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Focus on Regulation

Next step in rolling out Vietnam’s new competition regime

On 1 July 2019, Vietnam’s new Law on Competition (“Competition Law“) took effect. On 26 September 2019, the government issued the first implementing instrument, Decree No. 75/2019/ND-CP (“Decree 75“). Decree 75 is the first of a series of three implementing decrees that government is expected to enact to give guidance on how the Competition Law is to be enforced in practice.

The main goal of Decree 75 is to lay out more specific rules on administrative sanctions, but also contains useful guidance on other aspects. Decree 75 will take effect on 1 December 2019 and will repeal previous Decree No. 71/2014/ND-CP.

Effects-based jurisdiction

Decree 75 expands the scope of application of competition law enforcement to include foreign enterprises and individuals having “operations in Vietnam.” The decree is not very elaborate as to what will constitute having “operations” in Vietnam. However, it is possible that the Competition Law now covers any person or entity engaged in anti-competitive activity in Vietnam, irrespective of the location.

In contrast, in the past, the prior competition rules applied only to Vietnam-incorporated entities, and this was seen as a deficiency of the prior rules. Although the expanded scope looks like a case of “extraterritorial jurisdiction” of the Competition Law, depending on the issuance of further rules and actual enforcement practice, it may turn out to be more of an effects-based jurisdiction.

Tighter sanctions

Decree 75 increases financial penalties for anti-competitive acts. Significantly, the fines for the failure to file reportable transactions under the new merger control rules are a maximum of 5% of revenue for the preceding year, while the fines for anti-competitive (horizontal or vertical) agreements and abuse of dominant position are capped at 10%.

In additional to fines, Decree 75 permits the new authority, the National Competition Commission, to impose a range of non-monetary sanctions such as revocation of practice license, business license or enterprise registration, or suspension of business for 6 to 12 months. Suspension of business as a remedy for anti-competitive behavior is newly introduced under Decree 75.

Finally, Decree 75 updates the list of aggravating and extenuating circumstances that the National Competition Commission may consider when determining an enforcement action and/or monetary fine (with a maximum 15% increase or decrease to the standard level of fine). For example, Decree 75 adds ‘first time violation’ to the list of extenuating factors, leading to an uplift in fines.

What’s next

Decree 75 appears to indicate that Vietnamese competition rules apply to businesses abroad, if their conduct harms competition in markets in Vietnam. Importantly, the decree provides for significantly higher penalties than the prior competition rules, which may herald tougher competition law enforcement going forward.

Reports indicate that the government is drafting another two implementing decrees to flesh out the provisions of the Competition Law in more detail, including on key issues such as the numeric level of the merger filing thresholds (in terms of revenues, assets, and market shares). These additional implementing decrees will give the new Vietnamese competition regime further shape.