July 10, 2020
The long-waited guidance on the Competition Law — the Decree 35/2020/ND-CP (Decree 35) — was issued on March 24, 2020 with effect from May 15, 2020, and casts light on certain prominent provisions of the Competition Law, such as economic concentration.
Under the Competition Law, economic concentration includes, among other things, acquisition of a company to the extent of controlling or dominating the acquired company or its business line. Decree 35 now further defines “controlling or dominating” as:
- holding up to 50 percent voting right shares, or 50 percent total assets related to any or all business line, of acquired company; or
- having right to, directly or indirectly, appoint or remove majority of member(s) or chairman of the board, or chief executive officer, or amend the charter, or decide critical issues, of acquired company.
Under Decree 35, the thresholds that trigger mandatory pre-merger notification include:
- involved party’s total assets in the Vietnam market exceeding VND3,000 billion in the preceding fiscal year;
- involved party’s total turnover exceeding VND3,000 billion in the preceding fiscal year;
- the value of the transaction exceeding VND1,000 billion (not applicable in case of transaction outside the territory of Vietnam); or
- combined market share exceeding 20 percent in preceding fiscal year.
These thresholds are more stringent for transactions involving credit institutions, securities or insurance companies, in particular:
- involved parties’ total assets in the Vietnam market exceeding VND15,000 billion;
- involved credit institutions’ total assets exceeding 20 percent of the whole credit institution system;
- turnover of involved insurance companies exceeding VND10,000 billion, or of involved securities companies exceeding VND3,000 billion;
- involved credit institutions’ turnover exceeding 20 percent of the whole credit institution system;
- value of transaction involving credit institution exceeding VND3,000 billion or 20 percent of credit institution system’s total charter capital in the preceding fiscal year; or
- the combined market share exceeding 20 percent in preceding fiscal year.
After the 30 days upon the pre-merger notification filling, an economic concentration transaction may be implemented if it falls under either of below cases, among others:
- the combined market share is below 20 percent;
- the combined market share exceeds 20 percent but post-merger aggregate of square number of each involved parties’ market shares is less than 1,800;
- the combined market share exceeds 20 percent, and post-merger aggregate of square number of each involved parties’ market shares exceeds 1,800, but the amplitude increase of the aggregate of square number of each involved parties’ market shares between pre-merger and post-merger is below 100; or
- involved parties in relevant supply/manufacturing chain have 20 percent combined market share.
Otherwise, an economic concentration shall undergo an official review to determine whether it may cause significant competition-restraining impact and subsequently should be banned. The official review shall base on, among others, market share combination, threat to cause or reinforce market power, ability to increase ability for correlation or collusion, relationship between involved parties in the manufacturing and supply chain, competition advantage, ability to increase price or profit margin ratio.
In addition, Decree 35 also introduces various criteria in determining the significant competition-restraining impact on market of a cartel conduct, including, among others, development of market share of involved parties, barriers to market access or expansion, restriction on research, development and technological innovations, increase of costs and time for customers to purchase goods or services.
In respect of competition dispute settlement, Decree 35 gives further detail on requirements on evidence collection, usage and examination. Decree 35 further provides for procedure on implementing certain interim injunctions during competition investigation.
https://www.inhousecommunity.com/article/vietnam-release-long-awaited-guidance-competition-law/