Partner Tuan Nguyen commented on the URC company’s products

Nearly 40,000 barrels of  Red Dragon and C2 by URC Vietnam Company Limited produced that contains the lead content exceeding the permitted level was consumed out of the market. In spite of being obligated administrative penalty with the total amount over 5.8 billion Dong, the more concerning issue should be consumers’ health who directly suffered from such products. So in this situation, what shall consumers need to do to reclaim their rights?

Let’s watch the video to see how Mr. Tuan Nguyen – Partner in charge of Antitrust practice group at LNT & Partners gave comments on this case:

Vietnam: Merger Control – Vietnam Law Insight

Published by The Global Competition Review in association with LNT & Partners

Under Vietnam’s Competition Law (VCL), economic concentration includes company mergers, consolidations and acquisitions, and the creation of joint venture. Since it was created in 2005, the Vietnam Competition Authority (VCA) has not officially rejected any proposals for economic concentration that have been notified. However, this does not necessarily mean that this aspect of competition law is overlooked in Vietnam. According to the VCA’s reports, since 2011, it has dealt with an average of three to four notifications per year. In addition, the VCA is closely monitoring merger and acquisition activities in the market by cooperating with the licensing authorities and administering the structural changes of enterprises to ensure that all economic concentration is properly controlled by the competition authority. Notably, on 22 December 2014, the prime minister issued Decision 2327/QD-TTg (Decision 2327), granting an exemption to a merger between the only two card networks, resulting in a monopoly in the relevant market. This is remarkable for being the first exemption granted by the prime minister after 10 year’s enforcement of the VCL.

In this chapter, we shall revisit the merger control regime under the VCL, focusing particularly on the application of exemption rules. We shall comment on the merger control policy in Vietnam through the case study of the Card Union merger, and recommend some lesser-known solutions that investors may consider in the early stages to get the deal through.

Overview of the economic concentration regime

Certain merger controls may impose these economic concen­trations (ie, a statutory notification or prohibition). The applicable form of merger controls shall be subject to the combined market share of a transaction.

If the combined market share of an economic concentration in the relevant market is below 30 per cent, then there are generally no restrictions. Such non-restriction also applies if the resulting merger is considered a small or medium-sized enterprise. Under the current applicable regulations, the criteria for determining the size of business are based on investment capital and number of employees, depending on the line of business. For example, a medium-size trading or service enterprise will have an investment capital of from approximately US$500,000 to US$1 million and a number of employees from 50 to 100.

If the combined market share is between 30 per cent and 50 per cent, the economic concentration must be notified to and approved by the VCA before the parties may proceed with the merger.

If the combined market share is more than 50 per cent, the economic concentration will be prohibited unless exempted by the prime minister or the minister of industry and trade (minister), as the case may be.

A violation of economic concentration regulation would result in a penalty of up to 10 per cent of the turnover of the participating parties. Other remedies, including divestiture or separation of a merged company, may be applied subject to the authorities’ decision.

The market share of a company is calculated by reference to its percentage of turnover from sales or inwards purchases over the total turnover from sales or inwards purchases of all companies in the business of the same type of goods in the relevant market for a month, quarter or year. The combined market share is the total market share in the relevant market of all companies participating in the economic concentration.

The data necessary for determining market share may be obtained from various government agencies, such as the General Statistics Office (in general), the Ministry of Finance (for the insurance industry), the Ministry of Information and Communications (for the telecommunications industry) or the State Bank of Vietnam (for the banking industry). Data published by reputable market researchers can also act as a useful starting point. Interestingly enough, the Vietnam Competition Authority (VCA), a govern­mental competition watchdog, will predominantly look at the extent of the combined market share when assessing whether an economic concentration shall be notified or prohibited in accordance with the VCL.


The prime minister has the authority to exempt an economic concentration that would otherwise be prohibited if it is considered to contribute to the nation’s socio-economic development or techno­logy advance. Such exemption authority shall be under the minister in case a party of the prohibited economic concentration is at risk of dissolution or bankruptcy. The decision to grant an xemption shall consider, among others, the duration of the exemption, and the conditions on and obligations of the parties.

The VCA is responsible for evaluating requests of exemption and proposing that the minister grant exemption within its authority. If the prime minister authorises such exemption, the minister is required to send official letters seeking opinions on the exemption request from ministries, ministerial equivalent bodies, government bodies and other organisations and agencies concerned before submitting an evaluation report to the prime minister for his consider­ation and decision. Nevertheless, the VCL does not provide further guidance or criteria on determining such duration, conditions and obligations.

According to Decree 116/2005/ND-CP of the government dated 15 December 2015, providing detailed regulations for implement­ation of a number of articles of the Law on Competition, the follow­ing basic particulars must be included in the evaluation report:

  • compliance by the explanatory report of the merging parties with satisfaction of the criteria for entitlement to exemption for a definite period;
  • issues on which there are differing opinions and a plan for dealing with such issues; and
  • the opinion of the VCA or minister where the economic concen­tration falls within the category for which the prime minister has authority to make a decision on exemption.

The exemption decision must be made public within seven days from the date of issuance. The exempting authority (ie, the prime minister or the minister) may revoke the exemption at any time during the exemption period in certain circumstances, such as if the conditions for granting exemption no longer exist.

The Card Unions merger

Case background

Decision 2327 concerned the merger of the only two card unions in Vietnam: Smartlink Card Services JSC to Vietnam National Financial Switching JSC (Banknet). The two companies are the result of a joint venture established by commercial banks operating in Vietnam to provide payment services for bank and payment cards and other related services (ie, card unions). It is worth noting that the State Bank of Vietnam (SBV) became a major shareholder of Banknet in March 2010. Since these companies are exclusive providers for banks in Vietnam, the merger would result in a card union monopoly. As such, its initial proposal of merging Smartlink into Banknet in 2012 was considered controversial, despite the SBV’s endorsement.

The main concern was that the monopoly status of Banknet would effectively eliminate the competition in the market and relieve the banks from pressure of innovation. Furthermore, the monopoly may create commercial advantages for the bank members against those that have yet joined the system. In response to this concern, a representative of SBV assured the public that after the merger, Banknet would have various business plans to serve the nation and consumer interest. According to SBV, certain benefits of the merger include:

  • developing infrastructure for retail banking and non-cash payments in Vietnam;
  • providing better services to customers without interfering with the banking services; and
  • developing the national chip card standard set copyrighted by Vietnam which is also compatible with international standards.

As the combined market share of the participating parties exceed 50 per cent, an exemption is required for this merger. Upon a lengthy process of preparation, the application for exemption was finally submitted to the VCA in July 2014.

Conditions and duration

Under Decision 2327, the exemption was granted conditionally and for a limited period of time. Accordingly, the exemption is conditional upon the following obligations, whereby the post-merger Banknet is required to:

  • develop and implement a roadmap for the use of modern technology in ensuring the quality of the payment infrastructure service;
  • not discriminate among customers (eg, banks and other payment service providers);
  • register with the VCA the template of intermediary payment service agreement before contracting such agreement with the customer – this register is a guarantee to remove any disadvantageous terms and conditions, if any, that the company may impose to customers;
  • comply with the regulations and instructions of the State Bank of Vietnam when adjusting the service fee; and
  • report to the VCA on the performance of each of these items above every five years.

The exemption is granted for an initial term of five years, which will be automatically renewed every five years subject to the monopoly’s compliance with the aforementioned conditions.

Positive outlook

As the first economic concentration exemption issued under the VCL, Decision 2327 presents positive signals for the enforcement of the competition law regime in Vietnam. With Decision 2327, it is expected that there will be more compliance with the law, particularly in the public sector. It is worth noting that in the past, economic concentrations between State-Owned Enterprises often bypassed the competition procedures that are much more complicated and time-consuming than administrative procedures. In 2011, a controversial acquisition of Viettel (a corporation wholly owned and operated by the Ministry of Defence) over EVN Telecom (a subsidiary of Vietnam Electricity (EVN)), which had the alleged effect of increasing Viettel’s market share to over 50 per cent in 3G frequency resources, was conducted without the exemption procedures from the competition authority. Similarly, in 2012, the largest national air carrier, Vietnam Airlines, took over the state shares in low-cost carrier Jetstar Pacific without a competition exemption, although the acquisition has increased its share of the domestic market to over 90 per cent. These acquisitions were approved by the government decisions.

Missing the chance

Despite its positive outlook, Decision 2327 missed the chance to clear the murky water of the exemption rules under the VCL. The decision fails to present the authorities’ viewpoint on the economic benefits and potential anti-competitive effects of the merger. In particular, the decision did not provide any rationales for exemption (eg, factors that would be deemed to contribute to the nation’s socio-economic development or technology advance resulting from the merger). Likewise, since no potential effect on the restraint of compe­tition was identified, it is hard to say whether or not the conditions listed in Decision 2327 are adequate or even necessary to ensure that the merger would not cause any harm to consumers. Finally, Decision 2327 does not devise a sound mechanism to monitor and control the compliance of the post-merger company with the exemption condition. It leaves doubt on the enforceability of the decision because such mechanism is not available in the VCL.

Given the lack of a cost–benefit analysis in Decision 2327, it does not provide much implication for others cases. In addition, it may arguably create potential discrimination among cases given Vietnam does not have a binding precedent system.

Pre-merger consultation

The VCL is silent on pivotal issues and accordingly provides a leeway for the authorities to determine such issues at their discretion. Such leeway may be justified because the exemption should be granted on a case-by-case basis, subject to the industry, form of economic concentrations and so on. As such, the consultation with the VCA is one of the key factors for ensuring compliance with competition law requirements, especially in cases where investors have doubts or concerns over whether their proposed transaction will be prohibited or require notification to the VCA.

This consultation function of the VCA has proved successful and, in numerous cases, the VCA has even assisted in the accurate calculation of the combined market share. There were cases for which the VCA consultation has provided its worth, including a state company in the oil and gas industry and a Korea-invested company in Vietnam. These companies were advised not to make any notification as the combined market share of the participants did not meet the threshold stipulated by law.

However, despite this function being readily accessible and available (and, in fact, free of charge), only a small handful of companies have utilised it to date. Surprisingly, from 2008 to 2011, consultation from the VCA had only been requested nine times – an insubstantial figure considering the number of major economic concentrations closed in Vietnam during this period.

The VCA currently offers two types of consultation: general consultation and specific consultation. The former, which can be done by e-mail or phone, is primarily used for clarifying general concerns over the provisions of the VCL. The latter is used when considering the threshold of whether the proposed transaction requires notification or is prohibited. By providing the VCA with the salient details of the proposed transaction (to the extent sufficient), the VCA will be able to assist in ascertaining the relevant market share and its potential impact on the market.

While consultation does not eliminate the need for companies to legally notify the VCA for larger economic concentrations, they are an invaluable resource for investors in navigating the country’s complex merger control regime. When the free consultation has the potential to save millions of dollars in penalties and legal headaches, as well as save time and costs in ascertaining whether there may be a breach, it is surprising as to why many investors have not utilised it.

Past experience has shown that the VCA does not act as a roadblock to transactions upon receiving a notification. In fact, to date, the VCA has not objected to any economic concentrations that have been notified to it. These include substantial economic concen­trations that have resulted in a considerable increase to local market share, such as the merger of Nippon Steel and Sumikin Bussan Corporation, and the proposed merger of AIA and Prudential.

For this reason, prospective investors are advised to put these fears behind them and notify the VCA to close the transaction to the extent that they comply with competition laws. In addition, companies are not bound to proceed with their transactions after receiving approval by the VCA. Therefore, this notification can be provided as soon as the commercial terms of the transaction have been reached or even earlier during the deal negotiations.

Final words

While Vietnam’s competition law (particularly, its merger controls) arguably lack the sophistication of other developed jurisdictions, with their substantial penalties and potential to make or break a deal, they are often the overlooked elephant in the room for larger transactions.

Investors are reminded that competition law compliance should always be on the agenda when proposing and negotiating an upcoming economic concentration. However, these complex regulations need not be daunting and in fact, to ensure prospective transactions proceed as smoothly as possible and comply with competition law, the VCA should be considered as a friend, not a foe.

After all, to carry out the state’s overarching goals of promoting foreign investment and bolstering Vietnam’s economic growth, the VCA serves to promote healthy competition and foreign investment in the market to the extent permissible under the competition law.

AuthorAnh Tuan Nguyen

An extract from The Asia-Pacific Antitrust Review 2015 –

By Vietnam Law Insight

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us at or the author: Dr. Anh Tuan Nguyen at 

Neutralising the Advantages of State-Owned Enterprises for a Fair Playing Field – Vietnam Law Insight



LNT & Partners, Viet Nam November 2015

The Economic Research Institute for ASEAN and East Asia (ERIA) is an international organization established by a formal agreement among 16 heads of government at the 3rd East Asia Summit in Singapore on 21 November 2007. ERIA works closely with the ASEAN Secretariat, researchers and research institutes from East Asia to provide intellectual and analytical research and policy recommendations. Another key ERIA objective is capacity building aimed at strengthening policy research capacities in less developed countries.

This year, ERIA together with law experts in the region works on the discussion paper on Competition Law.

Dr Tuan Nguyen, is incharge of the Neutralising the Advantages of State-Owned Enterprises for a Fair Playing Field in Vietnam.


Despite Vietnamese competition authorities’ attempts to control state monopolies in domestic markets during the last 10 year of establishment, this appears to be the key challenge of Vietnamese competition regime. In the process of transitioning from a centrally planned economy to a market economy, the State-owned enterprises (SOEs) sector is perceived as a means to ensure the socialist orientation of the economy as well as preserve national economic goals. For these purposes, SOEs have been offered several advantages ranging from tangible incentives to latent conveniences over the privately owned enterprises. In this context, competition laws and policies should be able to neutralise the advantages of SOEs to level the playing field or else it would be used a shield to protect SOEs from their private rivals.

This paper looks into the issues with the SOE sector in the context of Viet Nam’s political economy and identifies the factors inhibiting the country’s effort to control State monopolies in the last 10 years of competition law enforcement. It provides commentaries on the implementation of competition laws and policies in Viet Nam from the perspective of economic integration, particularly the on-going negotiation Trans-Pacific Partnership.

The author expresses his gratitude to Associate Professor Hayashi Shuya, Graduate School of Law, Nagoya University, for his invaluable support during the drafting of this paper.


Neutralising the Advantages of State-Owned Enterprises for a Fair Playing Field _ Dr Tuan Nguyen

New Laws on Investment and Enterprise Come Into Effect from Midnight

As you now all know, the new Law on Enterprise (LOE) and Law on Investment (LOI) will take effect from 0.00AM tomorrow, 1 July 2015 promising to bring many positive changes to Vietnam business environment. 

What enterprises and investors are all now waiting for are the Decrees implementing the LOE and LOI, which have not been issued yet.

While the final draft of the decrees are now being circulated, and the vacatio legis by law would be 45 days after promulgation by the Government, the Ministry of Planning of Investment (MPI) sent and urgent Official Letter No. 4211/BKHĐT-ĐKKD dated 26 June 2015 (OL 4211) on business registration, implementing LOE (please click here to download).

Another Official Letter implementing the LOI are expected to be circulated anytime from now until Midnight (we have been informed that this Official Letter No 4326/BKHĐT-ĐTNN dated 30 June 2015 implementing LOI was issued, and will provide you with updates in the next legal alert).

Under OL4211, notable changes are as follows:

  1. Application of ERC for current foreign invested enterprise (FIE): for enterprises operating under an Investment Certificate (IC) or an Investment License (IL), when amending  the IC or IL, they will apply for the Enterprise Registration Certificate (ERC). The ERC dossier will be similar to the dossier for applying a new ERC, attached with the current IC or IL.
  1. Simplified ERC registration process: Art 24 LOE only requires applicants to file, among others, scope of business, and not the HS Code or CPC to the registration request or establishing an enterprise, be it a limited liability company (LLC) or a joint stock company (JSC). The form under Art 24 LOE is now being drafted by the local department of planning and investment (DPI) and to be released soon.  The CPC will be filled in by the DPI, and there is still a risk that the CPC/HS Code filled by the DPI are not matched by the CPC/HS Code of products to be imported by the enterprise. However, the enterprise’s application will no longer be rejected because the CPC/HS Code is not found or unfit.   Please note that with respect to FIEs, the filing of HS Code and CPC would still be required under form MĐ-6 of Circular 08/2013/TT-BCT dated 22 April 2013 of (Circular 08) of Ministry of Industry and Trade (MOIT).  This requirement is still valid until 1 July 2016, at the latest (LOI, Art 74.3).
  1. Place of business to be notified, not registered: the notice shall be sent within 10 days to the local DPI from the date of the decision to open a new place of business. This regulation does not affect requirements to have specific license for each type of business (e.g. a supermarket license, warehouse license, school license etc).
  1. A change of the scope of business, a JSC private placement, and entry of foreign shareholders to be notified, not registered: these changes are notified at the local DPI, who will then reconfirm within 3 working days from receipt of notice. The DPI reserves the right to reject the notice if the conditions for foreign investors’ entry under WTO assessments or other local laws are not met (for “conditional projects”). Therefore it is advisable that the scope of business of an enterprise must be “clean” from conditions, before a notice of foreign shareholders are sent. After foreign shareholders have been duly notified, the enterprise may change its scope of business. This change may still be subject to scrutiny, but the conditions will be strictly by law (e.g., percentage of foreign shareholding) rather by the authorities’ discretion.
  1. Enterprises can make more than one seals by notice. The new seals will be published on the National Business Registration Portal (NBRP).
  1. Liquidation process to be simplified: the enterprise’s liquidation shall be made within 6 months from the passing of the resolution for its liquidation. Within that 6 months, the tax authority should confirm the enterprise’s fulfillment of tax obligations. Unless the tax authority send a notice of objection, the liquidation process will complete within that time period and the enterprise will be deleted from the NBRP.


Some issues are still unclear under OL4211:

  1. Whether enterprises operating under an IC or IL must surrender its original IC or IL when receiving the ERC, and if so, what would be their new Investment Registration Certificate (IRC) under the new LOI, and what would be the In Principle Approval (IPA), should an IPA be required under the new LOI.
  1. Must a foreign shareholder have a “project” when it acquires shares (i.e., indirect investment) in a local company? It is likely that it is not required, but we might need to confirm this by an official letter implementing the LOI (ad hoc regulation pending Decrees implementing LOI).
  2. What is the real difference between “registration” and “notice” if DPI may have the right to send a negative opinion on a notice filed?

For more information about this article, please contact the author: Dr. Le Net at the email:

By Vietnam Law Insight (LNT & Partners)

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://

Vietnam Competition Annual Report 2014

On 02 April 2015, the Vietnam Competition Authority (VCA) published the annual report of 2014 on its website (the Report), drawing a panorama of the Vietnamese competition activities during the year.

From a  legal perspective, the Report produced an overview on the subject matters of three new legal instruments enacted in 2014 governing competition activities e.g. Decree No. 42/2014/ND-CP and Circular 24/2014/TT-BCT on administration of the multi-level selling of goods; and Decree 71/2014/ND-CP on penalties for breaches in competition sector. Furthermore, in 2014 there were two international treaties containing competition regulations executed including the Vietnam – Customs Union of Russia, Belarus, and Kazakhstan Free Trade Agreement, and Korea – Vietnam Free Trade Agreement.

Regarding the practical context of competition, the Report furnished an analysis of the enforcement of competition laws and policies particularly in 2014 and generally in the period from 2006 and 2014. Upon the comparison between 2014 and the whole period, it is clearly stated that there is a downturn in the number of activities that breach the laws on competition pertaining to two sectors; restraint of competition, and activities of unfair competition that have been investigated and had a penalty imposed. This data could be considered as a promising sign of the development of a fair and competitive business environment in Vietnam.

With regard to the global factors e.g. the establishment of ASEAN Economic Community, and the execution of a number of bilateral and multilateral agreements together with domestic factors i.e. the re-structuring of the Vietnamese economy, the competition between the entities is forecasted to intensify. The breach of competition is foreseen to be conducted in more sophisticated methods. Additionally, the economic concentration of transactions shall increase in number.

Below is the link to the Report on VCA’s website:

Competition law key factor in M&As

While investors’ interest in Vietnam has translated into healthy growth in mergers and acquisitions (M&As) and foreign direct investment (FDI), the potentially far reaching impact of the Competition Law is not understood by many players, writes Dr. Nguyen Anh Tuan from LNT & Partners.

As Vietnam’s increasingly outward looking economy and Competition Law develop, the country’s merger control regulations should not be overlooked – not least because of the hefty penalties that they attract. A fine of up to 10 per cent of a company’s total revenue in a financial year may be imposed for a breach of merger controls, including requirements on notification. Other severe penalties include forced demerger or withdrawal of a company’s business certificate.

It is also worth remembering that investors who have just completed transactions are not out of the woods yet. Competition authorities can still penalise companies up to two years from the date of the breach and prospective or existing investors must be aware of how these merger controls affect them and how to deal with potential non-compliance risks.

The term, “economic concentrations”, under the Competition Law includes company mergers, consolidations and acquisitions, as well creations of joint ventures. The law imposes certain merger controls on these economic concentrations that investors should be aware of, especially when dealing with larger transactions.

These merger controls focus on the consideration of the economic concentration’s “combined market share”. The market share of a company is calculated by referencing its percentage of turnover from sales or inwards purchases against total turnover from sales or inwards purchases by all companies in the business of the same type of goods in the relevant market for a month, quarter or year. The combined market share is defined as the total market share in relevant markets of all companies participating in an economic concentration. The job of looking at the extent of the combined market share falls to the Vietnam Competition Authority (VCA) when assessing whether an economic concentration will be subject to notification or prohibition under the Competition Law.

This makes it crucial for investors, before entering into an economic concentration, to calculate the resulting combined market share to evaluate potential risks of offending Vietnam’s merger control regime. This prudence will allow investors to determine whether VCA notification of the transaction is required.

The data necessary to determine market share can be obtained from government agencies, such as the General Statistics Office, the ministries of Finance and Information and Communications or the State Bank, depending on the respective industry. Reputable market research can also be used.

To prevent an under or overstatement of this market share figure, investors also need to identify the “relevant market”, because market share will be calculated on an assessment of the relevant product market and geographical area. For example, the market share of a company may be more than 95 per cent for the Ho Chi Minh City area, but only 5 per cent for the whole country.

With respect to notification requirements, there are generally no restrictions against an economic concentration if the resulting combined market share in the relevant market will be below 30 per cent, or if the resulting economic concentration is considered a small or medium-sized enterprise (SME).

If the combined market share falls between 30-50 per cent, the VCA must be notified of the proposed transaction before the parties can execute it. The parties can only proceed with the transaction once the VCA approves it.

Economic concentrations that result in a combined market share of more than 50 per cent will be prohibited, unless the VCA grants an exemption. Such an exemption can be granted if one or more companies in the economic concentration will be at risk of dissolution or bankruptcy or if the economic concentration will contribute to the country’s socio-economic development or technical and technological progress. However, these exemptions are not guaranteed and will be at the authorities’ discretion.

An open door to VCA consultation

If investors harbour doubts or concerns over whether a proposed transaction will be prohibited or require VCA notification, they may actively consult the VCA for guidance.

This VCA consultation function has proved successful and resulted in VCA assistance in accurately calculating combined market shares in certain cases. PV Drilling and Mirae are two key recipients of VCA expertise. These companies were advised not to make a notification (with regards to respective deals or a combined  deal/merger) as the participants’ combined market share did not meet the threshold stipulated by law.

However, despite VCA being on hand to provide this free service, only a handful of companies have utilised it. In fact, it was called into action just nine times from 2008 to 2011.

The VCA offers two types of consultations – general and specific consultations. The former, which can be done through email or phone, is primarily used for clarifying general Competition Law concerns. The latter is used when considering whether the proposed transaction requires notification or is prohibited. Through the provision of salient details on a proposed transaction, the VCA can help ascertain the relevant market share and its potential market impact.

It must be remembered that this consultation service does not excuse companies from legally notifying the VCA of larger economic concentrations, however such consultations are an invaluable resource for investors in navigating through the country’s complex merger control regime. Moreover, they could potentially save millions of dollars in penalties and legal headaches, as well as save time and costs in ascertaining whether a breach has occurred.

Confronting early notification fears

There have also been growing investor concerns about the serving of notification letters to the VCA, a Competition Law requirement, on proposed transactions.

Particularly, fears over the possibility of the VCA preventing the transaction from going ahead and breach of confidentiality are still commonplace among prospective investors.

However, the VCA does not act as a roadblock to transactions upon receiving a notification. In fact, it has not objected to any of the notified economic concentrations. These include substantial economic concentrations that have resulted in considerable increases in local market share, such as the merger of Nippon Steel and Sumikin Bussan Corporation and the proposed merger of AIA and Prudential.

In regard to confidentiality concerns, the VCA is prohibited by law from disclosing or using confidential company information and the extent of information disclosed in notices and applications for exemption vary on a case-by-case basis. For example, future business plans are often needed if an application for exemption is made. Companies can rest assured though that sensitive information, such as prices and detailed post-transaction business plans, will almost never need disclosure.

With this in mind, it is unclear why prospective investors unnecessarily chance facing a substantial fine for a Competition Law breach. Failure to notify the VCA as required by law may result in a company getting hit with a substantial fine of 3 per cent of its total turnover for the preceding fiscal year.

For this reason, prospective investors must put irrational fears aside and notify the VCA to comply with the Competition Law. In addition, companies are not bound to proceed with transactions after receiving VCA approval. Notification should be provided as soon as the commercial terms of the transaction have been reached or even earlier during the deal negotiations.

Sound advice on offer

Vietnam’s Competition Law regime is challenging for new and seasoned investors, despite the sound VCA support on offer. For investors that strive to comply with the law, their combined lack of experience and knowledge in Vietnam’s business and legal environment have often resulted in drawn out VCA assessment or consultation processes, largely a result of improperly prepared notifications and explanations.

For this reason, seeking assistance from professional advisers is highly recommended. In dealing with the VCA, legal assistance will leave an invaluable footprint on the preparation of notifications and explanations – particularly when it comes to how much information should be disclosed on the proposed transaction.

While Vietnam’s Competition Law arguably lacks the sophistication of other developed jurisdictions, with substantial penalties and the potential to make or break a deal, they are often the overlooked elephant in the room for larger transactions.

Competition Law compliance should always be on the agenda when investors propose and negotiate an upcoming economic concentration. However, there is no need to be daunted.  For prospective transactions to proceed as smoothly as possible in agreement with the Competition Law, the VCA should be considered a friend, not a foe.

The VCA is ready to serve investors and the nation in promoting healthy competition and maximising foreign investment to the greatest extent permissible under the Competition Law.

By Vietnam Law Insight, LNT & Partners.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://

The opportunity cost of retailing 2013

While many foreign investors are looking to expand businesses in Vietnam’s retailing market, they are advised to pay attention to regulations drafted by the Ministry of Industry and Trade (MoIT), writes Hoang Nguyen Ha Quyen, partner at LNT & Partners.

The foreign retailers are expanding in Vietnam

To implement Vietnam’s commitments when joining the World Trade Organization, the government must accept businesses with 100 per cent foreign investment to carry out retailing services in Vietnam.

The government is currently following a MoIT proposal and is drafting a decree detailing retailing activities in Vietnam. This decree is long awaited for foreign investors who seek to enter Vietnam’s booming retail market. This decree is expecting coming into effect in November this year. This article highlight certain requirements of foreign invested enterprises participating in retail market in Vietnam.

The draft decree on retailing activities applies to enterprises with the right to implement retailing activities in Vietnam. Enterprises are granted the rights to conduct retailing activities in Vietnam specified in business certificate or investment certificate. The forms of retail include wholesale, retail, distribution, direct sale, e-commerce or franchising activities.

Retailers have to implement business registration regulations regarding conducting a business, quality of goods, goods’ labels,consumer protection, competition, industrial ownership and safety, environment as stipulated (Article 9).

Chapter III details all provisions on retailing goods, goods subject to prohibition, goods subject to restriction, retailing goods subject to certain conditions and state monopoly goods (from Article 11 to 15). In Article 16, conditions about space, quality, safety, food hygiene, terms of origin, effects, features, and utilities of good, labels and stamps with import taxes or special consumption taxed are regulated.

This applies to goods such as those containing radioactive substances or equipment of radiation emission or radioactive sources or explosives, gas, flammable chemicals, and other dangerous chemicals. With direct selling methods, there are conditions on types of goods not allowed to trade by this method such as quality, safety, food hygiene, terms of origin, effects, features, and utilities of goods, labeled and stamped at Article 17. Prohibited and restricted goods or goods subject to certain conditions shall not be allowed to trade via Internet or electronic devices (Article 18).

Chapter IV deals with the most important part of the draft decree – retail unit. Section 1 provides that to establish a retail unit, such unit must comply with the retail masterplan. The types of retail units include grocery store (including also automatic selling machine), factory outlet, department store, convenience store, supermarket, hypermarket, boutique shop, shopping mall. The MoIT shall specify criteria for each type of retail unit.

The establishment of a retail unit must comply with the retail masterplan to be developed by the local authority where the retail unit is established, as well as statutory requirements, such as scale and the establishment and maintenance of the operation of retail shops are detailed carefully. As noted, local authority is responsible for developing retail masterplan of its location, and the MoIT is responsible for developing the national retail masterplan. The draft decree is unclear as to whether investors are allowed to establish a retail unit if a relevant masterplan has not been developed or approved.

Under Article 24, the masterplan must comply with the national economic plan, the traffic environment, the logistics conditions, the population and other paramaters of the location involved. Article 25 further specifies the content of retail masterplan, requiring to address issues such as projects, priority of retail projects, the infrastructure conditions as well as the national or local demand of the retail market, which should be implemented exactly.

These issues are rather unclear requirements that might risk to become technical barrier preventing foreign investors from participating in retail market. Understandably, Vietnam is suffering from trade deficit and foreign exchange deficit and therefore some policymakers believe the main culprit would be foreign trading companies. However, preventing retail market from developing in the end may backfire the good objectives of the policymakers, because it would then harm consumers who have limited choice, who then will pressure on the salary increase to the government, and later inflation.

Article 28 of the draft decree regulates the application of an economic needs test (ENT). It covers the establishment of retail establishments of all traders including foreign-invested enterprises which must follow procedures defined in this decree and be in accordance with the area’s masterplan.

Furthermore, the establishment of retail units other than the first retail units of foreign-invested enterprises is subject to criteria such as the number of existing retail establishments, the market stability and inhabitants’ density. The number of retail units means the number of all shops, the number of shops of the same level and the number of shops of the same field.

The market stability indicates the effect of a new shop opened on other shops of the same field on the same certain area. Inhabitants’ density is carefully applied with the main contents such as the number of retail units on habitants’ density in a geographical region.

It must not exceed [by five times] the rate of the number of retail units on habitants’ density in the province covering the concerned region (Item b, Clause 4, Article 28) and only retail units (not wholesale units) are allowed to be established in geographical regions of inhabitants’ density [by five times] higher than the average inhabitants’ density of that province (Item c, Clause 4, Article 28).

To non-shop retailing forms including direct sale (door to door, network and multi-level sales) and sales through the internet, there are specific provisions on conditions of registration, staff and goods, except mobile retail in forms of travelling sales, sales of small articles, sales from afar must obey the regulations on goods in this decree and Decree 39/2007/ND-CP dated March 16, 2007 on individuals practising trade independently, regularly without business registration (Article 42).

Besides, guaranteeing the information about goods, prices, transaction conditions, transportation and delivery, and payment methods on e-commerce website is also required with respect to the sale through the internet form (from Article 35 to 41).

Drafting such a retailing services decree is an important step in opening the market, which may bring investors, especially foreign ones, many chances to enter and invest in the Vietnamese market. Most of the requirements, however, are not really clear and difficult to meet.

As such, investors would face many technical barriers for access retail market, as WTO commitment gives them the rights, in particular with the ENT.

Despite all of this, this is the first time where ENT criteria is detailed, as well as the retail masterplan and tough law is still better than no law at all. If the draft decree is issued, it will become the basis for foreign investors while applying for making retailing service investment decisions in Vietnam.

By Vietnam Law Insight, LNT & Partners.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://

The Law on Price

On 6/20/2012, the National Assembly voted to adopt the Law on Price (the “LOP”) in response to the public demand for an effective legal framework to control price manipulation from dominant enterprises such as gasoline, electricity, etc.

The law will take effect from 01/01/2013 and repeal Ordinance No. 40/2002/PL-UBTVQH10 dated 26/4/2002 of the National Assembly Standing Committee (the “Ordinance“), which is conceived as outdated and containing certain provisions contravening the WTO’s regulation. This article describes the main features of the law and provides some insight into its potential impacts on the Vietnamese economy.

1. The purpose of the LOP

In the past when Vietnam was operating as a centrally-planned economy, the State controlled prices and outputs of enterprises and collectives by direct administrative orders. This price control mechanism has been gradually abolished since 1986 upon the introduction of the Renovation (“Doi moi”) policy, which set forth principles for the socialist-oriented market economy in Vietnam. However, at the beginning of the renovation process, the State was still indirectly regulating market prices by controlling the price of goods and services of the state-owned enterprises (SOEs). Later, as the privately owned enterprises become more significant in terms of quantity and contribution to the national economy there was the need to enact a legal framework for the State’s regulation of the market price. As a result, the Ordinance was passed in response to such demand.

However, during 10 years of its enforcement, the Ordinance was unable to provide an efficient legal mechanism that would control the price of commodities and essential goods in the markets as its intended purpose. Consequently, due to a lack of competition in the markets, particularly with those dominated by the SOEs such as gasoline, telecommunication and civil aviation, consumers have to suffer allegedly unreasonable prices set by the market players. As such, while the intended purpose is to meet the requirements of innovation management practices, in line with the price mechanism of the market economy and encourage price competition, whilst ensuring the role of prices in the economic market mechanism, the LOP has established a means for state intervention that will stabilize prices of certain goods and services.

2. Remarkable features of the LOP

The law has abolished some previous contents of the Ordinance that have been adjusted in the specialized legislation, such as regulations on anti-dumping and monopoly control. These are also specified in the Ordinance on Anti-dumping of imported products in to Vietnam and Law on Competition. In addition, the LOP removed price stabilization measures which are impractical and contravening the WTO’s requirement, such as subsidiary for agricultural products.

The LOP also inserts important principles in the management of the State in Article 5, under which the State will manage the market price mechanism (Item 1) and regulate prices under the LOP, to review the implementation of price stabilization (Item 2). Such regulations have significantly limited the scope and manner of state intervention in pricing decisions of the business. Particularly, the State will only be permitted measures to stabilize prices for the goods as stipulated in Article 15.2 and determine prices for goods and services as specified in Article 19.3. Accordingly, goods and services subject to price stabilization are those essential to production and human lives that are prescribed in two criteria; namely (a) raw materials, fuel, materials and services for production and circulation; and (b) goods and services that meet the basic needs of human sustenance.

Meanwhile, the State will determine the price or set a price limit for (a) goods and services under a state monopoly in sectors of production and business; (b) important natural resources; and (c) national reserve, products, services and public service industry using the state budget. These goods specified in Article 19 of the law include land lease, electricity supply and communication services. In the case that items must be added or to stabilize prices, the Government must submit to the National Assembly Standing Committee for approval.

According to Article 16, the State may only carry out the price stabilization measure when (a) the price of goods and services on the list specified in Article 15.2 of the law show abnormal fluctuations; or (b) the modified price level affects economic and social stability. Although clarification is required to establish which circumstances constitutes as affecting the economic and social stability, the provision creates an essential framework for limiting the scope of the state management of pricing, based on which consumers and businesses can capture and predict the adjustment measures of the State when prices fluctuate in the market. In addition, the LOP stipulates relatively specific methods to stabilize prices (Article 17) as well as the principles and basis for price valuation (Articles 21 and 22).

3. Does the LOP truly meet the market demand?

While the provisions of the Ordinance could hardly play the role of the price controller, the efficiencies as well as necessity of the LOP remain a valid question. From an economic perspective, the abolition of the Price Ordinance is necessary, however replacing it by the LOP seem to go against basic principles of market economy which is operating under the laws of supply and demand where businesses are the price takers. To ensure that the markets function efficiently and stable, the State can utilize a variety of instruments such as the macro fiscal policy, monetary and removal of natural barriers, technical barriers for businesses to enter and exit from the market as opposed to the direct intervention of price determination of businesses through administrative measures, such as providing the specific price, maximum and minimum price or price brackets for the goods and services not under State monopoly.

If these measures are not executed under strict control, this will lead to state pricing decisions for the business as the centrally-planned economy. Furthermore, if the state controls only the output price of particular items and does not guarantee the price of inputs (such as materials, fuel, forwarding, etc.) then businesses will face the risk of losses as production costs are not covered by the stated price.

Meanwhile, if the State implements other measures to encourage healthy competition such as removing barriers, reducing transaction costs for businesses, then these would be a more efficient form of management in terms of price. Since the enterprises will be permitted to compete for profits and establish prices that most consumers will accept to maintain and expand markets. This has been proven when the government implemented an open door policy for the importation of motorcycles, the telecommunication services, etc. Consumers benefit directly from cost of goods and services dropped quickly due to fierce competition between manufacturers and suppliers. Similarly, in the field of pharmaceuticals, if the foreign investors are granted the right to import and distribute drugs directly to Vietnam markets, drug prices can be much lower by reduction of transactional cost. Thus, by removing the technical barriers, the State has created conditions for the free market economy adjusting its defects.

It can be seen that the issuance of the LOP partially meets the expectations of consumers in the establishment of management mechanisms, regulate prices of some essential commodities in daily life and production; the law enforcement needs to be performed carefully and selectively to avoid the abuse of state administrative measures to intervene directly in business activities of enterprises.

By Vietnam Law Insight, LNT & Partners.

Disclaimer: This Briefing is for information purposes only. Its contents do not constitute legal advice and should not be regarded as detailed advice in individual cases. For more information, please contact us or visit the website: Http://