Economic concentration: changes under the Law on Competition 2018 in Vietnam

Economic concentration: changes under the Law on Competition 2018 in Vietnam (Internet image)

First, Clause 4, Article 29 of the Competition Law 2018 (effective from July 1, 2019) regulates economic concentration in the form of "enterprise acquisition," which is the direct or indirect purchase by an enterprise of all or part of the capital contribution and assets of another enterprise, sufficient to control and dominate the enterprise or an industry or occupation of the acquired enterprise. Meanwhile, Clause 3, Article 17 of the Competition Law 2004 only states: “Business acquisition is the purchase of all or a portion of the assets of another business by one business, sufficient to control and dominate all or one industry of the acquired business.” It can be seen that the concept of "business acquisition" under the Competition Law 2018 has been expanded, including the purchase of capital contributions.

Second, on the issue of economic concentration control. Previously, in the Competition Law 2004, an economic concentration transaction was prohibited only if the combined market share of the enterprises in the economic concentration case was more than 50% of the relevant market (Article 18 of the Competition Law 2004). However, according to Article 30 of the Competition Law 2018, this condition is replaced by factors on whether the economic concentration has the effect or is likely to have the effect of significantly restricting competition in the Vietnamese market. The impact assessment is based on one of the following factors or a combination of the following factors:

• Combined market share of enterprises participating in economic concentration in the relevant market;
• The level of concentration in the relevant market before and after economic concentration;
• Relationships of businesses participating in economic concentration in the production, distribution, and supply chain for a certain type of goods or service, or business lines of enterprises participating in economic concentration, are each other's inputs or complement each other;
• Competitive advantage brought about by economic concentration in the relevant market;
• The ability of enterprises after economic concentration to increase prices or increase profit margins on revenue significantly;
• The ability of enterprises, after economic concentration, to eliminate or prevent other enterprises from entering or expanding the market;
• Specific factors in the industry or field in which businesses participate in economic concentration.

Third, about the economic concentration announcement. Previously, an economic concentration transaction needed to be reported to the competition authority, if the combined market share of the economic concentration enterprises was between 30% and 50% in the relevant market, according to Clause 1, Article 20 of the Competition Law 2004. Currently, according to Article 33 of the Competition Law 2018, enterprises participating in economic concentration must submit economic concentration notification documents to the National Competition Commission if they fall within the economic concentration notification threshold determined based on one of the following criteria:

• Total assets in the Vietnamese market of enterprises participating in economic concentration;
• Total revenue of that enterprise in the Vietnamese market;
• Transaction value of economic concentration;
• Combined market share in the relevant market of enterprises participating in economic concentration.

Thus, instead of providing a specific number, the Competition Law 2018 has replaced it with qualitative criteria to determine whether an enterprise falls under the economic concentration notification threshold or not.

Bao Ngoc

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