Guidelines on the 2018 Law on Competition

On 24 March 2020, the Government issued Decree 35/2020/ND-CP detailing a number of articles of the Law on Competition by the National Assembly on 12 June 2018. Accordingly, Decree 35/2020/ND-CP will take effect on 15 May 2020 and feature some remarkable contents as follows:

(a) Determination of relevant market

Relevant market is determined based on the relevant product market and the relevant geographical market

• Determination of relevant product market
  •  Relevant product market means a market of goods and services which are interchangeable in terms of characteristics, use purpose and price.
  • Goods and services are deemed to be interchangeable in terms of characteristics if such goods or services have one or more of the following factors which are similar: (i) Characteristics of the goods or services; (ii) Composition of the goods or services; (iii) Physical or chemical properties of the goods; (iv) Technical features of the goods or services; (v) Side effects of the goods or services on users; (vi) Absorption capacity of users; (vii) Other distinct properties of the goods or services.
  • Goods or services are deemed to be interchangeable in terms of their use purpose if such goods or services have the same main use purpose.
  • Goods or services are deemed to be interchangeable in terms of their price when their price differs by no more than 5% in similar transaction conditions.
  • If the said factors are not sufficient to determine the relevant product market, one or more factors may be considered, such as the time of use of the goods or services; consumer habits, etc.
• Determination of relevant geographical market
  • Relevant geographical market means a specific geographical area in which interchangeable goods or services are supplied on similar competitive conditions and which is significantly different from neighbouring geographical areas.
  • The boundary of a geographical area is determined based on the following factors:
    • The business establishments of enterprises participating in distribution of the relevant goods or services are located within the geographical area.
    • The business establishments of other enterprises located in neighbouring geographical areas are close enough to the geographical area prescribed in sub-clause (a) above to compete with relevant goods or services in such geographical area.
    • Costs of transporting the goods or of providing the services.
    • Time for transporting the goods or providing the services.
    • Barriers to market entry or market expansion.
    • Consumer habits.
    • Costs and time for customers to purchase the goods or services.
  • A geographical area is deemed to have similar competitive conditions and to significantly differ from neighbouring geographical areas if it satisfies either or both of the following criteria:
  • • The transportation costs and transportation time cause the price of the goods or services to increase by no more than 10%.
    • One of the barriers to market entry and market expansion prescribed in Article 8 is present.

 

(b) Determining market share

• The market share of an enterprise in the relevant market is determined by one of the methods prescribed in article 10 of the Law on Competition.
• The sales turnover, input purchase turnover, number of units sold, and input purchased for any one type of goods and services of a group of affiliated enterprises are determined as follows:
  • Sales turnover, input purchase turnover, number of units sold, and input purchased for any one type of goods and services in order to determine the market share of a group of affiliated enterprises is calculated as equal to the total sales turnovers, input purchase turnovers, numbers of units sold, and input purchased for such type of goods and services of all of the enterprises in such group.
  • Sales turnovers, input purchase turnovers, numbers of units sold, and input purchased for any one type of goods and services of a group of affiliated enterprises does not include the sales turnover, input purchase turnover, or number of units sold and input purchased from the sale of goods and supply of services among the enterprises in such group of affiliated enterprises.
• The market share of an enterprise belonging to a group of affiliated enterprises is the market share of such group.

 

(c) Determining significant market power

The significant market power of an enterprise or group of enterprises is determined based on one or more of the following factors:

• Correlation of market shares among enterprises in the relevant market.
• The financial strength and scale of the enterprise or group of enterprises.
• Barriers preventing other enterprises entering or expanding the market.
• Ability to hold, access and control the market for distribution and/or sale of goods or services, or supply sources of goods and services.
• Advantages of technology and technical infrastructure of the enterprise or group of enterprises.
• Ownership and the right to hold and access infrastructure.
• Ownership and the right to use objects of intellectual property rights.
• Ability to switch to sources of supply and demand of other relevant goods or services.
• Special factors in the industry or sector in which the enterprise or group of enterprises is currently conducting business.

 

(d) Safety threshold for an agreement on restricting competition and economic concentration

• An agreement on restricting competition is deemed not to have a significant competition-restricting impact in either of the following cases:
  • Applicable to an agreement among enterprises in the same relevant market, when the combined market share of the participating enterprises is below 5%. (Horizontal competition restriction agreement)
  • Applicable to an agreement among enterprises conducting business at different stages in the same production, distribution and supply chain for a specified type of goods or services, when the market share of each participating enterprise is below 15%. (Vertical competition restriction agreement)
• Economic concentration is considered safe when:
  • The combined market share of the enterprises intending to participate in the economic concentration is less than 20% in the relevant market; or the combined market share of the enterprises intending to participate in the economic concentration is 20% or more in the relevant market and the total market share squares of the enterprises after such economic concentration in the relevant market will be less than 1,800 (calculated according to the formula prescribed in Article 2.4 of Decree 35/2020/ND-CP); the combined market share of the enterprises participating in the economic concentration is 20% or more in the relevant market, and the total market share squares of the enterprises after such economic concentration in the relevant market will be above 1,800 and the increase in the total market share squares of the enterprises in the relevant market both before and after the economic concentration is less than 100. (Horizontal economic concentration)
  • The enterprises participating in the economic concentration have relationship with one another in the chain of production, distribution and supply of a certain type of goods or services, or their business lines provide mutual inputs or provide ancillary support to one another is less than 20% in each relevant market. (Vertical economic concentration)

 

(e) Economic concentration notification threshold

• Enterprises intending to participate in an economic concentration must notify the National Competition Council prior to carrying out the economic concentration in any of the following cases:
  • Total assets in the market of Vietnam of the enterprise or group of affiliated enterprises of which such enterprise is a member are VND 3,000 billion or more in the financial year immediately preceding the year of proposed implementation of economic concentration.
  • Total sales turnover or input purchase turnover in the market of Vietnam of the enterprise or group of affiliated enterprises of which the enterprise is a member is VND 3,000 billion or more in the financial year immediately preceding the year of proposed implementation of economic concentration.
  • The transaction value of the economic concentration is VND 1,000 billion or more.
  • The combined market share of the enterprises intending to participate in the economic concentration is 20% or more in the relevant market in the financial year immediately preceding the year of proposed implementation of economic concentration.
• Within 30 days after receipt of a complete and valid file notifying an economic concentration, the National Competition Council will issue a notice of the results of its preliminary appraisal of the economic concentration

In addition, Decree 35/2020/ND-CP stipulates the evidence in competition legal proceedings such as rights and obligations regarding evidence; circumstances and facts not required to be proven; submitting evidence; arranging for or requesting an expert evaluation; arranging for an evaluation if evidence is alleged to be false; entrusting others to collate data and evidence; preserving evidence; evaluation of evidence; announcement and use of evidence. Sequence and procedures for taking preventive measures and ensuring resolution of administrative breaches during an investigation and resolution of competitive cases

 

 

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