competition acts. The head of VCA shall be appointed or dismissed by the Prime

Minister at the proposal of the Minister of Industry and Trade.

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2.7.2. Competition Council

Competition Council is established by the Government and shall be composed

of between eleven and fifteen members appointed or dismissed by the Prime Minister

at the proposal of the Minister of Industry and Trade (in fact, at the proposal of

Ministers or heads of sector regulatory agencies). Competition Council has tasks to

organize the settlement of complaints about competition cases involving competition

restriction acts.

Chairman of Competition Council shall be appointed or dismissed by the Prime

Minister among members of the Council at the proposal of the Minister of Trade (now

the Minister of Industry and Trade). In order to settle a specific competition case,

Chairman of Competition Council shall decide to set up Competition Case-Handling

Council composed of at least five members, one of whom shall be the president of a

hearing. Based on competition case dossiers transferred by VCA, Competition Case-

Handling Council shall organize hearings and adopt decisions on handling competition

cases by majority vote.

2.8. Competition proceedings

Competition proceedings are activities carried out by agencies, organizations

and individuals according to the order and procedures for settling and handling

competition cases prescribed by Competition Law and guidance Decrees. Competition

procedure process shall be divided into three main periods:

2.8.1. Investigation of competition cases

An investigation may be carried out based on the complaint dossier received by

VCA or signs of violation detected by VCA. The investigation of a competition case is

conducted respectively in two steps including preliminary investigation and official

investigation. After finishing the investigation, VCA takes responsibility to complete

an Investigation Report and Competition Case Dossier to prepare for handling of a

competition case.

2.8.2. Handling competition cases

Based on the Investigation Report and other documents and evidences in the

Competition Case Dossier, according to the legal provisions, the competition

authorities, which have competence for handling of competition cases, have to take the

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responsibility to research, evaluate and issue decisions on handling competition case.

Regarding unfair competition cases, competence in handling competition cases is

entrusted to the Director General of VCA, regarding competition restriction cases,

Competition Council (specifically Competition Case-Handling Council) has this

responsibility.

2.8.3. Complaint about competition case-handling decisions

If the involved parties disagree with a part or the whole of the contents of the

competition case-handling decision, they may lodge complaints to Competition

Council (as for competition restriction cases) or the Minister of Industry and Trade (as

for unfair competition cases).

Within thirty days after receiving the complaint dossier, Competition Council or

the Minister of Industry and Trade shall have to settle the complaint according to

competence; in specially complicated cases, the time limit for settling complaints may

be extended for another thirteen days at most.

If the involved parties disagree with the decisions to settle complaints about

competition case-handling decisions, they may initiate administrative lawsuits against

part or the whole of the contents of such decisions at the competent

provincial/municipal People's Courts.

3. Enforcement of Competition Law in recent years

3.1. General assessment

After more than five years of enforcement, Competition Law initially promoted

a positive role in ensuring a healthy competition environment and handling acts, which

distort or hinder competition in the market. Although the number of investigated and

handled competition cases is limited (3 competition restriction cases and 83 unfair

competition cases), but it initially proved that Competition Law actually came to life

and became familiar with business activities of enterprises. In the process of handling

first competition restriction case, on one hand, the competition authorities emphasized

the goals to protect legitimate rights and interests of organizations and individuals in

their business activities, and, on the other hand, gave warnings to enterprises, which are

conducting similar acts to change their business acts.

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3.2. Investigation of competition restriction cases

From 2006 until now, VCA has investigated 06 cases relating to competition

restriction acts, specifically as follows:

3.2.1. Cases on abuse of dominant position in the market

01 case related to a complaint of Tan Hiep Phat Limited Company (THP), in

which THP accused that Vietnam Brewery Limited (VBL) abused its dominant position in

premium beer market to prevent entry of new competitors.

01 case related to a complaint of a number of enterprises, operating in film industry, in

which they accused that Megastar Media Company Limited abused its dominant position in the

market of distribution of imported motion pictures or movies. In May 2010, VCA accepted

complainant dossier. Currently, the case is still under investigation for verification and

clarification.

3.2.2. Case on abuse of monopoly position in the market

01 case related to that Vietnam Air Petrol Company (Vinapco) has imposed

unfavorable conditions on a customer and abused the monopoly position to unilaterally

modify or cancel the contact already signed without plausible reasons.

3.2.3. Cases on competition restriction agreements

01 case related to a competition restriction agreement between 19 non-life

insurance companies in the car insurance market in Vietnam;

01 case related to a competition restriction agreement between enterprises in

the roofing panel market in North and Central of Vietnam;

01 case related to a competition restriction agreement between non-life

insurance companies in the pupil insurance market in Khanh Hoa province.

3.3. Investigation and handling of unfair competition cases

From 2006 to the end of 2011, VCA has investigated 94 unfair competition

cases under the competition procedure, 58 of them are advertising for the purpose of

unfair competition cases. The remaining cases included 20 cases related to the acts of

illicit multi-level sale, 8 cases related to the acts of discrediting other enterprises, 4

cases related to the acts of sale promotion for the purpose of unfair competition, 3

cases related to the acts of misleading indication, one case related to the act of

disturbing business activities of other enterprises. Among these 94 cases, VCA has

made 83 handling decision with the fine up to 4 billion 256 million dong.

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CHAPTER II

ISSUES EMERGING FROM ENFORCING COMPETITION LAW

***

Since its taking effect on 1 July 2005, Competition Law has been enforced for 7

years with many achievements but there are still a lot of difficulties and shortcomings.

In the scope of this report, the research team will just focus on evaluating some issues

emerging from legal provisions themselves, including both Competition Law and

guidance Decrees.

1. General provisions

1.1. The relevant market definition

Generally, the determination of relevant market in Competition Law is also

consistent with the principles that are commonly used by countries in the world: based

on the evaluation of demand and supply substitutability. The criteria for determining

the relevant market in Competition Law are particularly specified in Decree No.

116. On the positive side, the specific provisions will enhance the transparency of

Competition Law as well as create favorable conditions for the competition authorities

in the enforcement process. However, the listing of specific criteria as well as

simplifying economic evaluations in determining the relevant market has caused many

difficulties for the competition authorities and in some cases makes the evaluation of the

competition authorities away from market realities.

The objective of defining the relevant market in a competition restriction case is

to define a limitation to evaluate the substitution ability of products/services in a

specific geographical area. The relationship between the relevant market of products

and the relevant geographical market is dialectical; therefore, they cannot be separated

in the process of analyzing the relevant market. However, according to Clause 1,

Article 3 of Competition Law, the relevant market is defined: “relevant market means

relevant market of products and relevant geographical market.” This unintentionally

sets apart these two markets, which are inseparable and distorts the nature of relevant

market definition. Defining relevant market is not a simple summation of relevant

market of products and relevant geographical market but it is a process of evaluating

the substitution ability of a specific product in a specific geographical area bilaterally.

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The over-detailed provisions on defining relevant market are gradually

disclosing many aspects, which are not proper with realities. In Clause 1, Article 4 of

Decree No. 116, the substitution capability of products/services has to be considered in

terms of “characteristics, use purpose and price”. Other foreign competition agencies

also use these three criteria to evaluate the substitution capability of products/services

but they use them in a flexible way with comprehensive consideration. The

consideration of these criteria also depends on each particular products/services in

order to reflect the real situation accurately.

In Vietnam, the two products/services are deemed capable of being substituted

for each other only when they can be substituted for each other in terms of all three

criteria (characteristics, use purpose and price). If only one of these criteria cannot be

substituted for each other, it means that the two products lie in two different relevant

markets. Applying this rule of substitution for any products/service leads to inaccurate

reflection of the real competition context. When examining the substitution between

plastic chair and wood chair, these two products can be substituted for each other in

terms of price and use purpose. However, regarding the characteristics, plastic cannot

be substituted for wood. The conclusion in this case is that these two products lie in

two different relevant product markets despite of the fact that these two competitive

products can totally be substituted for each other in many cases. If we apply Clause 1,

Article 4 of Decree No. 116 rigidly, it will lead to the situation that each

product/service lie in one separated market which cannot be substituted for, and the

enterprise producing or delivering that product/service will always be the monopoly/

dominant enterprise in the defined relevant market.

Regarding determination of substitution in term of price, Point c. of Clause 5,

Article 4 of Decree No. 116 states that: “Goods or services shall be deemed capable of

being substituted for each other in terms of price if above fifty percent of a random

sample quantity taken from one thousand (1.000) consumers living in the relevant

geographical area change to purchase or intend to purchase other goods or services

with the same characteristics and use purpose as the goods they are currently using or

intend to use where the price of such goods or services increases by more than ten (10)

percent and remains stable for six consecutive months.”

This determination can be seen as a simple form of SSNIP test, which is

approved broadly by other foreign competition authorities. However, in the

enforcement process, this prescription on the substitution in term of price disclosed

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some difficulties and shortcomings. The above prescription requires that “above 50%

of a random sample” changing to purchase other goods/services in order to determine

the substitution between two products/services is over-strict. With the increase of 10%,

the quantity of consumers changing to purchase or intend to purchase other

products/services shall be take account of over 50%. However, this number is not

applicable and commonly leads to the result that the relevant market is defined as the

market of that product/service, or can be understood that the enterprise, which is being

investigated, is the monopoly in the relevant market. In many cases, this does not

reflect the real market competition properly.

1.2. Provisions on complaint procedures of competition cases

According to Article 58 of Competition Law, “organizations and individuals

deem that their legitimate rights and interests are infringed upon by acts in violation of

the provisions of this Law” may lodge complaints with VCA. However, the

complainants must provide to VCA the evidences on the violation act and shall be

accountable for the truthfulness of that evidences.

Complaint dossiers of organizations/individuals about competition case sending

to VCA is required and listed in Article 45 of Decree No. 116. The above provisions

on complaint procedure with requirements about evidences aim to prevent unfounded

complaints and reduce the pressure for VCA. However, these requirements and

responsibilities themselves are putting difficulties and pressure on the complainants.

Because in some cases, the violations actually exists but the complainants cannot

collect evidences to prove the claims they have made. These obstacles make the

complainants ignore the violation acts easily because of the redundancy in complaint

procedures.

By nature, Competition Law was issued to ensure the right of enterprises to do

business freely in the market in which the competition authorities will be representative

of State‟s power and in charge of handling anticompetitive acts of enterprises,

protecting consumers and social welfare. With this objective of protecting the public

interests, other foreign competition authorities such as Japan, United States, Australia

or EU will directly initiate an investigation against cases, which have violation signs

based on the detection by the competition authorities themselves or from information

of the third parties.

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The receipt of complaints or information from third-parties‟ accusations is very

flexible which via mail, email, telephone or fax. After receiving the information, the

competition authorities will be responsible for considering, evaluating the information

and continue to collect evidences, documents to decide whether to continue to

investigate the case officially or not. Complainants or providers are not accountable for

the truthfulness of the information, but that is the responsibility of the competition

authorities. Therefore, the daily quantity of warning letter sending to competition

authorities relating to violation acts shall be up to thousands and the role of

competition authorities in competitive environment will be higher and higher.

1.3. Provisions on investigating procedure and handling cases

1.3.1. Time limit for official investigation

Competition cases are usually complex, especially regarding competition

restriction cases. Handling these cases not only requires analyzing legal provisions but

also being based on economic analysis. Evidences and information are collected not

only at one specific point but also in a progress, from during, before and after the

performance of the violation act. In addition to 30 days of initial investigation, 150

days (including extended time) with regard to unfair competition cases and 300 days

(including 2 times extending) with regard to competition restriction cases is too short

for VCA to collect all the necessary information to make the accurate conclusion.

1.3.2. Time limit for issuing the decision on handling competition restriction

cases

Within 30 days after receiving the competition case dossier, Competition

Council must issue one of the following decisions: to open a hearing, to return the

dossier for additional investigation, or to stop settling the competition case. Actually,

abuse of dominant/monopoly position cases are very complex, the case dossier can

include of thousands of book of records. Meanwhile, the members of Competition

case-handling Council are usually non-specialized officials, holding more than one

office; therefore the time limit of 30 days for making handling decision is

unreasonable. For nearly 1 year of collecting information and evidences of competition

cases, the members of Competition case-handling Council are difficult to understand

clearly about all the details of the case within just 30 days. This will affect to the

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accuracy of the decision of Competition case-handling Council regarding the

investigation case.

1.3.3. Complaints about competition case-handling decisions that have not yet

come into force

In practice, competition cases usually involve with two or more related

enterprises. After Competition Council issues a handling decision, the related

enterprises (whether plaintiff or defendant) are both allowed to complain about the

competition case-handling decision of Competition Council to provincial/municipal

courts which directly under the central court. Thus, there is possibility that Competition

Council, as a defendant, will have to pursue many lawsuits in many places when the

complaining enterprises claim at different areas.

1.4. Provisions on forms of sanctioning violations

Handling of violation acts of Competition Law is prescribed and guided

specifically by Decree No. 120, comprises of the main forms of sanctions which are

warning and monetary fine, additional sanctions and remedial measures. The

sanctioning of violation acts still discloses some difficulties as following:

1.4.1. Regarding the provisions on fine sanction for competition restriction acts

Firstly, the fine level based on total turnover earned by the violating

organizations or individuals in the fiscal year preceding the year when they committed

the violation act is not reasonable. Article 5 of Decree No. 120 states that levels of

fines applicable to violations of Competition Law are up to 10% of total turnover of the

fiscal year preceding the year when they committed the violation act. Actually, the

enterprise‟s violation act only affects a specific product/service market; meanwhile an

enterprise can operate businesses in different products/services. Even in some cases,

the turnover arising from trading in the goods/services that directly related to the

violation act is just account for a very little part in total turnover of the enterprise.

Therefore, level of fine based on “total turnover” of the enterprise does not reflect the

impact of violation act properly and inconsistent with the damage caused by the

violation act.

From the viewpoint of sanctioning based on reasonable foundation for the

existence of enterprises, many countries have adopted the principle of sanctioning

based on the turnover in relevant or affected market which aims to ensuring the

reasonability but also strict enough to deter and notify the enterprises.

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Secondly, there is a lack of basis to determine the specific fine level for

enterprises that violate Competition Law. Regarding the fine sanction, current

Competition Law and guidance Decree only mention two fine levels that are 0-5% and

5-10% of total turnover for the fiscal year preceding the year when the violation was

committed. Article 7 of Decree No. 120 provides the grounds to identify levels of

sanctions applicable to the violations of Competition Law, but does not provide

principles and evaluation to calculate specific fine level. This makes it difficult for VCA

and Competition Council in determining the specific fine level for enterprises that

violate Competition Law, even cause controversies in the decisions on the sanctioning of

violations or cause arbitrary on deciding the fine level.

Thirdly, there is no provision on the minimum fine level. The lack of provision on

minimum fine level (greater than 0 VND) leads to the fact that many enterprises in

violations are subjected to a fine level equal to 0 VND, since the total revenue in the fiscal

year preceding the year when the violation committed is equal to zero. The application of

the fine level 0 VND in this case does not have deterrence effect to the enterprises from

performing the violations.

Fourthly, the provisions on the handling of violations of competition restriction

agreements have not considered the sanctions for professional associations.

Professional association is a forum where organizes meeting, exchanging information

among enterprises which produce and trade in the same kind of product/service.

Because of this characteristic, in many cases, associations serve as advocates in

building agreement ideas and organizing meetings, exchanging information among

enterprises, mobilizing enterprise members to participate in and implement the

agreement. In the context where the awareness of enterprises and associations on

Competition Law is still low, not applying sanctions for violations of associations in

competition restriction agreement cases will have no warning, deterrence effect as well

as encouragement to associations to abide by Competition Law.

1.4.2. Regarding the provisions on additional sanctions and remedial measures

There are 02 additional sanctions and 09 remedial measures according to the

current Competition Law; however, the reality of these measures is still limited.

Regarding provisions on additional sanctions, “confiscation of exhibits and means used

for commission of violations, including confiscation of all profits earned from commission

of violation acts”. Due to the specific characteristics of competition restriction agreement

cases, enterprises may agree orally or in written documents under many different forms

such as telephone, email, commitments, agreements... Therefore, the additional sanctions

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and remedial measures mentioned above seem not to be suitable and widely applied in

reality.

According to the current provisions, remedial measures are divided into two

groups: group of remedial measures based on the acts and group of remedial measures

based on structure, both aim at requiring the enterprise that perform the violation acts to

stop these acts. However, detailed listing of these remedial measures causes losing

flexibility of legal provisions, forcing unnaturally when applying the same remedial

measures to the cases which have different conditions, market context and

characteristics of business activities.

2. Provisions on competition restriction agreement

2.1. Regarding the provisions on the acts competition restriction agreement

The current provisions on the acts of competition restriction agreement have not

yet met the comprehensive and proper requirement at the point that it have not covered

all the relationship among subjects which arising during the procedure of competition

restriction agreement. Specifically:

Currently, Competition Law does not have any definition or general clause on

the acts of competition restriction agreement. The current provisions only aim at

external forms rigidly, but do not embrace all new forms of businesses with higher

degree of complexity of enterprises. For example, floor, ceiling price fixing agreement;

agreement to increase prices or lower prices (not only at specific level) ... are the

agreements with the nature of restricting competition, but have not yet been regulated.

While business practices, business strategies of enterprises (including the acts of

agreement) change in a more and more complex degree with many different forms, the

current “hard” approach will make it difficult for enforcing agencies in the

investigation and handling of specific cases.

Additionally, the actual handling of some cases relating to competition

restriction agreement shows that the associations are back organizations which

responsible for organizing, inducing enterprises taking part in and supervising the

agreement implementation among enterprises. Even in some cases, the associations

issue “decisions”, “resolution” in terms of price, quantity... for member to obey.

However, these practices of association have not been regulated by the current

provisions yet.

2.2. Regarding the prohibitions

Firstly, grouping the acts of competition restriction agreement into 2 groups

(the agreements are prohibited in all cases and the agreements are only prohibited

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when the combined market share of the parties participating in the agreement in the

relevant market makes up of 30% or more) is not entirely appropriate at current

time. Because some acts of price-fixing, output restriction, market allocation are

hardcore cartels, directly impact on market factors such as price, output, and

distribution areas... On the other hand, for those hardcore cartels, any positive

impacts to the competition in a market and the economy cannot be expected,

therefore, they must be prohibit in all cases without qualifying their impacts to the

relevant markets.

Secondly, using market share as the only basis to distinguish prohibition levels

is not comprehensive and does not reflect exactly the nature of the prohibition.

The reason of grouping the competition restriction agreements into 2 groups

(hardcore cartels and non-hardcore cartels) is in order to base on that to adjust properly.

Normally, the serious agreements are prohibited in all cases meanwhile the less serious

agreements are only prohibited when their anti-competitive effect is stronger than the

pro-competitive effect, and when the enterprise participating in the agreement has a

significant market power.

Competition Law also classifies the competition restriction agreements into two

levels of prohibitions: per se rule and rule of reason. In this regard, the market share is

a quantified index and the competition authorities can easily use it to analyze a case.

However, this index has only a certain meaning, not the key point using to decide

whether a competition restriction agreement is prohibited or not. Because it is

provisional and time-variable index, depends on many other factors such as barriers to

entry, excessive capacity of competitors, purchasing capacity of consumers...

Therefore, in order to evaluate the market power of enterprises in the market, we have

to evaluate all above factors (and the market share index is just one of them).

2.3. Provisions on handling violations on competition restriction agreement

In addition to shortcomings regarding the provisions on forms and level of

sanctions applied for competition restriction acts which are mentioned in the “General

provisions” above such as total turnover is not the proper foundation to calculate the

fine level, lack of basis to determine the specific fine level, no provision on the

minimum fine level, no provision on the forms and levels of sanction for individuals in

violations or not suitable additional sanctions and remedy measures; there are some

specific inadequacies related to the handling of the competition restriction agreements.

These shortcomings are that the current provisions have not considered sanctions on

professional associations yet.

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Although professional associations are within the regulation scope of

Competition Law under Article 2 of the Law, however, there has not been the legal

basis to apply sanctions for the violations of association in competition restriction

agreement cases. In the context of Vietnam, there are thousands of professional

associations with various small and big scales, despite of the fact that the awareness of

enterprises and associations about competition law is still low, not applying sanctions

for the violations of associations in competition restriction agreement cases will have

no warning, deterrence effect as well as encouragement to associations to abide by

Competition Law.

2.4. Regarding exemption

Improperly grouping of the competition restriction agreements leads to

improperly defining the scope of exemption with regard to prohibited competition

restriction agreements. The acts of agreements on directly or indirectly fixing

goods/services price, agreements on allocating market, agreements on restricting the

quantities/volumes of goods/services are serious competition restriction agreement,

they must be prohibited in all cases and should not be exempted as in the current

provisions.

In addition, although exemption with a time limit for competition restriction

agreement is very reasonable, current Competition Law does not stipulate foundation,

principles defining exemption with a time limit. That results in lacking of legal

foundation on defining the time limit of exemption for competition restriction

agreement cases that are allowed to be exempted.

2.5. Regarding leniency policy

Though the provisions on extenuating circumstances (Article 85 of the Decree

No. 116) are similar to leniency policy that applies for all competition cases including

competition restriction agreement cases, however they have not been concretized by a

leniency program yet. After more than 5 years of enforcing Competition Law, we find

that these provisions do not help to discover many violations regarding competition

restriction agreement cases.

Meanwhile, at risk of being subjected to sanctions because of performing the

prohibited competition restriction agreements according to Competition Law, these

agreements tend to be a “tacit consent” since the parties participating in the agreements

knowingly conceal the violation acts. This will make the detection and investigation of

competition restriction agreements more and more difficult and complex. Lacking of

the provisions on a leniency program, VCA has lost a useful tool in detecting and

handling serious competition restriction agreement acts.

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3. Provisions on abuse of dominant/monopoly position

3.1. Provisions on defining dominant/monopoly enterprise

Currently Competition Law evaluates the dominant position of enterprises based

on two criteria, including market share and the ability to restrict competition

significantly. However, the provisions on how to determine dominant position,

monopoly position are still rigid, and they do not reflect competitive correlation in

some cases properly, specifically:

Firstly, according to the current provisions, defining the market power of an

enterprise is based on market share, particularly: when the market share of an enterprise

(or a group of enterprises) gets a specific threshold, that enterprise will be seen as the

dominant position in the market by default. Obviously, market share has always been

considered as an important criterion in assessing market power of enterprises because it

reflects information of enterprise through specific, clear data; it also shows the power‟s

correlation among enterprises in the market. However, actually there are cases that the

enterprise holding the dominant position does not hold up to 30% market share but it

still has a market power in comparison with other enterprises in relevant market. In

these cases, the enterprise does totally have the ability to make the decisions that affect

the whole market. Therefore, competition authorities around the world also use many

different criteria to evaluate dominant position in addition to market share criterion

such as: position in the market, market barriers to entry, power of buyers, the essential

resources that enterprises are holding1... In all of these criteria, no single criteria can

confirm whether an enterprise holds dominant position or not, but various criteria

combined together can confirm that.

Secondly, the criteria used to define “the ability to restrict competition

significantly” are considered only in static state according to Competition Law. It

means that these criteria are only considered when the dominant enterprise is already

defined but they are not compared in correlation with other competitors in the market.

If these criteria are considered in the correlation with other enterprises, the competition

authorities will evaluate more accurate about market power of enterprise.

3.2. Provisions on the acts of abuse of dominant/monopoly position

Firstly, the differentiation between group of acts of abuse of dominant position

and group of acts of abuse of monopoly position is not appropriate for actual practice.

1 ICN, Report on the Objectives of Unilateral Conduct Laws, Assessment of Dominance/Substantial Market

Power, and State- Created Monopolies, Prepared by the Unilateral Conduct Working Group, 2007.

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According to Article 14 of Competition Law, besides prohibited acts of abusing

the dominant position in the market, enterprises holding the monopoly position are also

prohibited from performing the two acts including the act of imposing unfavorable

condition on consumers and the act of abusing the monopoly position to unilaterally

modify or cancel the contracts already signed with plausible reasons. That means

Competition Law imposes stricter supervision on monopoly enterprises in comparison

with dominant enterprises. However, actually, these prohibited acts can occur in any

business environment that lack of fair competition, especially when the enterprise

holding market power exists. Therefore, even when the dominant enterprise exists,

these two prohibited acts mentioned above still can occur and affect market

competition negatively.

Researching the experiences of Japan, United States and EU shows that these

countries do not differentiate between the act of dominant enterprise and the act of

monopoly enterprise. Instead, monopoly position is understood as a special case of

dominant position and monopoly or dominant enterprise both have market power by

nature, they have ability to act relatively independently from competitors (if any)

and consumers. When considering cases, the competition authorities of these

countries focus on analyzing competition restriction impact, exploitative or market

foreclosure. Competition laws of many countries therefore only mention the acts of

dominant enterprise but not differentiate clearly between the two groups of acts like

Vietnam Competition Law.

Secondly, the provisions heavily prescribe the format, external form of act

instead of describing the characteristics of act

Deriving from many reasons, the drafting group of Competition Law had chosen

the method of prescribing act bases on the external forms of acts, but this method itself

restricted the assessment capability of the competition authorities. According to the

current provisions, the competition authorities do not have authority to give the deep

evaluation about the competition-restrictive nature of the acts but just collects the

proper evidences that in accordance with the describing of law provisions in order to

finalize the suspicious acts. The above prescription in one hand facilitating efficient

work of the competition authorities since analysis and proof of the anti-competitive

impact of the act are not needed; but in other hand, it creates passive work style and

gives a little chance for the authority to analyze the suspicious acts carefully. For this

reason, the research team suggests that it is time for Vietnam to research on replacing

the current provisions on describing external forms of the acts by using the approach

which directly aims at the competition restrictive nature of the acts. If doing so, the

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enforcement of Competition Law will really bring efficiency to the whole economy

according to the objective of issuing the Law.

Thirdly, describing the acts with over-complex legal formations leading to

difficulties in applying the law in reality

Competition Law and Decree No. 116 prescribe the abusive acts through

describing over-complex legal formations, leading to difficulties in applying the

provisions in reality. For example, regarding the act of imposing irrational buying or

selling prices of goods/services, based on the provisions of Decree No. 116, in order to

prove that act, at first, VCA has to prove “demand for product/service does not

suddenly increase to a level exceeding the designed output or the production capacity

of the enterprise” This requirement is proper with the economic theory, recognizes the

law of supply and demand and price, however it is strictly difficult to apply in practice

because it‟s not easy to estimate exactly “the demand for product/service” in reality. If

temporarily accepting an estimation demand based on the past sales data then compare

with the production capacity of the enterprise, VCA will face the next obstacle which is

defining “average retail price” set in the same relevant market for a minimum period

of 60 consecutive days according to the provisions… In other aspects, describing the

act in detail as above accidentally narrowed significantly the scope of the provisions on

controlling this act. According to the provisions of Decree No. 116, the act of

unreasonably fixing selling price of goods/service is only approached under one form

which is “the act of increasing the selling price unseasonably”, that is an increase more

than 5% in selling price when there are no increase in the prime cost of producing such

products/providing service of more than 5%. Pursuant to this approach, if the enterprise

can approve that their production cost increases to 5,1%, the increase in selling price to

10%, 20%, 50%... even more will not violate Clause 2, Article 13 of Competition Law.

Reviewing other provisions of Competition Law and Decree No. 116, we can

see that there are similar problems in the provisions on other acts of abuse of

dominant/monopoly position. Hence, Vietnam need to assess seriously the current

approach, avoid prescribing over-detailed on violation acts because the more detailed

provisions are, the more difficulties that the competition authorities will face in reality.

Fourthly, listing the acts according to forms leads to the omission of

anticompetitive acts, creates gaps for enterprises to bend the Law.

Vietnam economic-social context in the past few years has changed a lot. It

makes some contents of Competition Law become outdated, not proper to or not catch

up with the business reality. Many new competitive strategies including

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anticompetitive practices were “imported” and applied in doing business by

enterprises. The competition restriction acts are performed under many new forms of

acts, and are more and more sophisticated and complex. Meanwhile the current

provisions of Competition Law is still very technical and rigid; it does not reflect the

anticompetitive nature of the acts but only prescribes the external forms of the acts and

thus easily creates gaps for enterprises to bend the Law. The research team suggests

that the main problems do not lie in having to review to supplement all the acts but in

the approaches of the provisions. The research team also suggests that even when

Competition Law lists hundreds of anticompetitive acts with regard to external forms

of the acts; it still cannot cover all the kinds of acts, especially in the context that the

business acts are more and more complex. For that reason, besides reviewing the new

forms of violation acts, the issue needed to be focused on to amend is the approach of

issuing and enforcing the Law which aims at balancing between the two approaches

(listing approach and approach of provisions on nature of the acts).

3.3. Provisions on handling violations

Besides the general issues on handling violations regarding group of

competition restriction acts, the provisions on handling violations regarding the acts of

abuse of dominant/monopoly position also discloses some limitation as follow:

Regarding additional sanctions, one of the additional sanctions can be applied

for the acts of abuse of dominant/monopoly position are “Confiscation of exhibits and

means used for commission of violating acts including confiscation of all profits

earned from the commission of violating acts”. Though the confiscation of all illegal

profits is necessary in some cases, however the research team recognizes that

considering this method as an additional sanction is unreasonable. In various aspects,

all profits earned from violation acts are not and cannot be a proof or a mean which is

used to perform the violating act. Meanwhile the Law on handling of administrative

violations considers the illegal profits under form of remedial measures, Competition

Law also need to adjust for ensuring the consistency in the legal systems.

Regarding the remedial measures, according to the provisions of Competition

Law, almost all the remedial measures aim at the main objective of stopping the

violation acts. Although listing many remedies, but these remedies are all rigid; they

can be proper in some cases but not in all cases or all sectors. Regarding experiences of

prior countries, group of behavioral remedies is usually prescribed in form of forcing

an enterprise to do some orders of the competition authority or to stop doing the acts

which have negative impact on competition environment. For this reason, behavioral

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remedies are usually very flexible to consistent with each condition, market context as

well as the characteristics of each enterprise.

Foreign competition authorities have the same viewpoint that designing proper

and efficient remedies is an investigative content which is not less important than

investigation of defining dominant position and abusive acts. In practice, competition

laws of many countries do not over-detailed prescribe on the remedies but they require

the competition authorities to consider, evaluate and decide on remedies which applied

for each case, each sector. In the future, for the efficiency of Competition Law,

Vietnam needs to research, adjust the approaches of remedies toward adjusting impact

of the acts instead of directly adjusting external forms of the acts as currently.

4. Provisions on controlling economic concentration

4.1. Current provisions on controlling economic concentration

4.1.1. Economic Concentration forms

According to Article 16 of Competition Law , “Economic concentration is the act

of enterprise including: (1) Merger; (2) Consolidations; (3) Acquisition; (4) Joint-

venture between enterprises; and (5) Other forms of economic concentration following

the regulations of the law”

In particular, Article 17 of Competition Law provides the concept of forms of

economic concentration as followings:

1. Merger of enterprises refers to the act whereby one or several enterprises

transfer all of its/their property, rights, obligations and legitimate interests to another

enterprise, and at the same time terminate the existence of the merged enterprise(s).

2. Consolidation of enterprise refers to the act whereby two or more enterprises

transfer all of its/their property, rights, obligations and legitimate interests to form a

new enterprise and at the same time terminate the existence of the consolidated

enterprises.

3. Acquisition of enterprise refers to the act whereby an enterprise acquires the

whole or part of property of another enterprise sufficient to control, dominate all or

one of the trades of the acquired enterprise.

4. Joint venture between enterprises refers to the act whereby two or more

enterprises jointly contribute part of their property, rights, obligations and legitimate

interests to the establishment of a new enterprise.

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Forms of acquisition stipulated in Article 35 of Decree No. 116 are not considered

to be economic concentration including “Insurance, credit agency acquires another

enterprise with the purpose of sale within the maximum period of 01 year. Acquiring

enterprise does not control or dominate acquired enterprise; or take control/dominate

within compulsory scope to achieve sale purpose”.

4.1.2. Notification threshold and evaluation standards of economic

concentration

Standard of market shares has been used in Competition Law to define

economic concentration notification threshold and evaluate impacts of economic

concentration as well.

Economic concentration notification threshold is defined in Clause 1, Article 20

of Competition Law. Following this article, in the case where, enterprises participating

in economic concentration have combined market share of between 30% and 50% in

the relevant market; their lawful representatives must notify the economic

concentration to VCA before implementing economic concentrations. If the enterprise

after economic concentration is a small and medium one as provided by relevant

legislations, it will be allowed to skip notification to VCA.

Market share is also regarded as standard to evaluate anti-competitive impacts

of an economic concentration. Article 18 of Competition Law prescribes that “It shall

be prohibited if the combined market shares of enterprises participating in economic

concentration account for over 50% in the relevant market”. For this approach, it is

seen that according to Competition Law, forming an entity (an enterprise or a group of

enterprises) accounting for over 50% market share in the relevant market creates power

strong enough to cause anti-competitive impacts, considerably reduce, prevent or

distort competition in the market. In this case, economic concentration is prohibited,

except the enterprise after economic concentration is a small and medium one as

provided by relevant legislations.

Economic concentration cases can be analyzed and granted exemptions under

Article 19 of Competition Law:

- One or more of the participants in economic concentration is/are in danger of

dissolution or bankruptcy (competence to decide on exemption is belonged to

the Minister of Trade - currently as the Minister of Industry and Trade)

- The economic concentration has an effect of expanding export or contributing to

socio-economic development, technical and technological advance (decided by

the Prime Minister)

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4.1.3. Provisions on handling violations

The handling of violations of economic concentration under Competition Law is

focused on economic concentration cases that are prohibited by nature but being

conducted already by related parties or is required notification as under the Law but no

notification.

Investigation and settlement process comply with competition proceedings, in

which VCA has the functions to receive complaints and investigate the case and

Competition Council has the function to handle violations by administrative sanctions

according to Competition Law and Decree No. 120.

Forms of sanctions include: monetary fine based on the severity of the acts, up

to 5% of the total turnover in the fiscal year preceding the year when economic

concentration is carried out for merger, consolidation, acquisition that are prohibited;

monetary fine from 5-10% of the total turnover in the fiscal year preceding the year

when economic concentration is carried out for merger, acquisition that are prohibited

in case where there is signs of constraint, forcing other enterprises to merger or sell all

or a part of property; monetary fine from 5-10% of the total turnover in the fiscal year

preceding the year when economic concentration is carried out for consolidation, joint-

venture that are prohibited in case this increase goods, services price in relevant market

considerably; monetary fine from 1-3% of the total turnover in the fiscal year

preceding the year when economic concentration is carried out in case of not notifying

under the regulations of Competition Law. Besides, enterprises can be forced to

separate merged, consolidated enterprises, be confiscated of business registration

certificate; sell purchased property, etc., (Article 25 to Article 29 of Decree No. 120).

4.2. Difficulties and challenges rising from the provisions on controlling

economic concentration

4.2.1. Regarding the criteria for controlling economic concentration

Competition Law uses market share as the basis to categorize economic

concentration and unique criteria to determine handling measures. Reality shows that

although the number of M&A transactions is quite high and has been increasing in the

past few years, though the size of many transactions is also quite large; the number of

transactions that are notified to VCA under the provisions of Competition Law is quite

low. This is partially due to the fact that enterprises carrying out M&A in the market

have low combined market shares (below the 30% market shares of threshold),

however, the provisions on the obligation to notify based on exact market share of

participating parties of economic concentration is difficult for enterprises. In fact, an

enterprise is only aware of and responsible for its own revenue and no obligation to

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know the revenue of other competitors in the market (basis for calculating market

shares of participating parties). Requesting for collecting huge information on market

and market shares create high pressure for enterprises wishing to conduct procedure on

notification or consultation to VCA. It is reason why many economic concentration

cases have been carried out, few of them are notified to VCA.

Additionally, from enterprises‟ perspective, recognizing direct competitors to

make suitable strategy for production and business is totally different from technique

on determining relevant market (including geographical and product relevant markets)

under the provisions of Competition Law. It creates the gap in combined market share

calculation between VCA and enterprises.

Besides, the use of combined market share to be the basis to control economic

concentration shows that Competition Law only controls economic concentrations

horizontally. Therefore, mergers, consolidations, acquisitions, joint-ventures among

enterprises in different market levels (including vertical and conglomerate mergers) are

not under the control of Competition Law.

4.2.2. Limitation in assessing economic concentration cases by using market

share as the only criteria

In principle, Article 18 of Competition Law only prohibits economic

concentrations with combined market share of over 50% in the relevant market. Once

determining that the combined market share of enterprises is 50% and less, VCA will

reply that the case is not prohibited. In other words, notification procedure is simply a

process of exactly re-determining combined market share of participating parties of

economic concentration, not assessing the effect of economic concentration to the

market in different aspects (not only from market share).

This approach makes the provisions on controlling economic concentration not fully

effective due to:

In nature, the assessment of the effect of economic concentration is of the future.

When undertaking notification procedure (before economic concentration), the

competition restricting consequence has not happened yet. Statistics of market shares

only reflects competition capacity of each participating enterprise in the past or at

present. If we only base on them to assess the effect of economic concentration to the

future of competition market, we are putting market in a static state. However, in the

non-stop movement of market, in many cases merger, acquisition, joint-venture…

among enterprises is the reason of changes in market share in the market rapidly

(enterprise after economic concentration has not implement any competition strategy

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that can increase market share to a certain level). In many cases, combined market

share of enterprises nearly reach the prohibited threshold, however, the effect of

economic concentration makes them develop or overcome the prohibited threshold.

Therefore, combined market share at present is not sufficient to prove the certain

damages of the economic concentration in the near future.

In competition theory, the ability to restrict competition of economic

concentration is not only to change competition structure of market but also to

reinforce market power to carry out anti-competitive acts in the future. Therefore, in a

certain context, economic concentration can be considered harmful for competition

market if it gives enterprises the ability to dominate market and potentiality to carry out

anti-competitive acts although the current combined market share is not sufficient to be

prohibited. Concerning historical context, at the time of promulgating Competition

Law, the provisions on prohibition can be quite reasonable, however, with the

movement of the economy as well as with enforcing experience of VCA, the

provisions needs to be considered for adjustment.

4.2.3. The role of competition authorities in assessing economic concentration cases

The provisions on prohibiting economic concentration in case of combined market

share over 50% do not reflect exactly the economic reality. According to statistics of VCA

and other independence report, most economic concentration cases practice in Vietnam

have average scope with the combined market share of approximately 30% in the relevant

market. In fact, in some markets, just the market share of 10% to 20% enough to give

businesses an absolute power in the market, especially with the market fragmented and

there is a substantial difference in market shares among businesses, group of businesses

head in the market with the business behind. On the other hand, even in the cases where

the combined market share of the parties is over 50% in a relevant market, when we take

into account the other elements of competition assessment like excess capacity of

competitors; barriers to enter the market; purchasing power of buyers; there are

assumed some cases which do not cause a significant market power in the relevant

market.

Therefore, the existing rules of Competition Law not only limits the jurisdiction

of VCA in assessing the economic concentration cases, but also lead to omission of

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cases which potentially restrict competition in the relevant market as well as lead to the

over regulation to M&As which will not cause any competition problem in reality.

Besides using market shares as standard for evaluating anti-competitive impacts

of an economic concentration, Competition Law also considers two other elements for

prohibition or permission on economic concentration: one participant in economic

concentration is in danger of dissolution or bankruptcy and positive impact of

economic concentration on export, socio-development, technical and technological

advance. Though two factors are the popular ones used by competition agencies of

countries to evaluate impacts of an economic concentration, it is seen that the role of

VCA in assessment these factors are low. In the former situation, if there is only one

participant in economic concentration is possibility of dissolution or bankruptcy, VCA

will propose the Minister of Industry and Trade for permission for economic

concentration, and no power to give other remedies for enhancing effectiveness of

market. It is the same as the second situation, when an economic concentration has an

effect of improving economic effectiveness, VCA will also have no power on

supervising that whether economic effectiveness of the economic concentration which

is considered causing competition restriction impacts will be brought to consumers or

not.

When using combined market share2 is as the standard to control economic

concentration, it is shown that Competition Law controls and manages horizontal

economic concentration only. Therefore, mergers, consolidations, acquisitions and

joint ventures among enterprises in different market level are not controlled by

Competition Law.

5. Provisions on unfair competition acts

The provisions against unfair competition are one of two constituent parts of

Competition Law. The provisions against unfair competition acts prevent the attempts

to create an improper advantage for one party in a competitive relation, forcing the

competitors to do business equally and fairly. According to Article 10bis of Paris

Convention for the Protection of Industrial Property, supplemented on The 1990

2 Article 3.6 states that: “Combined market share means aggregate market share on the relevant market of

enterprises participating in the competition restriction agreement or economic concentration”

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Convention and last amended in The Complementary Act of Stockholm 1967, any act

of competition contrary to honest practices in industrial or commercial matters

constitutes an act of unfair competition. Vietnam is a member of Paris Convention, so,

as the consequence, this definition in Article 10bis can be seen as the first source of

law on unfair competition in Vietnam.

In Vietnam, the concept of unfair competition was given in Clause 4, Article 3 of

Competition Law for the first time: Unfair competition acts mean competition acts

performed by enterprises in the process of doing business, which run counter to common

standards of business ethics and cause or can cause damages to the State‟s interests,

legitimate rights and interests of other enterprises or consumers. According to this

definition, an unfair competition act has these characteristics:

The purpose of the act is competitive-purpose or for-profit purpose

Subjects of application are enterprises performing business activities in the

market. According to Article 2 of Competition Law, „enterprise‟ is understood as

all business organizations and individuals doing business, which means

including the business owner does not register the type of enterprise under the

Vietnamese Enterprise Law

Characteristics of the act are contrary to the usual standards of business ethics

which are the general rules of conduct have been widely accepted for a long time

in the market

Injured subjects include three different types: the States, consumers and other

businesses.

In general, the definition of unfair competition in Competition Law is similar to

the definition in Paris Convention and laws of other developed market economy

countries.

Competition Law prescribes 9 specific unfair competition acts from Article 40 to

Article 48, including: Misleading indications; Infringement upon business secrets;

Constraint in business; Discrediting other enterprises; Disturbing business activities of

other enterprises; Advertising for the purpose of unfair competition; Sale promotion for the

purpose of unfair competition; Discrimination by associations; and Illicit multi-level sale.

Among these acts, some acts directly harm to competitors such as infringement upon

business secrets, discrediting other enterprises, disturbing business activities of other

enterprises; some other acts is both harmful to competitors and consumers such as

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misleading advertising, advertising for the purpose of unfair competition and sale

promotion for the purpose of unfair competition.

In the end, Item 10 of Article 39 provides other unfair competition acts

according to the criteria determined in Clause 4, Article 3 of this Law and prescribed

by the Government. Thus, in case of detecting new type of unfair competition act in the

market, VCA, other specific regulators or enterprises/associations themselves are able

to propose to the Government issuing new provisions to handle new violations.

In the process of handling violation acts, these provisions have been disclosing

some following inadequacies:

Firstly, the actual practices of enforcements of laws are posing many big issues

relating to the standardization of laws and enforcement mechanism. Currently, in the

situation where the same act is regulated in many different laws promulgated in

different period and implemented by different state management agencies, differences

in the prescriptions of the requirements of the same act, in measures and handling

level, handling procedure of the violator certainly exist. This actual practice has a great

impact on the standardization of laws and the strictness of enforcement processes of

laws. Besides, differences in handling mechanism can lead to differences in the opinion

to resolve a case relating to unfair competition acts. Although they are all acts in

violations of the laws in State economic management field, the enforcement of specific

law in each field entirely depends on the positive attitude of agencies, competent of

officials.

For specialized agencies, investigation is not the main responsibility; therefore,

the handling only starts from complaint of enterprises or from public. Specialized

agencies seem not to actively detect and investigate to handle violations. Meanwhile,

Competition Law gives VCA the authority to initiate an investigation even when there

is no complaint. With investigation jurisdiction and investigation staff, VCA has

actively carried out investigations to the cases of unfair competition acts, independent

of complaint from relating parties. These considerable differences have a substantial

impact on the standardization of enforcement process of laws and can create unfairness

in handling of enterprises that committed unfair competition acts as violations of other

laws. Therefore, the formation of a standardized mechanism and placing of united

principles in handling unfair competition acts is necessary.

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Secondly, the participation of many state management agencies in handling unfair

competition acts creates the necessity of coordination and cooperation among agencies in

government to ensure to resolve the acts impeding fair competition environment; ensure

enterprises, consumers to have many chances to rely on the civil authority to protect

their interests. However, this situation can lead to unexpected corollaries in these

directions:

Overlap of jurisdictions to handle the same unfair competition act.

The possibility of pushing responsibilities among law enforcing agencies

when a violation act is regulated in different laws in different economic

management field, especially the acts that are regulated in both Competition

Law and other laws.

Competition cases can easily encounter different groups of interests or cause

conflict in the protection against groups of interests of different participants

in the market. Besides the possibility to encounter groups of interests, the

handling of competition cases can also create disputes in social aspects.

All these situations above can cause pressure on law enforcing agencies. To

strictly enforce law, a law enforcing agency needs investigation staffs not only with

good knowledge of legislation, investigation techniques, information handling, but also

need to have skill and spirit, strong enough political position. Disadvantage in

specialized field or the inappropriate ability to stand pressure can decrease reaction

ability and resolution to handle the case absolutely. Shifting of responsibility among

agencies can happen in order to avoid social, economic pressures as above. Therefore,

from the legal angle, setting up of conflict resolving mechanism in terms of

jurisdiction, to settle the situation of shifting of responsibility among state agencies in

cases is necessary.

Thirdly, the current provisions of Competition Law on unfair competition acts

still have many limitations in the usage of legal terms in the requirements of the acts; it

is necessary to research appropriateness of some acts to conclude as an unfair

competition act and review the illicitness of some specific acts in unfair competition

act group. As analyzed in Chapter 1, the provisions on certain types of acts have never

been applied in reality, this is not because the acts do not happen in reality but because

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the requirements of the acts can help enterprises avoid violations and at the same time

achieve the goal of unfair competition such as presenting goods free for trial use but

requesting customers to exchange for similar goods manufactured by other

enterprises...; illicit multi-level sale is simply a violation of rights and interests of

participants through the provisions in multi-level sale contract; discrimination in

promotion needs to be reviewed in terms of illicitness in competition. Limitations in

the current provisions not only decrease the regulating ability of the Law but also

obstruct creation of fairness in the businesses of enterprises.

6. Provisions on competition management agency

6.1. Model of competition management agency

The model of competition management agency of Vietnam is currently divided into

investigation agency (Vietnam Competition Authority, VCA) and handling agency

(Competition Council). According to Competition Law and its guidance Dcrees, VCA is

responsible for discovering, investigating, collecting, searching for relevant evidences in

restrictive competition cases and then producing an investigation report. Competition

Council is in charge of judging, making decision, solving the complaints related to the

restrictive cases.

Competition Council shall be composed of between eleven and fifteen members

(currently eleven members) who are representativas of ministries such as Ministry of

Industry and Trade (MOIT), Ministry of Justice, Ministry of Finance, Ministry of

Planning and Investment, Ministry of Transport, Ministry of Construction…appointed

or dismissed by the Prime Minister at the proposal of the Minister of Industry and

Trade. However, besides being a member of Competition Council, they also have other

duty at their ministries, so that they have little time for reading competition restriction

cases. In addition, they are not people who took part in the case at the very first time

therefore they will need more time to make the final decision and will affect other

related enterprises. According to international experiences, almost all countries apply

the model of single competition management agency, such as Japan, Korea, Australia,

Russia, German… Some coutries have previously applied the model of two agencies

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has shown the shortcomings and are now in the process of transition to model of a

single competition authority.

6.2. The role of VCA

According to Decree No. 06/2006/ND-CP dated on January 9th

2006 of the

Government, VCA is an organization under the Ministry of Industry and Trade. This

also creates some shortcomings in the process of managing and enforcing Competition

Law in Vietnam because:

In Vietnamese current conditions, the state-owned enterprises are holding almost

all key sectors of the economy; therefore, subjects of investigation of VCA shall be state-

owned enterprises, huge economic corporations and even the state management agencies. If

VCA is not guaranteed a strong power, it will not perform well. In other hand, investigating

and handling a case related to state-owned enterprise by VCA and Competition Council can

lead to concerns on objectivity of the cases because of the viewpoint that these state agencies

“play both a soccer player and a referee”.

Regarding the independence, VCA under a ministry will not be guaranteed the

self-control characteristic in budget management, personnel recruitment, training and

appointment. These contribute to ensuring VCA‟s power in order to catch up with the

increasingly sophisticated requirements of economic integration, which reflects by the

significant increase in the number of Competition Law violations.

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CHAPTER III

RECOMMENDATION

***

1. General provisions of Competition Law

1.1. The relevant market definition

The provisions on relevant market definition should be revised in the direction

of being more open, flexible for application without specific and rigid regulation

especially in terms of the way to review and evaluate criteria of the substitutability of

goods and services. The criteria “characteristics, usage purpose and price” should be

assessed in a harmonized way appropriate with each goods or service without

separation of each criteria or rigid application of all criteria in case of all goods and

services, which might lead to false and impractical conclusion of relevant market

definition.

Economic analysis and market test should be used and considered as essential

basis for making conclusion on relevant market definition in competition restriction

cases. Therefore, regulations on market test or threshold of market tests should be used

for defining relevant market in conformity with practice.

1.2. Procedure of lodging competition complaints

The provisions on individuals, organizations to lodge complaints related to

violations against Competition Law should be revised to facilitate parties to lodge

complaints and denounce acts with signs of violation to VCA. Instead of complaint

procedure with the onus of proof belonging to complainants, VCA need a mechanism

of receiving all market information and issues so as to decide whether to intervene if

necessary. This will lead to fundamental changes in procedure of lodging complaints

and handling complaints.

All individuals and organizations should have the right to lodge complaints

on violations against Competition Law instead of the provisions that only

victims/sufferers of/from Competition Law violations can lodge complaints at

present;

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Complainants can provide information, evidence on their complaints,

however, this shouldn‟t be an obligation;

VCA needs the authority over evaluating complaints and selecting cases to

conduct investigation and resolution. The onus of proof under any

circumstance should be under VCA;

Remove the complainants‟ onus of paying competition case fee in advance.

1.3. Procedure of investigation and resolution

With regards to the time limit of investigation and decision issuance in case of

competition restriction, as analyzed above, the weak side of stipulating that time limit

is that it will restrain the investigators of VCA and the members of Competition

Council from reviewing the case in a comprehensive and accurate manner. Therefore,

Vietnam should learn the experiences from developed competition agencies in Japan,

the U.S or EU in expanding the time limit especially in competition restriction case

where neither regulation nor condition on the time limit exists. In those countries,

competition cases might last for 2 years or even 5 years depending on the complexity

of each case.

With regards to appeal to the decision of Competition Council, based on

analysis on the provisions on appealing competition cases, it means that enterprises can

submit appealing dossiers at local court where the competition authority must follow

the case. Such regulation causes big challenges for the competition authority in the

context of limited financial resources and long prosecution period. Therefore, handling

enterprise complaints against the competition authority‟s decision should belong to

several main points such as administrative courts at big cities and provinces in the

country where economic activities are strongly grown. If done, this will be meaningful

in two ways: (i) it can meet the expectation of the complainant; (ii) the designated court

has enough resources to handle the case, which facilitates the competition authorities to

follow the lawsuit.

1.4. Provisions on settlement measures

With regards to the provisions on fine sanction on competition restriction acts, as

analyzed above, definition of fine based on the total turnover of the fiscal year preceding the

year when the violation was committed is unreasonable. For amendment, Vietnam should

refer to the experiences of such countries as Japan, the U.S, EU…so as to define the level of

fine based on the turnover in the relevant market or affected market.

With regards to the basis of defining specific levels of fines in competition

restriction cases, to ensure transparency in settling violations, Vietnam should take into

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account specific provisions on the principle of defining sanctions, how to apply

agrrevating or mitigating circumstance in calculating the level of fine. In particular,

there should be a basic fine applied for violations and provisions on the increase or

decrease in the fine appropriately with aggrevating or mitigating circumstance.

Besides, from the practice demand, Vietnam should study and add a minimum

fine applied to violating enterprises in competition restriction cases as well as sanctions

applied for industry associations in competition cases especially competition restriction

cases.

With regards to additional sanctions and remedies, Vietnam should study to

adjust or add measures in direction of enhancing education and dissemination aimed at

associations and business circle on Competition Law, recover fair competition

conditions and implement committments not to violate Competition Law in the

future...More importantly, as those measures are much significant in handling

competition cases, Vietnam should build up a mechanism allowing the competition

authority to analyze, evaluate and propose remedies measures in specific cases.

2. Provisions on competition restriction agreement

On the basis of assessing drawbacks in existing provisions on competition

restriction agreement, the research team would like to propose some recommendations

on revising or supplementing in order to recover the above mentioned drawbacks so as

to be in conformity with practice and to enhance enforcement effectiveness. These

recommendations shall follow the group of issues on the acts, prohibiting provisions,

exemption provisions, form and level of sanctioning violation and leniency program.

2.1. Provisions on the act of competition restriction agreement

It is necessary to supplement a general provision or in other words a “basket

clause” on competition restriction agreements in order to “scan” all forms of acts of

competition restriction agreement

Along with social economic development, business forms of enterprises have

become increasingly diverse; therefore, the acts of enterprises also tend to change

constantly in order to achieve profit objectives, especially in fierce competition

environments. Therefore, the types of competition restriction agreements are gradually

being transformed by enterprises to cope with the provisions of Competition Law.

Although the types of agreements may change, the nature of competition restriction

agreements only relates to competition factors such as pricing, distribution areas,

consumption markets, productions, goods‟ and services‟ qualities.

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The current method of listing conducts can not well cover all types of

competition restriction agreements. Therefore, the research team thinks that Vietnam

should harmoniously combine the current listing method and the reasonable approach

method. In other words, besides considering the acts listed in the Law as well as in the

guidance Decree as the acts of competition restriction agreement, Vietnam should

allow the application of general provision or in another word, a “basket clause” in

order to “scan” all types of the acts of agreement affecting competition environment,

and should not regulate based on external forms rigidly like currently.

Consider the supplement of provisions on the acts of enterprise associations

in competition restriction agreement cases

Although associations do not directly participate in business activities in the

market, do not directly “compete” but the operation of associations in general can have

a major impact on the competition process of enterprises in the market. Therefore, the

research team find that Vietnam should consider supplementing provisions on the acts

of associations to suit actual practices and strengthen the effectiveness of law

enforcement.

2.2. Provisions on prohibitions

From the practice of enforcing the law and referring to experiences of other

agencies, the research team would like to bring 2 proposals for adjusting the provisions

on prohibitions under Competition Law as follows:

Consider adjusting the acts under the strictly prohibited group and the group

prohibited depending on each specific case.

Strictly prohibit 4 types of agreements which were always considered as

serious in all cases include price-fixing agreement; market allocation

agreement; agreement to limit, control production, sale and purchase output;

bid rigging agreement.

Prohibit each specific case for other forms of agreements (including less

serious horizontal and vertical agreements) depending on the characteristics

of each market. Those acts should be considered for prohibition according to

rule of reason, based on consideration between “interests” and “costs”, in

other words, balance between the impact on promoting competition and

restricting competition.

It is necessary to review and amend the approach assessing competition

restriction agreements based on the sole criterion which is market share as currently.

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The current provisions are easy to implement and suitable for fledgling

competition authorities however they do not reflect the nature, meaning and purpose of

regulation to competition restriction agreements accurately.

Therefore, the research team would like to propose considering the approach

assessing competition restriction agreements, i.e. when looking at agreements which do

not fall within the group of serious agreements, the competition authorities should not

only base on the criterion of combined market share of parties involved in the

agreement, otherwise it should follow rule of reason which has been applied by a

number of developed competition authorities in the world. Accordingly the assessment

is divided into 2 particular steps as follows:

Step 1: assess the possibility of restricting competition of the agreement, in

which evaluate market power of enterprises involved in the agreement to evaluate the

scope and impact in the market. To assess market power, not only combined market

share of parties participating in the agreement, but also many other factors like (1)

market structure, (2) excessive capacity of competitors, (3) barriers to market entry, (4)

purchasing power of customers must be taken into account. Detailed recommendations

of assessing market power are organized in the Section “General provisions”.

Step 2: In case the agreement can restrict competition, the competition

authorities will continue to review whether that agreement bring benefits to the

promotion of competition or not and whether the impact of promoting competition of

the agreement is greater than the impact of restricting competition or not. Criteria that

can help the competition authorities to assess may include (1) economic benefits the

agreement brings, (2) the necessity of an agreement to achieve such economic benefits;

(3) the benefits are transferred/shared with consumers and, (4) not eliminating

competition of the agreement.

However, to apply the rule of reason effectively and appropriately with the

practice of socio-economic development and the context of business in Vietnam, it

should be studied with care before making an appropriate set of evaluation criteria,

which ensure a balance between the listing method and the reasonable approach in

terms of economics.

2.3 Provisions on exemptions

As stated above, for agreements belonging to the severe group (hardcore cartels)

including 4 types of acts: (1) price-fixing agreement, (2) market allocation agreement;

(3) agreement to restrict production, and (4) bid rigging, Vietnam should consider

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amending the current provisions in the direction to prohibit in all cases and without

exemptions for this group of acts.

For other agreements, Vietnam needs to study and apply appropriate principles,

competition authorities would consider based on the evaluation of «cost» and «benefit»

factors of the agreement. With this approach, Vietnam does not need to promulgate

provisions on exemptions. The conditions for exemptions stipulated in Article 10 of

Competition Law can be included in the set of criteria to evaluate «costs» and

«benefit» of the acts of agreement (Non-hardcore cartels). At the same time, the time

limit of exemptions and the conditions to extend the exemption period should be

considered to be stipulated.

2.4. The forms and degree of handling violations

In addition to the proposals relevant to the revision and the supplementation of

provisions on the forms and degree of handling violations against competition in

general and competition restriction agreement stipulated in “General provisions” in

particular, based on typical issues on competition restriction agreement, the research

team would like to propose to supplement the provision on the forms of handling

professional associations‟ violations.

Since the professional associations are non-profit, therefore, the determination

of fine level based on turnover like for the enterprises in violations is unreasonable. For

the associations, we may stipulate fixed penalties (specific amount of fine) for

individuals belonging to the associations and for associations, we may apply additional

sanctions or remedial measures such as withdrawal of licenses, force to remove illegal

provisions from the decisions by the associations, force not to repeat the offence, force

to learn about Competition Law and disseminate knowledge of Competition Law to

member enterprises...

2.5. Leniency program

The striking feature of competition restriction agreement is involvement of two

or more than two enterprises where parties‟ interests are not always balanced.

Therefore, competition restriction agreements are often not permanent. However, when

benefits that enterprises might gain are so big and their awareness of Competition Law

so high that competition restriction agreement tends to be “tacit” and become

increasingly difficult for the competition authority to detect.

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At the same time, the leniency program contains specific benefits such as

exemption or partial exemption from the legal responsibility of parties involved in the

agreement depending on the degree of voluntary declaration, cooperation with the

competition authority, orders and time of declaration. With the above feature, the

leniency program will be an incentive to promote involved enterprises to look at this

program as a way out of sanctions and at the same time getting rid of their concerns

about whether other enterprises make declarations on the violation to the competition

authority or not.

From the practice of such developed countries as Japan, the U.S and EU; the

leniency program has proven to be successful in detecting and handling competition

restriction agreements. At the same time, codifying and applying the leniency program has

become a common tendency applied by a number of countries in the world. So Vietnam

should take into account designing its own leniency program in conformity with practice,

business customs and legal compliance of enterprises in Vietnam.

The key to success of any leniency program is the combination with severe

enough forms and degree of sanctions. Besides, the provisions on leniency program

should be built upon the clear and transparent principle. In parallel, mechanism of

information security for the declarant and the witness should be in place. If so, the

leniency program shall be an effective tool helping the competition authority to

implement well regulations on competition restriction agreement.

3. Provisions on abuse of dominant/monopoly position

3.1. Provisions on defining dominant/monopoly position

Based on theoretical issues as well as more than 5 years of practical

implementation of the Competition Law on the control of the acts of abuse of

dominant/monopoly position, it is showed that there is an urgent need to change the

way to determine dominant/monopoly position. In particular, more studies should be

done to change the way of assessing dominant position in the market primarily based

on the criterion of market share via fixed market share threshold like currently. To have

more accurate evaluation of the market power of the enterprise, other factors should be

taken into account such as excessive capacity of competitors; barriers to enter the

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market; purchasing power of buyers; essential resources held by enterprises; market

conditions,...

Though the research team support evaluation criteria for enterprise‟s position in the

market, we think that the provisions should be general ones. Instead of the provisions listing

criteria in a rigid manner, Competition Law should require the competition authority to make

in-depth assessment, economic analysis when evaluating the position/power of enterprises in

the market. Besides, while doing so the competition authority should assess the movement

and development tendency of the market, economic context...instead of taking into account

the static state like now.

3.2. Make a set of evaluation criteria applied for the abusive acts

The research team think that it is necessary to make a set of evaluation criteria

applied for the abusive acts of dominant/monopoly position and have comprehensive

provisions covering potential abusive acts causing anticompetitive impacts. In the coming

time, the provisions on abusive acts of dominant/monopoly position should be revised in

following directions:

There should be no discrimination between the abusive acts of dominant position

and monopoly position like currently. Instead, it should target at the nature of the

abusive act of market power by the enterprise;

Make basic criteria for evaluating the abusive acts of dominant position. Those

criteria aim at the nature of vulture or market closure of the acts and do not base

on the description of external features of the acts like now;

Beside listing a number of abusive acts of dominant position on reasonable

principle, Competition Law should have a basket clause to well cover acts with

nature of vulture or market closure implemented by dominant enterprises.

3.3. Provisions on prohibitions and handling measures

With regards to the provisions on prohibitions, the research team thinks that the

current approach of Competition Law in which such acts as abuse of dominant,

monopoly position are prohibited and non-applicable of exemption is reasonable. The

key point is to do research for making adjustment to the set of criteria defining the

abusive acts of market power as mentioned above.

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4. Provisions on economic concentration

4.1. The range and forms of economic concentration must be controlled

4.1.1. Expand the forms and acts of economic concentration transaction that

should be controlled

Vertical economic concentration transactions (especially enterprises participating in

the transaction have close relationship in the chain of distribution/production) can also

cause considerable restriction impacts in each level of market where enterprises implement

economic activities, even after-merger enterprises does not need to implement anti-

competitive activities. The two effects that are concerned by competition authorities are:

price discrimination and market foreclosure.

Besides that, it‟s necessary to be considered by Competition Law on marginal

transactions such as: buying shares of minority shareholders; trading a part of

independent property. Those transactions might be considered and adjusted in

economic concentration control method. On the other hand, if a transaction is carried

out in the internal of same enterprise group, such a transaction can be considered just

as restructuring of the enterprise group, then, it will not affect competition in a relevant

market significantly. Therefore, it should be issued exemption for such internal

transactions.

The research team proposes to consider expanding the adjustment of both the

forms and acts of economic concentration transactions.

4.1.2. It is necessary to control economic concentration transactions which are

proceeded outside Vietnam but have considerable competition restriction effect in

Vietnam market

One issue is that at the time being, Competition Law only control by notification

method or prohibition or grant exemption on economic concentration in Vietnam territory.

Merger of multinational companies outside Vietnam which might potentially cause

competition restriction in Vietnam will face a lot of difficulties from both sides of

enterprises and state management agencies. Therefore, there should be more provisions to

create legal corridors for the competition authority to look at those cases from the very

beginning if necessary.

4.2. Recommendation on revising the notification threshold of economic

concentration

Competition Law controls the economic concentration cases based on market

share criteria. As we explained above, the using of market share criteria to determine

notification threshold will help VCA to have accurate initial evaluation about potential

competition restriction, thereby increasing the proportion of actual competition cases

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among total cases that are considered by VCA. However, the market share based

criteria in the relevant market also caused many difficulties to the enterprises in the

implementation process of notification procedure such: identifying relevant market,

identifying their market-share in the relevant market.

Therefore, instead of defining threshold based on market share like currently in

Competition Law, the research team recommends to use turnover standard or total

assets standard to define economic concentration notification threshold.

4.3. Evaluation on impacts of economic concentration

The research team would like to recommend changing the method of assessing

market concentration case to make the objective of evaluating economic concentration case

to be definition and prevention of anticompetitive impacts of that case or bring remedial

measures in order to ensure economic efficiency or consumer rights as well as limit

anticompetitive impacts borught by the case.

Market share and method to evaluate level of market concentration play

important role in analyzing economic concentration. This is initial information to

help the competition authority recognize possibility of competition concerns of

economic concentration, then proceed deeper analysis. However, it is necessary

to note that it is not decisive condition of competition restriction possibility.

Other detailed evaluation of market condition is necessary to issue a review of

market power.

Assessment of economic concentration impacts are based on:

+ Unilateral impact: (i) situation of economic concentration parties; (ii)

competition pressure from enterprises which do not participate in economic

concentration; (iii) direct or potential competition pressure from entering and

participating possibility of new competitors; (iv) economic efficiency and

existence possibility of economic concentration parties.

+ Coordinate impact: (i) possibility to establish combining conditions; (ii)

possibility to recognize violations when conducting combined impact; (iii)

possibility to punish those violations.

Besides, it should prescribe some remedies or necessary adjustment which the

competition authority can be actively determined by itself to apply for parities

in economic concentration.

In essence, when Competition Law allows VCA to evaluate the market power of

the parties participating in economic concentration and the impact of economic

concentration, as well as request parties participating in economic concentration to

have remedies, the provisions on application for exemption are not necessary.

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5. Provisions on unfair competition acts

Firstly, it is necessary to reconsider the provisions on illicit multi-level sales with

following reasons: conducts listed in Article 48 of Competition Law mainly take place

among multi-level sale enterprises and participants in the network, the competition factor

is not clearly manifested in each conduct prescribed in Article 48 of Competition Law.

Secondly, it is necessary to amend and clarify several specific provisions on unfair

competition acts. Specifically:

(1) As for the act of misleading indication, it should be revised in the way of

describing the current act. Hereby, misleading indication cannot be understood

narrowly as the conduct creating confusion among products, but also includes the

usage of misleading commercial indication in terms of the content of the product.

(2) It is necessary to clarify the legal formation of the conduct of imitating

another advertising product to mislead customers. In this case, there are two issues

need to be clarified when establishing the provisions which are (i) clearly identify

unfairness of the act; (ii) building legal formation of the act.

(3) It is necessary to reassess the unfairness of the act of discrimination towards

similar customers at different promotion areas in the same promotion program. In

terms of legal formation, the current provisions of Clause 3, Article 46 of Competition

Law creates a complex legal formation and makes it difficult to apply in practice. In

addition, in many aspects, the conduct of applying promotion interests for different

customers at different promotion location in the same promotion program does not

have the nature of an unfair competition act, therefore, it is necessary to leave this

provision as unfair competition act out of Competition Law.

(4) With regards to the act of presenting goods free to customers for trial use but

requesting customers to use their goods in exchange for similar goods manufactured by

other enterprises and currently used by such customers. In nature, this conduct has an

unfair nature since the promotion activity is carried out only to people using goods of other

enterprises, then, it interferes a trade between consumers and other enterprises. However,

this prescription does not cover all types of this group and are likely to be outdated

comparing to the actual practice of the market. On the other hand, with the identification

according to Clause 4, Article 46 of Competition Law, only when an enterprise sets forth

conditions on receiving promotion is requesting customers to use their goods in exchange

for similar goods…, can be a violation. In other words, based on the current provision, the

case where the request by the conductor is unclear or does not exist will not be a violation.

This makes this provision narrower comparing to the unfair nature of the act.

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Thirdly, we must identify clearly that the relation between Competition Law and

other State management laws in specific fields is the relation of general law and special

laws. In which, Competition Law sets forth basic principles in identifying and handling

unfair competition acts. Other laws, when regulating unfair competition acts, must

comply with these principles. Other laws regulate and supplement Competition Law on

unfair competition acts within its regulating scope. However, it is necessary to

differentiate between unfair competition acts and the acts simply in violations of a

special law. In order to do this, it is necessary to have formal research about the types of

acts and the nature of unfair competition acts in each field to have appropriate

regulations.

Fourthly, it is necessary to standardize legal provisions on the acts stipulated in

Competition Law and in special laws and to standardize handling viewpoint.

Fifthly, it is necessary to standardize sanction level towards unfair competition act

prescribed in Competition Law and in laws regulating specific legal fields. In order to do

that, there should be further researches on the cooperation mechanism between the

competition authority and the specific sectoral regulatory bodies when investigating and

handling unfair competition acts.

6. Provisions on the model of competition authority

Based on the functions and duties of VCA, Competition Council and with

reference to international experiences, Vietnam should establish a single competition

authority under the Government on the ground of merging VCA and Competition

Council with following reasons:

Activities of the competition authority primarily are investigating and

handling. In particular, in the current context of our country, almost all pivotal

positions in the economy are held by state owned enterprises. So the subjects under

investigations are often state owned enterprises and big economic groups and even

state management agencies. Without a strong position, the competition authority will

surely not be able to fulfill its tasks.

Establishment of an independent competition authority under the Government

shall facilitate mobilizing state budget via independent activities and at the same time

increase the freedom of the competition authority. From the experiences of separating

ministries, branches or restructuring sectors in recent years, it‟s feasible to establish a

ministry-level agency in terms of institution with small structure at the beginning stage

and a mechanism of mobilizing state budget for specific activities. Obviously, the

likelihood of being more independent in the coming time shall not be limited by any

framework.

An independent position of a governmental agency shall ensure and promote

expertise concentration, transparency, accountability and explanation. Independence in

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the process of recruiting, training and appointing personnel as well as independence in

state budget shall ensure higher independence of the competition authority in reality.

One of the most important functions of almost all competition authorities in

the world is consultation. Stipulated at Decree 06/2006/ND-CP dated January 9th

2006,

VCA also has the right “to detect and recommend the relevant agencies in dealing with

issued documents containing contents inappropriate with competition regulations”.

This is actually a progressive point as in a direction to empower the competition

authority with removing all regulations in contradiction with competition regulations.

However, to do this in practice, the competition authority is required to be strong and

powerful enough.

In the current context of Vietnam economy, the number of violations against

Competition Law will surely increase rapidly. This requires the competition authority

to expand to ensure financial and human resource for effective implementation of

assigned tasks.

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CONCLUSION

***

Competition Law was adopted by the National Assembly on 3 December 2004

and has taken effect since 1 July 2005. After more than 5 years of the enforcement,

Competition Law has created an important legal corridor which contribtues to forming

and maintaining a level playing field for business so as to facilitating economic

development, efficient allocation of social resources. Despite achievements,

Competition Law has shown certain drawbacks in need of revising or supplementing in

conformity with practice. To ensure effectiveness in the course of enforcing the Law to

satisfy practical demands from business in the context of the new economy, doing

research and implementing the amendment of the Law need to be done in a quick and

comprehensive manner by competent agencies.

Under the framework of this Report, the research team just indicated several

drawbacks in Competition Law itself together with guidance Decrees. In the course of

revising it, competent agencies need to do more in-depth researches on raised issues in

order to build a set of provisions in conformity with the context of Vietnamese economy,

common practice and customs of doing business. Furthermore, in the course of

amendment, on one hand, the provisions need to be well based on concrete economic and

legal basis, on the other hand, capacity and experiences on law enforcement of the

competition authority as well relevant court system need to be well paid attention to. If

done, the amendment of Competition Law shall bring actual effectiveness./.

Three hierarchies of transducers

Documents

Transcript of Three hierarchies of transducers