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Vietnam: Notable changes introduced by the draft competition law

A new competition law is scheduled to be enacted in 2018 and take effect in 2019. Currently, legislators are collecting public opinions on the second draft of this legislation, one of the hot topics currently being discussed by legal practitioners. One of the most important points to consider is that unlike the current regulations which do not clearly govern foreign entities, the draft law expressly provides that foreign entities and anti-competitive activities, including economic concentrations (ECs) which are performed outside of Vietnam but would cause a restriction of competition in Vietnam market, shall be subject to this legislation. Therefore, M&A deals between offshore entities in relation to indirect equity interests in a Vietnam-based entity will come under the oversight of the Vietnamese competition authorities.

The draft law also introduces the concept of leniency to encourage violating entities to coordinate with authorities in discovering, investigating and dealing with prohibited anti-competition acts. Leniency shall be granted by the National Competition Committee (NCC) established by the government in the form of exemptions or reductions of sanctions if the violating entities satisfy certain conditions set forth by the law. The details of such exemptions or reductions will be provided in separate legal documents.

ECs are currently prohibited if participants have a combined market share of 50% or more in the relevant markets (with some exemptions), and are subject to a notification obligation if participants have a combined market share of 30% to 50%. In practice, the combined market share is not easily determined by EC participants. Thus, the draft law changes the control method of ECs by setting clearer thresholds to determine the ECs subject to the notification obligation. It also empowers the NCC to determine the prohibited ECs (without exemptions) if such ECs can potentially cause a significant negative impact on competition in Vietnam (including vertical, horizontal and mixed transactions). These thresholds include: (i) either party holding 20% of the relevant market shares; (ii) either party having the total annual revenue of VND500 billion ($22 million) in Vietnam in the preceding fiscal year; or (iii) a transaction value from VND300 billion. If the EC falls in one of these cases, it must be reported to the NCC in advance. The NCC shall then appraise and decide whether it is prohibited or not.

Vu Le Bang and Nguyen Tuan Anh

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