“Group of affiliated enterprises” (Nhóm công ty liên kết) is an important concept under the merger control regulations in Vietnam. This is because this concept is used to calculate (1) the relevant notification thresholds (e.g., market share, revenue, or total assets) of an economic concentration, and (2) the market share of a party to an economic concentration. Unfortunately, Decree 35/2020 provides an unclear definition of a group of affiliated enterprises. In particular, Decree 35/2020 defines that a group of affiliated enterprises means a group of enterprises which are jointly subject to control and governance by “one or more of the enterprises” within said group, or which shares the same management.

The following issues may arise from the definition of a group of affiliated enterprises under Vietnamese merger control rules:

• To determine whether an affiliate relationship exists, Decree 35/2020 refers to the control of one or more ultimate parent entities. This is an unusual approach since in order to determine an affiliate relationship between two entities, only a single ultimate parent entity should be used. Both EU competition rules[1] (see Article 5.4) and US competition rules (see definition of “person” at 801.1(a)(1)) use the singe ultimate entity approach.

Let’s take an example for four companies A, B, C, and D in which A and B own 90% and 10% of C respectively and A and B own 10% and 90% of D respectively. Using a single ultimate parent entity approach then A is affiliated with C but not D (since A only owns 10% C) and B is affiliated with D but not C (since B only owns 10% C). But under the definition provided by Decree 35/2020, then C and D are affiliated with both A and B since A and B collectively own 100% C and D.

• Decree 35/2020 also uses the criteria of sharing the same management to determine whether an affiliate relationship exist. However, Decree 35/2020 does not clarify what sharing the same management means. Under the wording of Decree 35/2020, two companies with different ownership which have the same General Director could be considered as affiliates.  

• If the notification thresholds under Decree 35/2020 were to cover negative (or minority) control (which position is taken by some practitioners), then it would be extremely difficult (if not possible) to list all affiliates of a company since a company will likely have negative control over more companies than positive controls.

This post is written by Nguyen Quang Vu.

[1] See Article 5.4 at