Vietnam: Competition Commission’s evolving practice sets the stage for further reform

In summary

This article provides an overview of the Vietnamese merger control regime from the regulatory and practice perspectives, including notes that transaction parties should be aware of when filing in Vietnam. It is expected that the Vietnamese merger control practice will evolve in the years to come and gradually move closer towards internationally recognised standards.

Discussion points

• Extraterritorial application
• Notifiability assessment
• Two-phased review process
• Penalties applicable to merger control violations
• Practice notes for filing in Vietnam

Referenced in this article

• Competition Law 2018
• Decree 35/2020/ND-CP dated 24 March 2020 detailing a number of provisions of Competition Law 2018
• Decree 75/2019/ND-CP dated 26 September 2019 prescribing administrative sanctions against competition law violations
• VCC – Vietnam Competition Commission
• VCCA – Vietnam Competition and Consumer Authority

Introduction

The Competition Law 2018 (Law No. 23/2018/QH14) is the primary merger control legislation in Vietnam. The law came into force on 1 July 2019 to replace the Competition Law 2004 and related guiding instruments. One of the most significant changes introduced by the new law is a shift in regulatory approach from form-based to effects-based, whereby the antitrust authority will employ the substantial lessening of competition test to decide whether to green-light a merger rather than relying on purely quantitative criteria. Other notable reforms include a new set of jurisdictional thresholds, a two-phased appraisal process and the automatic clearance mechanism.

Accompanying the Competition Law 2018 are two key secondary regulations, namely Decree 35/2020/ND-CP (the Guiding Decree), which sets out the filing thresholds and substantive assessment criteria (among other things), and Decree 75/2019/ND-CP, which provides for the administrative sanctions and remedies for violations of merger control regulations, among other relevant matters.

Relevant merger authorities

On 1 April 2023, the official competition watchdog under the Competition Law 2018, the Vietnam Competition Commission (VCC), was formally established. The VCC sits under the Ministry of Industry and Trade (MOIT) and assumes the functions of overseeing the merger control regime and imposing fines and remedies, which were formerly discharged by the Vietnam Competition and Consumer Authority (VCCA) and the Vietnam Competition Council, respectively. VCCA case officers in charge of merger review have been transferred to the VCC, although there have been significant changes at the leadership level. Notably, the current VCC President was formerly the Director of Trade Remedies Authority (also under the MOIT) whereas the Vice President overseeing merger control matters previously served as Deputy Head of Multilateral Trade Policy Department.

A much-welcomed development in the past 12 months is the introduction of an online submission portal for merger filings. We expect that the VCC will continue to implement reform initiatives, such as the release of an official merger review guideline or perhaps even an expedited review process for no-issue filings such as intra-group restructuring or transactions where the target company is not active on the Vietnamese market. There have also been talks that the VCC will take a more proactive enforcement approach, including investigating failure to file and gun-jumping violations. Indeed, on 15 February 2024, Circular 40/2023/TT-BCT on the operation of the VCC with respect to handling anticompetitive cases came into effect. The regulation provides further details on and introduces a series of templates to be used in the competition litigation process, heralding the authority’s preparation to strengthen its enforcement activities.

Extraterritorial application

As the merger control regime under the Competition Law 2018 adopts the effects-based approach, an offshore transaction will be caught if it has an actual or potential restrictive impact on the Vietnamese market.^[1]

However, in practice, a contemplated foreign-to-foreign transaction will technically trigger a filing in Vietnam if it qualifies as a statutory concentration and crosses any applicable filing threshold, regardless of whether the transaction is capable of producing any impact on the Vietnamese market. For example, a merger filing obligation will not be excluded even if the target company does not generate any revenue or have any commercial presence on the Vietnamese market, or if the greenfield joint venture to be established will not be active in Vietnam.

Mandatory filing obligation and suspensory effects

Vietnam’s merger control regime is characterised by two core features. First, it is ex ante in nature, which means parties to a contemplated transaction must notify their transaction prior to implementation if it qualifies as an economic concentration within the meaning of article 29 of the Competition Law 2018 and crosses any of the applicable jurisdictional thresholds. The current regime noticeably does not provide for any filing or clearance exemption, which means that notification is mandatory if the above prerequisites are satisfied.

The second core characteristic of Vietnam’s merger control regime is the standstill obligation. This entails that merger parties are required to put the anticipated transaction on hold until it is cleared, either automatically or explicitly by a clearance decision.^[2]

Filing requirement under the Competition Law 2018

Notifying parties

The Competition Law 2018 does not differentiate the filing obligation based on the type of concentration, and instead mandates that all undertakings and individuals participating in a notifiable concentration are responsible for filing, even if only one party technically crosses a jurisdictional threshold.

In practice, the regulator has treated all transaction parties as notifying parties and has requested the notification form to be signed by all such parties (for instance, the contractual buyer entity – majority as well as minority – target and contractual seller entity in the case of an acquisition). It also follows that the filing must contain the requisite formality documents of all parties, including the seller’s financial statements and legalised certificate of incorporation.

For each reportable concentration, the regulator only accepts one filing jointly made by the notifying parties.

Caught transactions

As mentioned above, a contemplated transaction is notifiable under the Competition Law 2018 if it qualifies as an economic concentration within the meaning of article 29 and crosses any of the applicable jurisdictional thresholds. An economic concentration encompasses a merger, consolidation, acquisition, joint venture and other types of concentration provided by laws, as follows:

• A ‘merger’ is defined as when one or more undertakings transfers all lawful assets, rights, obligations and interests to another business and, concurrently, terminates business activities or ceases to exist.
• A ‘consolidation’ is defined as when two or more undertakings amalgamate all their lawful assets, rights, obligations and interests to establish a new entity and, concurrently, terminate their business activities or cease to exist altogether.
• An ‘acquisition’ is defined as when an undertaking directly or indirectly acquires all or part of the capital contribution or assets of another undertaking sufficient to control the acquiree or any of its business lines.
• A ‘joint venture’ is defined as when two or more undertakings jointly establish a new undertaking by contributing a portion of their lawful assets, rights, obligations and interests.

The joint venture definition focuses on the legal form of the joint venture rather than its activities or corporate governance. First, only joint ventures incorporated as legal entities or juridical persons are relevant under Vietnam’s merger control regime, while purely contractual joint ventures are not regarded as economic concentrations for the purposes of Vietnam’s competition law. Second, unlike the European Union’s full-function test, the definition is not concerned with whether the joint venture has any market-facing business activities or the extent of its autonomy from the parent companies. Third, it is also not relevant for Vietnamese merger control purposes whether the joint venture is jointly controlled by all of its parents in the EU sense. Similarly, the joint venture definition only covers joint ventures that are established by way of setting up a new company and does not cover, for example, joint ventures that are formed as a result of changing a company’s corporate governance from sole control to joint control. The VCC would instead consider whether the latter qualifies as a statutory acquisition in its notifiability assessment.

Consequently, if a joint venture exists as a newly established legal entity, it will be construed as an economic concentration subject to the merger filing requirement, irrespective of whether it is a greenfield joint venture with no actual business operation or whether it relies almost exclusively on its parent companies for sales revenue on a lasting basis, and irrespective of the ownership and corporate governance structures among the parent companies.

Jurisdictional thresholds

The jurisdictional thresholds under the Competition Law 2018 are based on financial criteria such as total revenues, total assets and transaction value in addition to the former combined market share threshold. The Guiding Decree provides for two sets of jurisdictional thresholds, one of which is reserved for transactions involving credit institutions (CIs), insurers or securities companies, and the other is applicable to transactions in all other sectors.

General thresholds

A contemplated concentration, except for one involving CIs, insurers or securities companies, must be notified to the competition authority if any of the following thresholds is met.

^* A seller is also considered a transaction undertaking for Vietnamese merger filing purposes. Therefore, a merger filing obligation can be triggered even if only the seller meets a notification threshold.

Sector-specific thresholds

A contemplated transaction involving CIs, insurers or securities companies must be notified if it crosses any of the following thresholds.

Definition of ‘control’

An undertaking is deemed to control or govern another undertaking or any of its business lines for Vietnamese merger control purposes if the undertaking:

• owns more than 50 per cent of the controlled undertaking’s charter capital or voting shares;
• owns or has the right to use more than 50 per cent of the controlled undertaking’s assets in all or one of the latter’s business lines; or
• has the right to:
  • directly or indirectly appoint or dismiss all or the majority of the controlled undertaking’s board of directors or the chair of its ‘members’ council’, chief executive officer;
  • alter the controlled undertaking’s constitutional document; or
  • make crucial decisions about the controlled undertaking’s business.

The control concept is pivotal to the definitions of ‘acquisition’ and ‘group of affiliated undertakings’. The VCCA (the former competition regulator) had clarified that the definition of ‘control’, for merger filing purposes, does not encompass negative control. Consequently, acquisition of minority interest with veto rights or other standard minority shareholder protection rights would not be deemed a concentration for Vietnamese merger filing purposes. It follows that, for instance, a private equity fund’s acquisition of strategic minority interests in a portfolio company with standard veto rights would generally not trigger a filing obligation.

The VCC’s review practice has further indicated that, in assessing if there is control, the authority also considers factors such as whether the target company is publicly listed or privately held, the relative shareholding ratios among shareholders and the actual attendance rates at annual general shareholders’ meetings (GSM). For example, consider the acquisition of a minority interest in a listed company with a relatively disperse shareholding structure. If the acquired interest is nonetheless sufficient to enable the purchaser to become the largest shareholder in the target company and effectively hold more than 50 per cent of the average voting shares present at GSM, these will be relevant factors demonstrating that the purchaser will have de facto control over the target company post-transaction.

On the other hand, under the VCC’s current interpretation of the laws, a transaction may still fall within the scope of Vietnam’s merger control regime even if it does not lead to any meaningful change in control. Two categories of transactions are demonstrative of this approach. First, if the purchaser already controls the target pre-concentration (for instance, by holding a more than 50 per cent interest), the VCC’s current view is that a buyout to increase the purchaser’s shareholding would still technically constitute a statutory acquisition. Parties should take into account this view of the VCC when planning the transaction structure and filing strategy. Second, intra-group transactions (eg, parent or subsidiary mergers and other types of internal restructurings) similarly remain subject to the Vietnamese merger control regime even though they do not result in any change of control at the ultimate shareholding level. The VCCA and the VCC rationalise this view on the grounds that there is no exemption to the merger filing requirement in Vietnam, meaning that any transaction that qualifies as a statutory concentration and crosses any applicable filing threshold must be notified to the regulator. Multinational corporations intending to streamline the businesses of its member companies should therefore be mindful of the filing requirement under the Vietnamese merger control regime.

Group of affiliated undertakings

Determining the existence of a group of affiliated undertakings is a crucial element in the asset and turnover tests, especially in transactions that involve a member company of a corporate group. The Guiding Decree defines a ‘group of affiliated undertakings’ as a collection of companies that are under the common control or governance of one or more undertakings within the group in question, or that shares the same management. This very concept negates any attempt by the transactional parties to bypass the merger filing obligation by establishing a special purpose vehicle. Importantly, it also serves as a critical component for catching foreign-to-foreign transactions with limited to no local nexus. For example, an overseas acquisition by a SPC of a target company is still notifiable in Vietnam if the affiliated group of said SPC crossed a filing threshold.

Calculation of jurisdictional thresholds

Asset test

The term ‘assets’, in this test, refers to assets in the Vietnamese market of each party in the anticipated merger or, where such a party belongs to a group of affiliated undertakings, the total assets in the Vietnamese market of the whole group.

The asset test is applied in a non-discriminatory way. Assets of the entire corporate group on the Vietnamese market will be taken into account irrespective of whether other member undertakings carry out any business activities related to the affected market.

The current merger control regime does not define ‘assets’. In practice, references are often made to the financial statements of each relevant party for their applicable asset value.

Turnover test

In this test, the ‘relevant turnover’ refers to both sales in and into Vietnam of each party in the transaction or the group of affiliated undertakings. Neither the VCCA nor the VCC has issued any official guidance on whether revenues for threshold purposes should be calculated on a shipped-to or billed-to basis. Although in practice the regulators tend to assess the notifiability issue based on the parties’ approach (eg, billed-to), due to the lack of official guidance, in certain cases the regulator may apply a different approach (eg, shipped-to) if they deem such approach is more appropriate in view of the relevant sectoral regulation or customary practice.

Transaction value test

The transaction value test does not apply to foreign-to-foreign transactions where all parties involved are non-Vietnamese undertakings.^[3]

The authority tends to refer to the transaction value set out in the transactional documents. However, it is unclear how this test would apply in, for instance, stock swap transactions or transactions where part of the consideration is not fixed but subject to the target’s performance in the future. In these transactions, the deal value is not always clear-cut, making the application of this test a practical challenge.

Market share test

Combined market share is the sum of the market shares in the relevant market of the undertakings involved in the anticipated merger. The market share of the member undertaking in a group of affiliated undertakings corresponds to that of the entire group. When calculating the turnover of a group of affiliated undertakings for market share purposes, intra-group turnover should be excluded.^[4]

The application of the market share test is not easy given, on the one hand, the general lack of reliable and accessible market data in Vietnam, and, on the other, the regulator’s reluctance to accept regional market shares as proxies for local shares. Critics perceive the test as a burden on businesses and argue that it should not have been retained. However, proponents maintain that market share is a relevant filing threshold and it is inconceivable that a business cannot determine its position on the market.

The VCCA has clarified that the combined market share threshold only applies to horizontal mergers. In other words, offshore transactions where the parties do not have any overlaps or vertical relationships in Vietnam would only be notifiable if either party crosses the total local turnovers or assets thresholds. This is a much-welcomed clarification, especially with respect to conglomerate mergers. For clarity, however, the combined market share test does not require a market share increment from below to above 20 per cent, such that a Vietnam filing will be triggered if the market share on the relevant market of one undertaking to the horizontal merger is already above 20 per cent prior to the concentration. We understand that the VCC will apply the same interpretation.

The relevant market is determined on the basis of the relevant product and geographical markets. In practice, our experience suggests that the required level of details for the relevant market analysis would depend more on the regulator’s familiarity with the markets in question than whether the transaction is capable of lessening competition. For instance, in cases where there is no relevant local precedent, parties should generally be prepared to provide a detailed and comprehensive relevant product market analysis – often more so than in other jurisdictions – and to answer technical questions from the VCC about their products. While references to decisional practice of overseas regulators, such as the European Commission, would be helpful, filing parties would still be expected to discuss relevant Vietnamese regulations and categorisation systems (if any) in their analysis.

With respect to the relevant geographical market, the regulator has maintained the view that ‘nationwide’ is the widest possible relevant geographical market, reasoning that they are only concerned about the impact of the contemplated concentration on the Vietnamese market. Filing parties should thus provide national share data for review even if their position is that the relevant geographical market is regional or global in scope.

Notwithstanding the above, the authors have observed some degree of liberalisation by the regulator in certain types of transactions. For instance, the VCC is receptive of a simplified relevant market analysis where the products in question concern a regulated industry with which it is familiar (eg, insurance and securities). The VCC has also accepted the argument that the transaction does not give rise to any relevant market where the target company has no operations in Vietnam.

Exemptions

As mentioned above, the Competition Law 2018 does not provide for exemptions to filing or review. All reportable transactions must be notified to, and subsequently green-lit by, the competition regulator prior to implementation. This principle covers transactions that are inherently not capable of harming competition such as intra-group transactions and transactions where the target or joint venture company does not have any commercial presence or revenues in Vietnam.

Overall, the relatively technical notifiability test, the extensive set of jurisdictional thresholds with relatively low values and the absence of filing exemptions are some of the key drivers behind the steady increase in the number of transactions – including foreign-to-foreign transactions – caught by the Vietnamese merger control regime. For instance, between 2005 and 2019 (that is, before the current merger control regime took effect), the VCCA only received an average of 11 notifications per year. This number surged to 62 notifications in 2020 when the new set of jurisdictional thresholds were introduced, then nearly tripled to reach 183 notifications in 2023. By November 2024, the VCC had received a total of 178 notifications. Given the increased awareness about the Vietnam’s merger control regime and the risk exposure for failure to file, we expect that the number of notifications submitted to the VCC will continue to rise in the years to come.

Steps in the regulatory process

Filing deadline

The Competition Law 2018 (article 33.1) only states generally that reportable transactions must be filed before implementation without providing further guidance on when a transaction would be deemed implemented. A conservative construction of this provision in conjunction with other provisions of the legislation (specifically article 34.1(b), which requires submission of the transactional document in draft form) arguably suggests that the parties must notify prior to signing. In practice, the VCC (and its predecessor VCCA) accepts filings submitted after signing provided that closing is subject to receipt of regulatory approvals.

Preliminary appraisal phase

The Competition Law 2018 provides for a two-stage review process. Within seven working days of receiving the notification file, the VCC must inform the filing parties whether the submission is valid and complete. If the notification requires further clarification, the VCC will issue a request for information (RFI) and the parties will have 30 calendar days from the date on which the first post-filing RFI is issued to submit satisfactory responses to the VCC. The notification will be returned to the parties for resubmission if satisfactory responses are not submitted within this deadline. The RFI responses must be adequate in terms of both formalities and substance, which means that the parties must have submitted all required formality documents and the VCC must be satisfied with the parties’ responses to their substantive RFIs. Considering the authority’s heavy workload and highly technical review approach, a filing would face a higher risk of being returned if the parties do not adequately and timely address the VCC’s requests. Transaction parties should thus be mindful of these variables when considering the filing strategy and anticipated transaction timetable.

The preliminary appraisal or initial review phase (Phase I) formally starts once the VCC has confirmed receipt of a complete and valid notification file. After a 30-calendar-day period lapses, the VCC will:

• issue a decision stating that the transaction either is unconditionally cleared or must undergo the official review; or
• not issue any decision or findings at all, in which case the transaction is automatically green-lit (ie, the auto-clearance mechanism), effectively ending the regulatory process.

The Competition Law 2018 introduces, for the first time, the concept of automatic clearance, meaning merger parties may proceed with the transaction if they have not received any response from the authority within 30 days of receiving a complete and valid merger notification. The VCC cannot retroactively investigate and prosecute mergers that have been automatically green-lit even if the mergers may later be found to have a significant restrictive impact on market competition. The VCC does not have grounds to impose remedies or conditions on such a merger.

Official appraisal phase

Anticipated transactions that fail to satisfy the safe harbours (see below) will proceed to the official appraisal or full review phase (Phase II).

Depending on the complexity of a case, the VCC will, within 90 calendar days for typical mergers or a maximum of 150 calendar days in complex cases of the official commencement of Phase II review, decide whether a proposed merger is unconditionally green-lit, conditionally cleared or entirely blocked.

During Phase II, the VCC has the power to stop the clock and request the parties to provide further information. The review timeline is suspended until the parties have adequately satisfied all VCC’s RFIs. This stopping the clock power has limitations, however, as the VCC is only allowed to issue a maximum of two RFIs during Phase II review. In our experience, the VCC’s Phase II RFIs are significantly more extensive than Phase I RFIs and designed to equip the case team with an in-depth understanding of not only the industry in question but also the parties’ business model, supply chain and clientele in Vietnam. The VCC may also specifically request the parties to submit templates of commercial contracts with key customers to review the commercial terms such as selling price and quantity, as well as to scan for restrictions and exclusivity obligations. If the target company has manufacturing sites in Vietnam, the VCC may also hold a site visit as part of their Phase II review.

The VCC is also empowered to consult relevant industry regulators, who are mandated to respond within 15 calendar days of receiving the consultation request, and other third parties such as experts and industry associations, who are responsible for furnishing the VCC with complete and accurate information upon request and in a timely manner.

In the filings we have advised on, the VCC had reached out to the line ministry, industry association, competitors or the parties’ distributors to enquire on a wide range of matters, such as the number of undertakings active on the market in question, their market share estimates and whether the contemplated transaction poses any antitrust or consumer interest concerns. In addition, if the filing concerns imported products and the parties are unable to furnish official import data to substantiate their market share estimates, the VCC would reach out to Vietnam Customs to collect the relevant data. If Vietnam Customs is similarly unable to provide the requested data, we understand that the competition regulator will rely on all information available to it at the point of assessment to produce the final findings without making any further request for information. The notifying parties are of course responsible for the accuracy and truthfulness of any and all information provided.

Assessing the transaction

The VCC employs the ‘substantial lessening of competition’ approach to decide whether to block a merger.

In the initial review phase, the VCC primarily relies on the combined market share of the involved parties, the Herfindahl–Hirschman Index (HHI) and the delta between pre-merger HHI and post-merger HHI to determine whether a contemplated transaction should be green-lit. If the transaction is subject to a full review, the VCC will assess both the significant restrictive impact and the positive effects of the anticipated merger.

Safe harbours

Horizontal mergers

In the initial review phase, the VCC will unconditionally green-light a horizontal merger if:

• the combined market share is less than 20 per cent;
• the combined market share is equal to or more than 20 per cent and the post-merger HHI is less than 1,800; or
• the combined market share is equal to or more than 20 per cent, the post-merger HHI exceeds 1,800 and the delta is lower than 100.

Non-horizontal mergers

A vertical or conglomerate merger will receive unconditional clearance in Phase I if the market share of each merger party on its respective relevant market is less than 20 per cent. While this is the general rule, our experiences suggest that the regulator is relaxing its review approach. Specifically, with respect to pure conglomerate mergers, the regulator has been willing to conclude the review process within Phase I even if the market share of one party on its relevant market exceeds the 20 per cent safe harbour. The key is to demonstrate to the authority that there are no horizontal overlaps, vertical and conglomerate relationships between the buyer’s affiliated group and the target company in Vietnam.

Substantive assessment

A contemplated transaction that fails to pass the safe harbour test must go through a more thorough assessment, which ascertains whether it will be green-lit (conditionally or unconditionally) or blocked as discussed below.

Assessment of significant restrictive impact

When it comes to assessing the significant restrictive impact or the ability to cause such an impact, the VCC mainly focuses on competition issues such as the ability of the post-merger undertaking to foreclose the market or raise market barriers. As mandated by the Guiding Decree, the VCC needs to take all these factors into account to the applicable extent:

• pre- and post-merger combined market share and concentration ratio (as applicable to the assessment of horizontal mergers);
• the relationship in the supply chain of the parties involved in the contemplated merger;
• competitive advantages brought by the merger in terms of product characteristics, chain of production and distribution, financial capacity, goodwill, technology, intellectual property rights and other factors that give the post-merger undertaking an edge over its rivals;
• the ability of the post-merger undertaking to considerably increase price or return on sales ratio, or to exclude or impede other undertakings from penetrating or expanding the market; and
• other relevant special factors in the sector or industry in question.

Assessment of positive effect or efficiencies

In assessing the positive effect, the VCC also considers efficiencies. Accordingly, the VCC is required to assess the impact of the transaction on any one or a combination of the following factors:

• the development of the industry, science and technology in alignment with the state’s master plans (by assessing, among other factors, economies of scale and the application of technological advancements and innovation);
• the development and promotion of small and medium-sized businesses; and
• the competitiveness of Vietnamese undertakings (ie, advancing national champions).

It is our understanding that, in practice, the VCC is open to expand the factors relevant to the positive effect test. The above list is not exhaustive and other factors such as contribution to gross domestic product or state budget may also be taken into account provided that the supporting data is genuine.

In general, mergers that have a net positive impact will be more likely green-lit than not, although conditions and remedies may apply. As per our experience, this largely depends on the VCC’s discretionary assessment as there is no specific guideline as to how each factor should be included in the equation.

Conditional clearance

Based on the VCC’s review practice, a transaction that is subject to an official review would more likely receive a conditional clearance than an unconditional clearance. Essentially, like many other regimes, the clearance conditions may be structural or behavioural. The former includes mandatory demerger or divestiture while the latter is available in the form of subjection to the state’s control with respect to price or other commercial terms. The VCC may, if necessary, propose other remedies aimed at alleviating the restrictive impact or enhancing the positive effects brought by the merger, or both.

According to press releases published on its website, the VCC has completed eight Phase II reviews since its establishment. The transactions all received clearance subject to general undertaking to comply with the laws and periodic reporting obligations on pricing strategy and manufacturing improvements at the request of the VCC. In other words, to date the VCC has not imposed any structural remedies as a condition to green-light a transaction.

Legal ramifications

Violations under the current merger control regime can be categorised into four types: failure to file, gun jumping, unlawful mergers and unfulfilled remedies.

Failure to file

Failure to file a notifiable transaction contradicts the ex ante principle of Vietnam’s merger control regime and may result in a fine of up to 5 per cent of the applicable violator’s total turnover.^[5] Given that all transaction parties are subject to the filing obligation, each will be held liable for failure to file.

Gun jumping

For failure to fully observe waiting periods or standstill obligations, the violator may be fined up to 1 per cent of its total turnover.

The merger control regulations, however, do not specify which activity constitutes an implementation of concentration. Based on the authority’s review practice, we understand that the test for gun jumping is whether the activity in question confers on the buyer premature control over the ordinary course of operation of the target company, such that the buyer and the target company cease to act as independent undertakings on the relevant market. As such, auxiliary or preparatory actions such as the cessation or termination of an existing cooperation agreement between the target business and the seller would arguably not amount to gun jumping.

Unlawful mergers

The third group of violations consists of the two following types of conduct:

• implement a concentration despite being blocked by the authority after a full review (ie, Phase II), which may be fined up to 3 per cent of the total turnover; and
• implement concentrations prohibited by article 30 of the Competition Law 2018, which outlaws any concentration that has an actual or potential significant restrictive impact on the domestic market – the highest fine level for this conduct is 5 per cent of the respective violator’s total turnover (eg, the merged entity in case of an illegal merger, or the purchaser and target in a prohibited acquisition).

The key difference between the above violations lies in whether a merger has been notified. If the parties fail to notify a reportable transaction and the transaction is later found to be a prohibited concentration, they will be held liable for two violations under Vietnam’s ex ante merger control regime (ie, conducting an unnotified and unlawful merger).

Unfulfilled remedies

Merger parties who are granted a conditional clearance but fail to satisfy any of the entailing conditions will face a fine as high as 3 per cent of their total turnover.

Supplementary sanctions and remedial measures

In addition to pecuniary penalties, for unlawful mergers, the Competition Law 2018 also provides for supplementary sanctions, such as revocation of certificate of incorporation, and remedial measures in the form of mandatory divestiture or subjection to the state’s control with respect to price or other commercial terms.

Expediting the review process

In many circumstances, the review process was prolonged due to the parties’ lack of experience in preparing the filing and liaising with the case team. There are a number of practical measures the parties should consider to expedite the review process, including:

• prepare a sufficiently detailed filing based on the criteria in the Guiding Decree and relevant Vietnamese regulations, focusing in particular on the characteristics, intended use and manufacturing process of the affected products as well as the distribution models in Vietnam of the parties;
• begin the legalisation process as soon as possible to minimise logistical delays;
• develop an appropriate filing strategy with local counsels to ensure contractual deadlines are met and the regulators’ competition and administrative concerns timely and adequately addressed;
• respond to the authority’s RFIs as promptly and comprehensively as possible to initiate the Phase I review and, where applicable, expedite the Phase II review; and
• maintain an active communication channel with the VCC throughout the review process to address any concerns that the case team may have pertaining to the transaction in a timely manner.

The final point is particularly important where the parties are under time pressure to obtain clearance by a specific deadline. With insight into the regulator’s concerns, the parties would be in a better position to draw up a proper filing strategy to meet the deadline.

Conclusion

The Vietnamese merger control regime has seen positive developments since the introduction of the Competition Law 2018 and its guiding instruments. The regime is gradually moving closer towards internationally recognised standards and expected to keep evolving in the coming years. The VCC also has plans to review the Guiding Decree, which signals potential amendments in the near future. From the procedural perspective, it would also be interesting to see what reforms the VCC will introduce to streamline the review process, as well as whether the authority will take a different approach to the VCCA on any issue.

Given the VCC’s constantly evolving practice and potential changes to legislative regime, it is crucial to keep up with the regulator to ensure accurate assessment of the notifiability of the transaction and, if the transaction is indeed reportable, swift obtainment of clearance. Engaging experienced local counsel with an established working relationship with the regulator will help the parties to navigate this nascent merger control regime and ensure that global transaction timetables are adhered to.

Endnotes