Economic concentration takes several forms such as merger of enterprises, consolidation of enterprises, acquisition of enterprises, and joint ventures among enterprises.  This article provides information on cases where enterprises shall carry out notification of economic concentration.

Notification threshold of economic concentration

Enterprises that are not credit institutions, insurance companies, securities companies, participating in economic concentration must notify the National Competition Committee before performing economic concentration if they fall into one of the following cases:

  • Total assets in the Vietnamese market of such enterprise or a group of associated enterprises of which such enterprise is a member reach at least VND 3 trillion in the fiscal year preceding the planned year of economic concentration;
  • Total sales turnover or costs for purchase in the Vietnamese market of such enterprise or a group of associated enterprises of which such enterprise is a member reach(es) at least VND 3 trillion in the fiscal year preceding the planned year of economic concentration;
  • Traded value of economic concentration reaches at least VND 1 trillion;
  • Combined market share of enterprises intending to participate in economic concentration represents at least 20% in a relevant market in the fiscal year preceding the planned year of economic concentration.

A dossier of notification of economic concentration is a complete dossier specified in Article 34, the 2018 Law on Competition, in which the enterprises shall submit a draft agreement, contract or memorandum of understanding on economic concentration between related enterprises.  Therefore, it can be understood that the parties are not allowed to sign an economic concentration agreement or contract, a memorandum of understanding on economic concentration before submitting an economic concentration notification dossier to the National Competition Commission.  Enterprises submitting dossiers of notification of economic concentration shall take responsibility for the authenticity of the dossiers.  Foreign-language documents in dossiers shall be accompanied by Vietnamese translations.

Prohibited practices of economic concentration

Practices of economic concentration performed by enterprises which restrain competition or are likely to restrain competition in Vietnam’s market shall be prohibited.  The National Competition Committee shall assess significant competition restraining impacts or possible significant competition restraining impacts of economic concentration based on one or several of the following elements:

  • Combined market shares of enterprises participating in economic concentration in relevant markets before and after economic concentration.
  • Concentration level in relevant markets before and after economic concentration, to be assessed to identify risks of creating or consolidating market power of enterprises, and possibility of increasing coordination or collusion between enterprises in relevant markets.
  • Relationships between enterprises participating in economic concentration in production, distribution and supply chains for a certain type of goods or services or business lines of enterprises participating in economic concentration that are inputs of or complementary to one another, to be assessed to identify the possibility that involved parties after economic concentration create a significant competitive edge compared to enterprises being other competitors in order to bar such competitors from entering markets or eliminate them.
  • Competitive edge brought about by economic concentration in relevant markets, to be subject to overall review based on advantages in product characteristics, production and distribution chains, financial capacity, brands, technology, and intellectual property rights, and other advantages of enterprises after economic concentration in relationship with competitors in relevant markets, which are likely to create or consolidate significant market power of enterprises established after economic concentration.
  • Possibility that an enterprise increases prices or profit-to-sales ratio after economic concentration, to be assessed based on one or several of the following elements:
  • Expected change in demand in case of the possibility that the enterprise increases prices or changes output or trading conditions of its goods or services in the relevant market after economic concentration;
  • Expected change in supply of enterprises being competitors in the relevant market in case of the possibility that the enterprise increases prices or changes output or trading conditions of its goods or services after economic concentration;
  • Expected change in prices, output or trading conditions of enterprises supplying goods or services being inputs of enterprises participating in economic concentration;
  • Conditions for and possibility that enterprises being competitors in the market intensify coordination or reach agreement to increase selling prices or profit-to-sales ratio;
  • Other elements that affect the possibility of increasing prices or profit-to-sales ratio of enterprises after economic concentration.
  • Possibility that an enterprise eliminates or bars other enterprises from entering or expanding the market after economic concentration, to be identified based on one or several of the elements such as level of control of production or business inputs before and after economic concentration; competition characteristics in sectors and competitive practices of enterprises participating in economic concentration during the period before economic concentration; market entry and expansion barriers; other elements that might lead to the possibility that the enterprise eliminates or bars other enterprises from entering or expanding the market after economic concentration.
  • Special elements in sectors which enterprises participating in economic concentration may consider, when such elements directly impact or considerably change results of the assessment of competition restraining impacts or possible competition restraining impacts of economic concentration.

Conditional economic concentration

After completing official review of economic concentration, based on the review contents, the National Competition Committee shall issue a decision that economic concentration is permitted or prohibited.  In some case, the National Competition Committee will allow economic concentration with some conditions, such as separation or splitting of an enterprise participating in economic concentration or resale of part of capital contributions or assets of such Enterprise; or control of the contents relating to purchase prices and sale prices of goods and services or other transaction conditions in contracts of the enterprise formed after economic concentration; or other measures to remediate possible competition restraining impacts in the market or to enhance positive impacts of economic concentration.

According to Article 16, Decree 35/2020/ND-CP dated March 24, 2020 detailing a number of articles of the Law on Competition, positive impacts of economic concentration shall be:

  • Positive effects on development of sectors and science and technology under the State’s strategies and master plans, to be assessed based on capability to promote economy of scale and resources of localities, sectors and the society possibly brought about by economic concentration in conformity with objectives set forth in sector development strategies and master plans approved by the Government or Prime Minister; level of application of scientific advances and technological innovations by enterprises after economic concentration for improving productivity, quality and business efficiency in order to reduce costs and raise quality of products and services or bring benefits to consumers and the community.
  • Positive effects on development of small- and medium-sized enterprises, to be considered based on evaluation of opportunities and favorable conditions for small- and medium-sized enterprises to enter and expand the market or participate in goods or service production chains and distribution networks expected to be brought about by economic concentration.
  • Enhanced competitiveness of Vietnamese enterprises in the global market, to be assessed based on positive consequences of economic concentration thanks to expansion of domestic production scale and consumption, and export of goods and services of enterprises after economic concentration.