Vietnam is one of the fastest-growing economies in the world. The low cost of living and highly qualified population make it an ideal location for foreign companies who are looking to branch out and invest. However, expanding internationally has its disadvantages as well. Not knowing the local laws and regulations makes it a thousand times harder to open a company overseas.
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.
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.
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
- 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.
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:
4.2. An economic concentration regime will be carried out if one of the following cases occurs:
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.
- The National Competition Commission shall receive notification dossiers.
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.
6.2. 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.
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:
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