Vietnam: Administrative penalties for violations of competition law under the new regulations
The Vietnamese Competition Law was issued in 2018 and took effect on July 1 2019, with the expectation that it would provide healthy and fair competition conditions to businesses in Vietnam by expanding governance out of the territory, and more severe provisions on the prohibited restricted agreements and unfair competition practices.
To give guidance as to how the 2018 Competition Law is to be practically enforced, on September 26 2019, the government issued Decree No. 75/2019/ND-CP (Decree 75), repealing Decree No. 71/2014/ND-CP (Decree 71), to provide a general legal framework and sanctions for administrative violations on competition. Accordingly, violations on competition under the application of Decree 75 include the violations on anti-competitive agreements, abusing a dominant or monopolistic position, economic concentrations, and unfair competition. Subject to specific violations of competition, different administrative penalties shall be applied, including warnings, a fine, additional penalties and remedial sanctions. Below are notable points of the new regulations.
Expanded governance scope
In line with the expanded governance scope of the 2018 Competition Law, Decree 75 explicitly widens its scope beyond the country by covering ‘relevant foreign enterprises’ under its application. Accordingly, regardless of violations on competition law occurring outside of Vietnam, but if the violations are determined to have or probably have competition restricting impacts on Vietnam’s market, the violators will be subject to relevant penalties as described by Decree 75.
Newly regulated state authority in charge of imposing the penalties
Under Decree 75, the National Competition Committee (the NCC), a newly-established authority incorporating the Vietnam Competition Authority and the Vietnam Competition Council, is the only competent authority with the power to impose administrative penalties. This is consistent with regulations of the 2018 Competition Law where the NCC is the only enforcement authority handling competition regulation violations.
Heavier administrative sanctions applicable to unfair competition practices
Pursuant to the Vietnam Competition & Consumer Authority, in 2018, the authority has conducted an inspection on seven cases of abuse of dominant or monopoly position and one case of economic concentration, and received approximately four hundred complaints filed about unfair competition practices performed under various types and manners. The most common types of unfair competition practices that have been recognised are infringement of business secrets, coercion in business, defamation, disrupting competitors’ business, illegally luring customers, and the sale of goods and services below cost.
Due to the fact that the most common violations of competition are acts of unfair competition, the government decided to increase penalties. They may be increased by as much as ten times the maximum penalties applicable to certain violations of unfair competition regulations under Decree 75, according to which, an enterprise may be subject to the highest rate of up to VND2 billion (approximately $84,500). For instance, a monetary fine can be up to VND2 billion for unfair competition practices in respect of selling goods and services below costs which involves two provinces or central-affiliated cities or more, under Article 21.2 of Decree 75.
The penalty levels for other unfair competition practices are also regulated at a higher level under Decree 75 than under Decree 71. Specifically, the act of disrupting competitors’ business may be punished by a monetary penalty up to VND150 million as specified by Article 19, the act of illegally luring customers may be subject to a highest rate of VND 200 million under Article 20, and the acts of infringement of business secrets, defamation, and coercion in business may be subject to a fine of up to VND300 million, as described by Article 16. Meanwhile, the monetary penalty imposed on similar violations under Decree 71 was about VND30 million, VND100 million and VND150 million respectively.
Administrative sanctions imposed on both horizontal and vertical agreements
Under the 2018 Competition Law, horizontal and vertical agreements are distinctly recognised. Decree 75 also provides a clear difference in administrative sanctions to be imposed on horizontal and vertical agreements.
For any violation of vertical agreements, a maximum monetary penalty of five percent of an enterprise’s total income generated within the relevant market in the preceding financial year will be applied. However, as to any violation of horizontal agreements, a higher rate of up to 10% of an enterprise’s total income earned within the relevant market in the preceding financial year will be enforced, but it should be lower than the lowest monetary fines applied to the violators described by corresponding provisions of the Criminal Code.
One notable point is that even if a violating enterprise receives zero profit within the relevant market in the preceding financial year from its violation, still, an administrative fine from VND100 million to VND200 million will be imposed.
Similar to Decree 71, Decree 75 allows the additional application of non-monetary penalties and remedial measures if the NCC deems it appropriate. The additional non-monetary penalties include withdrawals of business licences or enterprise registration certificates or practising licences, confiscation of illegally earned profits, and suspension of business operation for six to 12 months, of which suspension of business operation is a newly introduced and seemingly harsh additional penalty under Decree 75.
Mitigating and aggravating circumstances
The list of mitigating and aggravating circumstances is updated and incorporated into Decree 75 and shall be considered by the NCC upon its determination of applicable penalties. Previously, this list was not written in Decree 71 but separately in another legal document, Decree No. 116/2005/ND-CP. The incorporation of the list into Decree 75 makes a compelling and comprehensive document. The additional mitigating factor, ‘first-time violation’, in the list can be seen as mercy on the applicable penalties under Decree 75. Decree 75 took effect on December 1 2019.
Vu Le Bang