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Focus on Regulation

Vietnam merger clearances as new filing regime comes into force

One week before the new decree for implementing the 2018 Law on Competition comes into force on 15 May 2020, the Vietnam Ministry of Industry and Trade (MOIT) announced merger clearance decisions for two offshore transactions. The decisions were made in the name of the MOIT, as the new competition authority – the National Competition Commission (NCC) – has not yet been set up.

PepsiCo/Pioneer Food transaction

The transaction was announced internationally in July 2019, with a value of US$ 1.7 billion. PepsiCo Inc. (PepsiCo), a US-based food and beverage company, plans to acquire 100% ownership of Pioneer Food Group Limited (Pioneer), a South Africa-based company, indirectly via a PepsiCo subsidiary in South Africa. In Vietnam, both PepsiCo and Pioneer have business in the fruit juice market.

The parties submitted the merger filing to the MOIT on 13 December 2019. In turn, the MOIT delegated authority to review the transaction to the prior competition authority, the Vietnam Competition and Consumer Authority (VCCA). Based on the VCCA’s findings, on 5 May 2020, the MOIT concluded that the transaction does not violate the 2018 Law on Competition and may be implemented without conditions.

Elanco Animal Health/Bayer animal health transaction

Announced in August 2019, Elanco Animal Health (Elanco), a US-based provider of products and services to improve animal health and food-animal production, offered to spend US$ 7.6 billion to acquire the whole animal health business of Bayer AG, a German multinational pharmaceutical and life sciences company. In Vietnam, the two companies work in animal healthcare, including producing and providing biological products, pharmaceuticals, harmful organisms, and food supplements.

The parties submitted the merger filing to the MOIT on 22 January 2020. Following a delegation of authority from the MOIT, the VCCA carried out the review of the transaction. Based on the VCCA’s findings, on 5 May 2020, the MOIT concluded that the transaction between Elanco and Bayer AG does not amount to a prohibited transaction under the 2018 Law on Competition. However, as Elanco would likely dominate the market of antimicrobial drugs for pigs in Vietnam following completion of the transaction, the MOIT granted conditional clearance. The specific conditions, which the parties need to adhere to, were not disclosed in the MOIT decision.

Takeaways

The 2018 Law on Competition hands jurisdiction over merger control to the new NCC. However, that authority has not yet been fully established. Although the MOIT and the VCCA are not explicitly authorized in the 2018 Competition Law, they have taken on the responsibility to review and decide on merger filings – at least in these two instances – until the NCC is up and running.

The MOIT’s approach may be a pragmatic step to bridge the ‘institutional gap’ until the NCC is operational. That said, at the end of this week – on 15 May – the new merger filing thresholds will be in effect. The four sets of benchmarks – combined value of assets in Vietnam; combined revenues in Vietnam; value of an onshore transaction; and combined market share – will likely catch a wide range of transactions, including many offshore deals (see our analysis here). Therefore, it is more pressing than ever that the NCC becomes operational and the new Vietnamese merger control regime gets off to a good start.