Vietnam: 05 elements for assessing the likelihood of appreciation in the profit margin of an enterprise after economic concentration

According to Decree No. 35/2020/ND-CP of Vietnam’s Government, likelihood of appreciation or increase in the profit margin of an enterprise after economic concentration. This shall be evaluated based on one or some of the following factors:

- Projected changes on the demand side which shall be assessed in anticipation of the fact that, after completion of the economic concentration program, the participating enterprise may appreciate and change their production or conditions for transaction of their products and services in the relevant market;

- Projected changes on the supply side of enterprises which shall be assessed in anticipation of the fact that, after completion of the economic concentration program, their competitors in the relevant market may appreciate and change their production or conditions for transaction of their products and services;

- Projected changes in prices, production output and conditions for transaction of suppliers of products or services that are input factors of enterprises participating in the economic concentration program;

- Competitor’s conditions for and threats from increases in cooperation or agreement between them for the purpose of elevating their selling prices or profit margins;

- Other factors causing effects on likelihood of appreciation or increase in the profit margin of an enterprise after economic concentration.

This is one of the subject matters of the assessment of anti-competitive effects or likelihood of causing significant anti-competitive effects of economic concentration regimes. Moreover, other important contents are specified as follows:

- Joint market share of enterprises participating in the economic concentration program in the relevant market before and after economic concentration.

- Level of concentration in the relevant market before and after the economic concentration which is assessed for the purpose of determining the threat of creating or reinforcing the market power of an enterprise, the ability to increase coordination and collusion among enterprises in the relevant market.

- Relationship between enterprises participating in the economic concentration program in the same chain of production, distribution and supply of a certain product or service, or business sectors or industries of enterprises engaging in the economic concentration program that are providing input or supporting products or services for each other. This shall be assessed for the purpose of proving that, after completion of the economic concentration program, participating enterprises will have capabilities of creating more competitive advantages than their competitors in order to impede or rule out market entry competition.

- …

View more details at Decree No. 35/2020/ND-CP of Vietnam’s Government effective from May 15, 2020.

Le Hai

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE