New Criteria Of Anti-Competitive Agreements In Vietnam Under The Competition Law 2018

The Competition Law 2018 defines an anti-competitive agreement to mean: (a) an act of agreement between parties in any form, and (b) which causes or has the ability to cause a competition-restraining impact. Under Article 3.3. of the Competition Law 2018, a competition-restraining impact means an impact, which removes, reduces, distorts or hinders competition in the market. The definition of anti-competitive agreement is a new provision under the Competitive Law 2018 which the Competition Law 2004 does not have.

The Competition Law 2018 continues to provide a list of specific agreements which may be considered as an anti-competitive agreement which is similar to that of the Competition Law 2004. However, due to the new definition under the Competition Law 2018, logically, an anti-competitive agreement must now satisfy two tests:

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Written by Nguyen Quang Vu On In ,

New Law on Enterprises 2020 for Companies in Vietnam

Introduction

In June 2020, the National Assembly passed a new Law on Enterprises 2020 (Enterprise Law 2020) to replace the Enterprise Law 2014 from 1 January 2021. The Enterprise Law 2020 was issued just four years after the Enterprise Law 2014 came into effect. So, in just 20 years Vietnam already has four different versions of the Law on Enterprises. Such frequent changes could cause concerns to investors since they will not know for sure that their rights as a member or shareholder in a company in Vietnam will not be adversely affected by another set of changes in 2025. The fact that many of the changes introduced under Enterprise Law 2020 are just wording changes (but at the same time fail to clarify various unclear issues under the Enterprise Law 2014) also raises questions about the quality of the law-making process in Vietnam.

This post is written by Nguyen Quang Vu. Our comments are based on the version of the Enterprise Law 2020 supplied by Mr. Truong Trong Nghia, a member of the National Assembly and Vietnam Business Lawyers Club (VBLC). Since the official version of the Enterprise Law 2020 has not been released, our comments are subject to change. For easy reference, a compared version between the Enterprise Law 2020, and the Enterprise Law 2014 in Vietnamese can be downloaded here.

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Written by Nguyen Quang Vu On In ,

Internal restructuring and merger filing in Vietnam

The Competition Law 2018 does not exempt internal restructuring within the same group of companies from merger filing requirements. That said, arguably, internal restructuring between companies which are under the control of the same ultimate parent company is not subject to merger filing in Vietnam. This is because:

  • Under the competition law, the market share of a company is calculated by reference to the market share of the group of companies that such a company belongs to (the Group). Therefore, an internal restructuring does not have any impact on the market share of the Group and accordingly any anti-competitive impact on the market. Relying on Article 1 of the Competition Law 2018 which provides for the scope of application of the Competition Law 2018, one could argue that an internal restructuring transaction is not governed by the Competition Law 2018;

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Written by Nguyen Quang Vu On In ,

Potential structures for overcoming a merger filing threshold in Vietnam

The merger filing thresholds under the new Decree 35/2020 are drafted broadly and have no exception (see more here). Accordingly, many M&A transactions, which have no anti-competitive impact in Vietnam are still subject to filing requirements. A filing process could take substantial time and effort since at law and in practice, the competition authority (NCC) has very broad discretion in demanding additional information or documents about the parties. Below are some potential structures for overcoming the merger filing threshold in Vietnam. The risks associated with these structures is that Vietnamese authorities may take the view that the parties have undertaken a transaction to conceal another transaction and therefore the first transaction is not valid. Failure to notify the NCC may be subject to a penalty from 1% to 5% of the total revenue in Vietnam of the parties.

Unincorporated joint venture

For a joint venture transaction, instead of incorporating a new joint venture company, the parties may consider entering into an unincorporated joint venture where no new entity is established (e.g., a Production Sharing Contract). An unincorporated joint venture does not fall into the types of economic concentration that is subject to merger filing in Vietnam. This is because the Competition Law 2018 only expressly applies to incorporated joint ventures but not unincorporated joint ventures.

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Written by Nguyen Quang Vu On In ,