INTRODUCTION

The Competition Regulation Act of Vietnam was firstly enacted in 2004 (having taken effect from July 1, 2005), marking a significant milestone in creating a unified legal corridor for competition activities of businesses in the market.

After more than 13 years of implementation, with extensive and comprehensive changes of the economy as well as the legal-social environment, Vietnam has issued a new Competition Law (Law No. 23/2018/QH14 dated June 12, 2018 includes 10 Chapters, 118 Articles, which takes effect from July 1, 2019) (“Competition Law 2018”). The Competition Law 2018 replaces the Competition Law 2004 and is implemented by Decree No. 35/2020/ND-CP dated March 24, 2020 (“Decree 35“).

Decree 35 takes effect from May 15, 2020 with notable provisions on:

1. Provisions on merger control;
2. Provisions on anti-competitive agreements; and
3. Provisions on economic concentration’s notification thresholds and substantial market power.

(“Highlights of Decree 35“)

In this legal update, we wish to highlight the above notable provisions of Decree 35.

HIGHLIGHTS OF DECREE 35

1.The Definition of Control, Domination of a Business

Based on the ownership rate and control right of the acquiring enterprise over the acquired enterprise, Decree 35 provides a specific definition of “controlling and dominating the enterprise” (or a business line of another enterprise) when it falls into one of the following cases: ^[1]

1. Ownership rate: Acquiring enterprises shall acquire ownership (i) over 50% of charter capital or (ii) over 50% of voting shares;
2. Ownership/Use of assets: Acquiring enterprises hold the ownership/use of assets over 50% of assets of acquired enterprises;
3. Relevant managing rights over acquired enterprises: Acquiring enterprises have one of the following rights:
4. Directly or indirectly making decisions regarding (most or all) certain management personnel of the acquired enterprise;
5. Making decisions on amendment or supplementation of the corporate charter of the acquired enterprise; and
6. Making decisions on important statutory issues in the business activities of the acquired enterprise.

While the old regulations (Competition Law 2004 and its guiding Decree 116/2005/ND-CP) merely stipulated the methods of controlling and dominating enterprises through property ownership of acquired enterprises, Decree 35 provides a broader scope, not only on the property ownership but also on the ownership rate of charter capital and shares, especially the actual rights that acquiring enterprises may impose a significant impact on the business activities and operation of the acquired enterprise.

2.         Determination of Substantial Market Power

Stipulation on “substantial market power” is the new provision in the Competition Law 2018 and Decree 35 containing specific legal criteria. It should be noted that the “substantial market power” provision is (one of) the ground for determining whether an enterprise/group of enterprises holds a dominant position in the market and this has important implications for the government in regulating competitive activities.

While the Competition Law 2004 only focused on market share factor to assess market power, the Competition Law 2018 and Decree 35 made reference and adjustment according to foreign laws, specifically the laws of the United States and the European Union to supplement evaluation criteria and provide detailed guidance on how to determine these criteria in order to legislate and define the concept of “substantial market power”. This makes the analysis of market power of enterprises become more comprehensive and accurate, the relevant competent authorities would be more proactive and flexible in reviewing and making assessments of whether an enterprise or group of enterprises is considered to be dominant in the market or not.

3.         Notification thresholds

An enterprise or group of enterprises must notify economic concentration when it exceeds one of the 4 following “thresholds” (based on the fiscal year preceding the planned year of economic concentration):

Criteria	Proportion
Banking	Insurance	Securities	Other industries
Total asset available (in the Vietnamese market)	≥ 20%	≥ VND 15,000 billion	≥ VND 3,000 billion
Tổng doanh thu/ Total revenue	≥ 20%	≥ VND 10,000 billion	≥ VND 3,000 billion	≥ VND 3,000 billion
Transaction value	≥ 20%	≥ VND 3,000 billion	≥ VND 1,000 billion
Combined market share (in relevant market)	≥ 20%
Note: The criterion “Transaction value” does not apply in case of economic concentration conducted outside the territory of Vietnam.

Therefore:

Decree 35 has adjusted the approach to economic concentration transactions by introducing various economic factors rather than focusing on only combined market share element as in the preceding law.

The combined market share of enterprises intending to participate in economic concentration is more strictly controlled (“from 20% or more” compared to “from 30% or more” under the preceding law).

4.         Preliminary Appraisal of Economic Concentration

The preliminary appraisal result of economic concentration will be notified by the National Competition Commission within thirty (30) days from the date of receipt of the complete dossier of the parties. The results of this notice shall be: (i) allow economic concentration to be carried out; or (ii) economic concentration must be in the official appraisal.

If after a preliminary appraisal, the National Competition Commission decides that there must be an official appraisal conducted within ninety (90) days from the date of notification on the preliminary appraisal (can be extended but not later than sixty (60) days for complicated cases and must be notified in writing to the parties) before making a final decision.

5.         Anti-competitive Agreement

Decree 35 provides detailed guidance on the appraisal of impact or likelihood of causing significant anti-competitive impact of anti-competitive agreements. However, a notable new point in this Decree is the stipulation of safe “threshold” of anti-competitive agreements, or in other words, when an anti-competitive agreement is considered not causing or not being able to exert a significant anti-competitive impact. Accordingly: (i) a horizontal competitive agreement with a combined market share less than 5% or (ii) a vertical competitive agreement with a market share less than 15% shall be considered to have no significant anti-competitive impact.

CONCLUSION

In brief, the biggest change that the Competition Law in general and Decree 35, in particular, aiming at is the strict control of economic concentration transactions. Specific provisions referring to foreign law regarding the economic concentration’s notification thresholds, the definition of business control or business domination, stipulations on substantial market power determination, etc… have created a clear and enforceable systematic legal provisions, from the perspective of both State management and the businesses in the implementation of related transactions under the governing scope of the new Law.