OECD kpcdb

1. Competition Law

 

The Vietnam Competition Law (No. 27/2004/QH11) (the “VCL” or “Competition Law”) which took effect on 1 July 2005 is the main legal instrument on competition policy in Vietnam. Together with the 2005 Enterprise Law and the 2005 Investment Law, the Competition Law represents the transition of Vietnam to a market economy.

 

The VCL regulates two types of conducts, i.e. competition-restricting acts and unfair competition acts. Competition-restricting acts include agreements in restraint of competition, abuse of dominant/monopoly position and economic concentration (mergers) which restrain competition in the market. Unfair competition acts include misleading instructions, infringement of business secrets, and coercion in business, defamation of another enterprise and advertisement aimed at unfair competition.

 

General exclusion: There is no sector excluded from the application of the VCL. It applies to all economic sectors and enterprises, including enterprises providing public-utility products or services and state-owned enterprises (SOEs).

 

Extra-territorial application: According to Article 2, the VCL applies also to foreign firms operating in Vietnam. To specify this, Article 2 could be interpreted in two ways:

 

1. Foreign firms with representation in Vietnam, or 2. Foreign firms, products and services circulated in Vietnam. This Article hasn’t been enforced yet due to following reasons: (i) no clear legal ground; (ii) limited enforcement capacity; (iii) lack of other conditions to exercise co operation with other competition agencies; (iv) lack of regulations on the procedure of applying that article.
2. The Vietnam Competition and Consumer Authority and the Vietnam Competition Council

 

2. The Vietnam Competition and Consumer Authority and the Vietnam Competition Council

 

There are two enforcement authorities of VCL, namely the Vietnam Competition and Consumer Authority (“VCCA”) and the Vietnam Competition Council (“VCC”).

 

In September 2017, the VCA was split into two agencies – the Vietnam Competition and Consumer Authority (VCCA) which inherited the competition and consumer protection functions of the VCA and the Vietnam Trade Remedies Authority (VTRA) which inherited the VCA’s trade remedies function. Given this occurred only at the final stage of the drafting of this Guide, most of the institutional data and historic information in this report concerns the VCA as an entity rather than the VCCA. Unless, VCCA is expressly mentioned information regards VCA.

 

The VCCA conducts investigations concerning both the prohibitions on the restraint of competition and the prohibitions against unfair competition but can only itself determine liability and penalties with respect to unfair competition cases. 

 

In relation to restraint of competition investigations (such as cartels and abuse of dominance) if the VCA conducts and investigation and forms the view there has been a breach of the law, it refers the dossier to the VCC who determines whether the accused is liable and what sanctions should apply. 

 

VCCA: The VCCA was established in September 2017 and took over from the Vietnam Competition Authority that had been in place since 2004. The VCA had as tasks, according to Decision No 848/QD-BCT of 5th January, 2013 of the Ministry of Industry and Trade of Vietnam (“MoIT”), to conduct investigations on (a) competition-restricting acts, which submits to the VCC for decision (see below), (b) other practices in breach of the VCL. For instance,  failure to co-operate with competition investigations and (c) unfair competition acts, evaluate requests for exemption eligibility to submit to the MoIT for decision and supervise the process of economic concentration. The VCA also has adjudicating power in cases relating to unfair competition cases, whereas the VCC adjudicates cases relating to competition-restricting acts.

 

The VCA also carried out the functions of protecting consumers’ rights and administering anti-dumping, anti-subsidy, application of safeguards measures on imported goods into Vietnam. As mentioned previously, the VCCA has consumer protection and competition powers, only.

 

Organisational structure of VCA: The VCA is established under the MoIT. The head of the VCA is appointed by the Prime Minister on the proposal of the Minister of Industry and Trade. The VCA had 90 staff members as of 2016. The VCCA has 43 staff, including an Acting Director General; 25 staff dedicated to competition work of which: 18 are ‘front line’ staff responsible for competition functions (7 in the Unfair Conduct Division, 5 in the Anticompetitive Division and 6 in the Economic Concentration Division); 7 support staff; and 14 staff are dedicated to consumer protection (front line and support); and 3 staff in the HCMC regional office supporting both competition and consumer protection functions. 

 

VCC: The VCC is a separate body from the VCCA.

 

According to Decree No.07/2015/ND-CP of 16th January, 2015, the VCC has the following powers and responsibilities: (a) Imposing fines and dealing with breaches of the competition-restricting acts provisions of the VCL; (b) requiring organisations and individuals involved to supply information and data necessary for the Council to carry out its assigned duties; (c) resolving complaints regarding decisions made by the Competition Council (d) Participating in administrative proceedings in accordance with the law on competition and the law on administrative proceedings.

 

Organisational structure of VCC: The VCC consists of 11 to 15 members (including a Chair) appointed by the Prime Minister on the proposal of the Minister of Industry and Trade. The VCC has 20 staff in total including 11 Commissioners as of 2017.

 

Relationship with other regulators: Most sectoral regulations provide for a specific provision on competition. The VCCA and sector regulators operate based on a mechanism of co operation.

 

Competition advocacy: New public policies that may have implications for competition are subject to competition assessment in Vietnam. The Agency of Examination of Legal Normative Documents, Ministry of Justice is in charge of examining and recommending sanctions against violation related to normative documents. In practice, the VCA often co operates with this Agency in reviewing legal documents having implications for competition upon request of the host agency. The VCA conducts market or sector studies. Where the VCA identifies an obstacle or a restriction to competition caused by an existing public policy, the study can include an opinion/recommendation to the government to remove or reduce such obstacle or restriction.

 

International co operation: The VCA maintains international co operation with other competition agencies from Australia, Japan, Korea, New Zealand, Russia, and the United States etc. VCA signed memorandums of understanding (MoUs) on competition with JFTC (Japan) and FAS (Russia) respectively. In addition, Vietnam also signed various agreements, which include competition chapters, such as Japan-Vietnam Economic partnership Agreement, ASEAN-Australia and New Zealand Free Trade Agreement, ASEAN-Japan Comprehensive Economic Partnership, Vietnam-Eurasian Economic Union Free Trade Agreement, and Vietnam-Republic of Korea Free Trade Agreement. Also, Vietnam-European Union Free Trade Agreement and Trans Pacific Partnership (TPP), these have been signed but are not yet in effect

 

3. Investigation

 

Initiation of investigation: Under Article 87, a preliminary investigation of a competition case may be conducted based on a complaint or initiative by the VCA upon detection of signs of breach of the VCL.

 

Within 30 days from the date of a decision by the head of VCA to conduct a preliminary investigation, the investigator assigned must complete the preliminary investigation and make a recommendation to the head of the VCA on whether to conduct an official investigation or to end the investigation. Based on the result of the preliminary investigation and recommendation, the head of the VCA decides either to end the investigation or conduct an official investigation if the preliminary investigation indicates the existence of an offence.

 

Under Article 90 VCL, once the decision to conduct an official investigation has been made, the time-limit for investigating competition-restricting acts is 180 days. Investigations concerning competition-restricting acts may be extended twice, each extension not exceeding 60 days. An investigator must notify any extension of the time-limit for an investigation to all parties concerned at least seven working days prior to expiry of the time-limit.

 

Upon completion of an investigation, the head of the VCA must send a report on the investigation together with the whole of the file on the competition case to the VCC. Should there be signs of a criminal infringement, Article 94 provides that the investigators must propose to the head of the VCA to consider the transfer of the files to the State body with authority to institute a criminal prosecution. 

 

Powers of investigation: Under Article 77, investigators have the power to require organisations and individuals concerned to provide all necessary information and documents relating to a competition case and recommend to the head of the VCA to apply administrative preventive measures. Such measures may be taken under Article 88 of Decree No. 116/2005/ND-CP dated September 15th, 2005 on detailing the implementation of a number of articles of the competition law and include measures such as temporary detention of persons and material evidence, as well as searches. The latter may also be applied at the request of the complainant. Articles 91 and 94 of the Decree provides VCA with the power to search places used to hide material evidence. This power is approved by either the head of the VCA, the chairman of the VCC or persons described in Article 45 of the Ordinance on Dealing with Administrative Offences. There is no need for court authorisation except for the case of search and seizure at residential premises. In the case of the latter, the VCA needs a written document issued by the Chairman of the District People’s Committee. Yet, in practice, VCA hasn’t exercised this power. Furthermore, there is no provision detailing the procedure of conducing search and seizure in the current competition legislation.

 

Failure to comply with investigation: In case of failure to provide sufficient and accurate information, obstruction of provision or destruction of information related to the competition cases, parties may be subject to fines from VND 2 million to VND 10 million (specified in Decree No.71/2014/ND-CP).

 

Procedural fairness: Article 66 VCL provides a number of rights which are at the disposal of the investigated party in order to assure procedural fairness. The parties under investigation for an antitrust infringement have opportunities to consult with the VCA with regard to significant legal, factual or procedural issues during the course of its investigation. The concerned party may produce documents, be informed of any elements produced by the complainants or the VCC and VCA and may participate in hearings before the imposition of any sanctions or remedies for having committed an antitrust infringement. The article allows the investigated party to request a change of investigators if the latter fall into a case foreseen by article 83, such as being relatives of one of the parties, having a personal interest in the case or any other circumstance which may affect the impartiality of the investigator. The investigated party may also request witnesses or propose that the competition-managing agency seek expertise.

 

Confidentiality: Article 78 (2) VCL imposes upon investigators an obligation to maintain confidentiality regarding any business secrets of enterprises which may come to their knowledge. 

 

Article 120 VCL indicates that a violation of Article 78 may lead to disciplinary action or penal liability depending on the seriousness of the violation. If any damage is caused, the offender must pay compensation to the affected party.

 

According to Article 3, trade secret refers to information which is not common knowledge, is capable of conferring an advantage to its holder over non-holders of such information and which the owner has taken necessary measures to protect from disclosure.

 

4. Remedies and Sanctions

 

Remedies and administrative sanctions

 

Article 117 provides both remedies and sanctions in the case of a breach of the VCL. According to Article 119, the VCA and the VCC have the power to apply these measures.

 

Remedies include restructuring enterprises which have abused their dominant position or forcing consolidated enterprises to undo a merger.

 

Penalties imposed for breaches of the VCL consist of either a warning or a fine. A fine may be imposed totalling up to 10% of the total turnover of the organisation or individual in breach in the financial year preceding the year in which the prohibited practice took place.

 

Depending on the nature and seriousness of the breach, additional penalties are applied: withdrawal of business registration certificate; revocation of the right to use a license or practicing certificate; and confiscation of exhibits and facilities used to commit the breach of the laws on competition. With respect to breaches of the VCL in relation to practices in restraint of competition, Decree No. 71/2014 / ND -CP establishes that penalties will be determined as a percentage of the relevant enterprise’s turnover from the sale, or purchased input of goods or services relevant to the violation itself during the period when the conduct occurred.

 

There is a two year limitation period that starts on the date on which indications of the breach are discovered.

 

Criminal sanctions: Recently the Vietnam Assembly has approved the amendment of Criminal Law (Law No. 100/2015/QH13) that provides Articles 217 (for competition restrictive agreement) and 222 (for bid-rigging) on the breach of VCL. By this regulation, the competition legislation offender could be subject to imprisonment for up to 5 years. Potential penalties for engaging in such criminal conduct include fines from VND 200 million to 1 billion (approximately USD 8,900 to 44,600), non-custodial reform for up to 2 years or imprisonment from 3 months to 2 years. The range of fines is increased to between VND 1 billion to 3 billion (approximately USD 44,600 to 133,800) and imprisonment is increased to a period of 1 to 5 years where aggravating circumstances set under the law are found.

 

Sanctioned individuals may also be prohibited from holding certain positions or practicing certain occupations for 1 to 5 years. Penalised companies, in addition to potential fines, may be forced to suspend operations from 6 months to 2 years where there has been a breach involving certain aggravating circumstances and raising capital can be prohibited from 1 to 3 years.

 

Bid-rigging is addressed in art. 222 of the Penal Code which, based on the circumstances, can lead to prison terms of up to 20 years, being prohibited from certain occupations for up to 5 years and confiscation of property. 

 

5. Appeal

 

In the case of decisions dealing with practices in restraint of competition, according to Article 106 and Section 7 of the VCL, complaints must be lodged within 30 days with the panel of the VCC and resolved by the VCC. Complaints must be resolved within 30 days of receipt, extendable in complex cases but for not more than another 30 days. Any concerned party disagreeing with a part or the whole of a decision resolving a complaint has the right to institute administrative proceedings at the provincial-level people's court.

 

6. Private enforcement

 

Under Article 117 VCL, parties may have recourse to civil procedural law for compensation for loss incurred by prohibited acts under the VCL.