LEGAL UPDATE: Did you know that Vietnam has a Competition Law or anti-trust law that prohibits unfair trade practices such as price fixing, illegal use of trademarks as well as prevents monopolies in the market?
Did you know this means if you intend to enter into M&A deals or JVs (joint ventures) you need to take this law into consideration?
The Government has now decided to give some bite to the law by the issuance of a new Decree imposing penalties on anti-competitive practices.
1. Under this Decree, each party to a price fixing agreement whose combined market share is 30% may be subject to a fine of 10% of its turnover.
2. Regarding M&A deals, a prohibited merger that forms a prohibited economic concentration or monopoly may also be subject to a fine of 10% of its turnover and the company may be required to be separated or split. A prohibited joint venture may even lose its license.
The Competition Law requires parties to a M&A deal or JV to notify the Competition Board if the deal will lead to them having a combined market share of 30% or more. Thus, the parties have to make this determination themselves and notify the Competition Board. Most companies are not yet aware of this requirement and may not even not if they will in fact form an illegal economic concentration as the determination of market share is very difficult in Vietnam. The consequences, however, as set out above can be quite severe. In some cases, under the Law, the deals have to unwound.
(Decree 71/2014/ND-CP, valid 15 September 2014)