The Vietnam Competition and Consumers Authority (VCCA)recently unveiled its Annual Report 2019. The Report, accessible on the authority’s website, summarises the VCCA’s last year activities, ranging from unfair competition investigations to merger review, as well as offers a view to the regulator’s main focuses for 2020.
This publication focuses on the VCCA’s enforcement of the merger control regime in2019.
Observation: Despite lack of a guiding decree, the VCCA remained active in the past year, particularly in merger review. Although the new competition authority has not been set up, businesses are strongly recommended to notify reportable transactions or risk being fined as high as 5% of their annual revenues.
• In March 2020 the VCCA debuted the long awaited Decree 35/2020/ND-CP guiding the Competition Law (the Guiding Decree). Accordingly, the Guiding Decree introduces two new sets of filing thresholds, one for businesses operating in virtually all sectors and the other reserved for transactions involving credit institutions, insurers and securities companies.
Implications: The sector-specific thresholds seek to accommodate the high values of transactions in these sectors and should therefore curb the influx of notification files by the said entities. For other businesses, considering the relatively low thresholds, we expect to see an increase in the number of transactions caught by the filing requirement.
• Other notable provisions introduced by the Guiding Decree include the ‘control’ concept and safe harbours, which are based on the Herfindahl-Hirschman Index (or HHI) and market share.
Implications: Coupled with the new filing thresholds, these provisions should give businesses a better understanding as to whether an anticipated transaction is subject to the filing requirements, and if so, whether it would be greenlit after the initial review phase or require an official review. However, the Guiding Decree is noticeably silent on important matters such as whether the ‘control’ concept also includes negative control or veto right.
A more in-depth analysis of the new thresholds and other notable provisions concerning merger filing is available here.
• No exemption to merger filings: A contemplated transaction that (i) qualifies as an economic concentration within the meaning of the Competition Law 2018 and (ii) crosses any of the filing thresholds must without exception be notified prior to its implementation.
Implications: Intra-group transactions, such as reorganisations or restructuring, inherently harmless to competition as they are, must still be notified if they satisfy the above conditions.
• To date, the National Competition Commission (NCC) has not been formally established. That said, many businesses continue to notify reportable transactions to the VCCA. For the time being, the VCCA will remain in charge of reviewing notified transactions and investigating transactions which potentially violate the Competition Law 2018 (if any).
• A decree providing for the formal establishment of the NCC is in the pipeline and slated for release later this year.
• The VCCA will continue to monitor M&A activities on the market; develop and finalise internal procedures on merger review; and start building market databases to serve merger control activities.
Given the mandatory nature of the notification requirement and the hefty fine that can be imposed on businesses for failure to notify, it is important to seek legal advice on whether the transaction in question is subject to the notification requirement and obtain the necessary approval prior to completion. LNT & Partners is currently assisting a number of leading MNCs with their merger filing obligations.
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 legal advice, please contact our Partners.