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Vietnam Economic Concentration

When could prohibit a case of economic concentration? LOC could prohibit implementation of economic concentration of enterprises if it exerts an impact or is likely to exert a significant anti-competitive effect on Vietnam market. The criteria to determine the case of being prohibited is based on the nature of the effect. Another criteria is the possibility of causing the competition restriction effect of the economic concentration transaction. Only economic concentration transactions that cause or likely to exert significant anti-competitive effects without remedying such anti-competitive effects are prohibited.

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Table of contents
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1. What is economic concentration

Economic concentration (from the perspective of economic science), is seen as a strategy of capital accumulation and production concentration to form large-scale business entities in order to exploit advantages of scale. From the perspective of a market economy, economic concentration is a popular activity of enterprises in order to enhance their economic potential and create new enterprises of larger scale than before. Thus, economic concentration can form an enterprise with a dominant position or a monopoly position. When in this position, enterprises tend to abuse their position to perform acts that adversely affect the market, other enterprises and consumers. Therefore, the acts of economic concentration must be controlled by law.

Vietnam's competition law does not provide a general concept to define the act of economic concentration, but only lists the forms of economic concentration. According to Article 29 of the Competition Law 2018, economic concentration is an act of an enterprise, including: merger of enterprises; consolidation of enterprises; acquisition of enterprises; joint venture between/among enterprises and other categories of economic concentration as per the law.

2. Purpose of economic concentration

Economic concentration is becoming more frequent and larger in scale. This fact comes from many different reasons, but mainly because economic concentration always benefits enterprises. The main purposes of economic concentration are:

-        Economic concentration helps enterprises create large business models to increase economies of scale

-        Self-protect against the risk of financial control by another corporation that the enterprise do not desire

-        Consolidate distribution enterprises or customers into one to better ensure the supply or consumption of products

-        Implement strategies that focus on a few activities or activities diversify

-        Meeting the needs of foreign corporations gaining a foothold in the market

-        Create opportunities to penetrate new markets

3. Transactions that need to be notified to the National Competition Commission before carrying out the economic concentration regimes:

  1. Total asset available in the Vietnamese market of a company or a group of affiliated companies of which the company is an affiliate must be worth VND 3,000 billion or more in the fiscal year preceding the planned year of economic concentration;
  2. Total sales or purchase volume arising in the Vietnamese market of a company or a group of affiliated companies of which the company is an affiliate must be worth VND 3,000 billion or more in the fiscal year preceding the planned year of economic concentration;
  3. Value of all economic concentration transactions must be worth at least VND 1,000 billion;
  4. The joint market share of enterprises intending to participate in the economic concentration program must account for at least 20% of total share of the relevant market in the fiscal year preceding the planned year of economic concentration.
  5. Any enterprise, including credit institutions, insurance companies or securities companies, intending to participate in the economic concentration program as provided in Clause 1 of Article 33 in the Competition Law must notify the National Competition Commission before carrying out the economic concentration regimes if one of the following cases occurs:

-        Total asset available in the Vietnamese market of a company or a group of affiliated insurance companies of which the company is an affiliate must be worth VND 15,000 billion or more in the fiscal year preceding the planned year of economic concentration; total asset available in the Vietnamese market of a credit institution or a group of affiliated credit institutions of which the credit institution is an affiliate must account for at least 20% of total asset of the entire system of credit institutions in the Vietnamese market in the fiscal year preceding the planned year of economic concentration;

- Total sales or purchase volume arising in the Vietnamese market of a company or a group of affiliated insurance companies of which the company is an affiliate must be worth VND 10,000 billion or more in the fiscal year preceding the planned year of economic concentration; Total sales or purchase volume arising in the Vietnamese market of an enterprise or a group of affiliated securities companies of which the enterprise is an affiliate must be worth VND 3,000 billion or more in the fiscal year preceding the planned year of economic concentration; total sales earned in the Vietnamese market of a credit institution or a group of affiliated credit institution of which the credit institution is an affiliate must account for at least 20% of total sales earned in the entire system of credit institutions in the fiscal year preceding the planned year of economic concentration;

- Value of all economic concentration transactions of insurance companies or securities companies must be at least VND 3,000 billion; value of all economic concentration transactions of credit institutions must account for at least 20% of total charter capital in the entire system of credit institutions calculated in the fiscal year preceding the planned year of economic concentration;

- The joint market share of enterprises intending to participate in the economic concentration program must account for at least 20% of total share of the relevant market in the fiscal year preceding the planned year of economic concentration.

  1. f. If economic concentration regimes are implemented outside of the Vietnamese territory, the threshold for issuing notification of economic concentration shall conform to provisions laid down in point a, b or d of Clause 1; point a, b or d of Clause 2 of Article 13 of Decree 35/2020/ND-CP dated 24/3/2020 elaborating on several Articles of Competition Law.
  2. The process of appraising economic concentration dossiers

4. Preliminary evaluation of economic concentration

4.1. Within 30 days after receiving a complete and valid notification of economic concentration, the National Competition Commission shall issue a notice of one of the following results of preliminary evaluation of economic concentration:

  1. Consent to economic concentration regimes;
  2. Official evaluation of economic concentration regimes.

4.2. An economic concentration regime will be carried out if one of the following cases occurs:

  1. The joint market share of enterprises intending to participate in the economic concentration program must account for less than 20% of total share of the relevant market;
  2. The joint market share of enterprises intending to participate in the economic concentration program must account for at least 20% of total share of the relevant market while the sum of squares of market share points of enterprises after economic concentration in the relevant market must be less than 1,800;
  3. The joint market share of enterprises participating in the economic concentration program must account for at least 20% the relevant market; the sum of squares of market share points of enterprises after economic concentration in the relevant market must be more than 1,800; the amplitude of increases in the sum of squares of market share points of enterprises in the relevant market before and after economic concentration must be less than 100;
  4. Market shares of enterprises participating in the economic concentration program that have relationships with each other 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, must be less than 20% of total share of the relevant market.

4.3. Upon expiration of the time limit specified in Clause 1 of Article 14 of the Decree 35/2020/ND-CP elaborating on several Articles of Competition Law, if the National Competition Commission has not yet issued a notice of preliminary evaluation results, the economic concentration regime shall be implemented.

4.4. Economic concentration regime will be subject to the official evaluation if it does not fall into the cases specified in the Section 4.2 and 4.3 above.

5. Competent agencies of receipt and process of economic concentration dossiers:

-  The National Competition Commission shall receive notification dossiers.

  • Within 7 working days from receipt of an exemption application, the National Competitive Commission shall notify the applicant in writing that whether the application is complete and valid.

If the application is incomplete or invalid, the National Competition Commission shall notify the applicant in writing of deficiencies need amendments and allow them 30 days to make amendments from the date of notice.

Upon expiry of 30 days, if no amendment is made or the application is not amended completely, the National Competition Commission shall return the notification dossier.

6. Components of an economic concentration notification dossier

6.1.   A notification dossier shall consist of:

  1. A notification of economic concentration issued by the National Competition Commission;
  2. Agreed contents of the economic concentration or draft contracts, memorandum of understanding regarding economic concentration between/among enterprises;
  3. Valid copies of the business registration certificates of similar documents of all enterprises engaging in economic concentration;
  4. Financial statements of all enterprises engaging in economic concentration in two consecutive years before the notification year or, in case of newly-established enterprises, from the establishment time to the notification time as per the law;
  5. The list of parent companies, subsidiaries, associate companies, branches, representative offices and other affiliated entities of every enterprise engaging in economic concentration (if any);
  1. The list of goods, services dealt in by each enterprise engaging in economic concentration;
  2. Information about market shares in the sector where economic concentration will take place held by every enterprise engaging in economic concentration in 2 consecutive years before the notification year;
  3. Proposed remedies for possible anti-competitive effects of the economic concentration;
  4. Report on assessment of positive effects of economic concentration and measures to enhance the positive effects of economic concentration.

6.2. Enterprises submitting notification dossiers shall be accountable for the truthfulness of their dossiers. Vietnamese translations are required if documents in the dossier are made in foreign language.

LHD Law Firm Advise (Notes For Preparing A Dossier For Notification Of Economic Concentration in Vietnam)

Assessing the positive impact of economic concentration on one of the following factors or a combination of these factors: Positive impacts on the development of the sector, field and science and technology according to the government’s strategies and zoning plans are evaluated based on the following aspects:

  1. The ability to promote economic efficiency thanks to the scale and resources of localities, industries, fields and society, due to the economic concentration in accordance with the goals set in the strategies and plannings on the development of fields and sectors already approved by the Government or the Prime Minister;
  2. The level of application of scientific and technological advances of enterprises to the society after economic concentration in order to improve productivity, quality and business efficiency that aims to reduce costs and improve the quality of products and services or serve the interests of consumers and society.
  • The positive impact on small and medium-sized enterprise’s development is considered based on the assessment of opportunities and favorable conditions for small and medium-sized enterprises upon the entry and expansion of the market or joining the production chain, the distribution network of goods and services expected to be brought about by the economic concentration.
  • Enhancing the competitiveness of Vietnamese enterprises in the international market is assessed based on the positive consequences of economic concentration due to the expansion of production, domestic consumption, export of goods and services of enterprise after economic concentration.

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