Threshold for notification of economic concentration under the law of vietnam and lessons from international experience

BẠCH NGỌC VÂN BACHELOR THESIS YEAR 2021 MINISTRY OF EDUCATION AND TRAINING HO CHI MINH CITY UNIVERSITY OF LAW *** MANAGING CENTER OF SPECIAL AND INTERNATIONAL PROGRAMS BẠCH NGỌC VÂN THRESHOLD FOR NOTI[.]

BẠCH NGỌC VÂN MINISTRY OF EDUCATION AND TRAINING HO CHI MINH CITY UNIVERSITY OF LAW *** MANAGING CENTER OF SPECIAL AND INTERNATIONAL PROGRAMS BẠCH NGỌC VÂN BACHELOR THESIS THRESHOLD FOR NOTIFICATION OF ECONOMIC CONCENTRATION UNDER THE LAW OF VIETNAM AND LESSONS FROM INTERNATIONAL EXPERIENCE BACHELOR THESIS Faculty: Commercial Law School year: 2016 - 2021 YEAR 2021 HO CHI MINH CITY YEAR 2021 MINISTRY OF EDUCATION AND TRAINING HO CHI MINH CITY UNIVERSITY OF LAW *** MANAGING CENTER OF SPECIAL AND INTERNATIONAL PROGRAMS BẠCH NGỌC VÂN THRESHOLD FOR NOTIFICATION OF ECONOMIC CONCENTRATION UNDER THE LAW OF VIETNAM AND LESSONS FROM INTERNATIONAL EXPERIENCE BACHELOR THESIS Faculty: Commercial Law School year: 2016 - 2021 Supervisor: LLM Nguyen Thi Phuong Ha Student: Bach Ngoc Van Student ID: 1651101030163 Class: 74-CLCQTL4 HO CHI MINH CITY YEAR 2021 DECLARATION I declare that this thesis is the result of my research, which is implemented under the supervision of LL.M Nguyen Thi Phuong Ha, ensures honesty, and complies with rules and regarding quotation, the note of references Therefore, I hereby take full responsibility for this declaration LIST OF ABBREVIATIONS Decree 35/2020/ND-CP Decree 35/2020/NĐ-CP detailing and guiding the implementation of a number of articles of the Competition law 2018 EC European Commission EU European Union GDP Gross Domestic Product ICC International Chamber of Commerce ICN International Competition Network ICLG International Comparative Legal Guides LOC 2004 Law on Competition 2004 LOC 2018 Law on Competition 2018 M&A Mergers and Acquisitions MOIT Ministry of Industry and Trade NCC National Competition Commission OECD UK Organization for Economic Cooperation and Development The United Kingdom US The US United States UNCTAD VCA United Nations Conference on Trade and Development Vietnam Competition Authority VCCA Vietnam Competition and Consumer Authority TABLE OF CONTENTS INTRODUCTION 1 Problem statement Literature review 3 Purpose of the study Objectives and Scope of the study 4.1 Objectives of the study 4.2 Scope of the study Research methodologies 6 Thesis structure CHAPTER THRESHOLD FOR NOTIFICATION OF ECONOMIC CONCENTRATION UNDER VIETNAMESE LAW 1.1 Theoretical issues relating to economic concentration 1.1.1 Definition and nature of economic concentration 1.1.2 Definition and meaning of notification threshold for economic concentration 1.2 Threshold for notification of economic concentration under the Law on 13 Competition 2018 1.2.1 Regulations on notification thresholds under the Law on Competition 15 2018 1.2.2 The limitations of notification threshold regulations under the Law on 15 Competition 2018 22 CONCLUSION OF CHAPTER 28 CHAPTER ECONOMIC CONCENTRATION NOTIFICATION THRESHOLD UNDER THE SELECTED LEGISLATIONS AND RECOMMENDATIONS FOR VIETNAM 29 2.1 Threshold for notification of economic concentration under the law of other countries 29 2.1.1 Periodical adjustment of notification threshold 29 2.1.2 Control of transactions implemented outside the territory but having impacts on the domestic market 32 2.1.3 Combining criteria to determine notification threshold 33 2.1.4 Abolition of market share as a criterion for notification threshold 36 2.2 Recommendations for Vietnam 38 CONCLUSION OF CHAPTER 40 THESIS CONCLUSION 41 INTRODUCTION Problem statement In the trend of globalization and economic integration, the wave of mergers and acquisitions (M&A) in developed and developing countries is rising rapidly In the United Kingdom (the UK), between 1986 and 1989, approximately 5,200 industrial and commercial companies implemented M&A M&A activities in the United States (the US) initiated in the early 20th century following with a prompt expansion in the 1980s.2 In Vietnam, since the Law on Enterprise 1999 came into effect, corresponding M&A activities have been concerned and become active in recent years with immense growth in both quantity and value From 2009-2011, there were around 750 M&A deals in Vietnam with an estimated total trading value of 6.89 billion USD Between 2012 and 2014, the total value of M&A cases increased significantly up to 11.13 billion USD The Institute of Mergers, Acquisitions, and Alliances (IMAA) statistics recorded that in 2015, Vietnam executed 341 M&A cases with the total value up to 5.2 billion USD, followed by more than 611 M&A deals accounted for 5.8 billion USD in 2016 The market size in 2017 increased nine times compared to 2008 In 2017 alone, the total value of M&A in Vietnam reached 10.2 billion USD, the highest level recorded, and 175% growth compared to 2016.6 Following the Vietnam M&A Forum research team, in the past ten years, there have been nearly 4,000 deals, with a total value of about 48.8 billion USD Economic concentration transactions, especially M&A, have accelerated enormously all over the world Economic concentration is a form of capital accumulation that contributes to growing enterprises’ value In the open economy, 1Nguyen Thuong Lang, Nguyen Thi Quynh Nhu, “Một số vấn đề sáp nhập, mua lại doanh nghiệp tình hình Việt Nam” (Some issues on mergers and acquisitions and the situation in Vietnam), https://www.sbv.gov.vn/webcenter/contentattachfile/idcplg%3FdDocName%3DSBV281431%26filename%3 D283199.doc, Accessed on 25 March 2021 Nguyen Thuong Lang, Nguyen Thi Quynh Nhu, supra note 1, p.1 Nguyen Thi Viet Nga (2019), “Triển vọng hoạt động mua bán sáp nhập doanh nghiệp Việt Nam” (Prospects of mergers and acquisitions in Vietnam), Financial Journal, https://tapchitaichinh.vn/tai-chinhkinh-doanh/trien-vong-hoat-dong-mua-ban-va-sap-nhap-doanh-nghiep-tai-viet-nam-301760.html, Accessed on 25 March 2021 4Vietnam Competition and Consumer Authority (VCCA) (2015), Tổng quan tập trung kinh tế (Overview of Economic concentration), Competition and Consumer News, No (54)/2015, http://vcca.gov.vn/Newsletter.aspx?CateID=99&page=1, Accessed on 25 March 2021 Nguyen Hong Hiep (2018), “Thực trạng hoạt động mua bán, sáp nhập doanh nghiệp Việt Nam” (Actual situation of mergers and acquisitions in Vietnam), Business and Finance Journal, p.85 Hien Minh (2018), “M&A Việt Nam vượt mốc 10 tỷ USD” (M&A in Vietnam surpasses 10 billion USD), Government electronic newspaper of the Socialist Republic of Vietnam, http://baochinhphu.vn/Thitruong/MA-tai-Viet-Nam-vuot-moc-10-ty-USD/342105.vgp, Accessed on 25 March 2021 business reorganization under affiliate forms helps businesses deal with fierce competition This constitutes to establish highly competitive enterprises and improve the competing capability of an economic branch In general, economic concentration activities enhance the existing financial and operation power of one company by hunting synergy gains.8 For instance, merging two companies’ cooperation into one big enterprise can enlarge their business scale, boost competition ability, cut down on costs, and optimize financial capacity However, “as the economic concentration is a reality more and more well-defined in the context of economic development, it increases the dimensions of the companies and sets up the prerequisites premise for an abuse of dominant position on the market, what is strongly against competition rules.”9 Therefore, it is necessary to develop a solid and reasonable legal framework to assess and control the economic concentration transactions which seriously affect the competition landscape More than 146 jurisdictions in the world currently have certain forms of economic concentration control regime under their antitrust laws 10 One of the practical tools for economic concentration control is a notification system Without exception, the Vietnamese competition law adopts a mandatory ex-ante notification system.11 On 12 June 2018, the Vietnamese Government issued the new Law on Competition 2018 (hereinafter referred to as LOC 2018), which replaced the old version of Law on Competition 2004 (hereinafter referred to as LOC 2004), and took effect on July 2019 The LOC 2018 has brought new regulations that are more suitable and applicable in Vietnam’s current competition environment, thereby improving the old LOC 2004’s limitations, especially those related to economic concentration12 and notification threshold However, the new regulations on the notification threshold in the LOC 2018 remain certain drawbacks that may cause several challenges, especially in terms of applicability Such deficiencies are associated with not only competent authorities but also enterprises Firstly, in the context of developing countries like Vietnam, the new law Ha Thi Thanh Binh (2019), “Thông báo tập trung kinh tế pháp luật cạnh tranh” (Economic concentration notification under competition law), Vietnamese Journal of Legal Sciences, No.01(122)/2019 Hoang Le Uyen Phuong (2020), Evaluation of the criteria for effective economic concentration control under the Competition Law 2018 of Vietnam and recommendation for improvement, Bachelor thesis, HCMC University of Law, p.1 Berinde Mihai (2008), “Economic concentration in the context of the world economy globalization”, Annals of the University of Oradea: Economic Science, Vol 1(207)/2008, p 203 10 Daniel Sokol & William Blumenthal (2012), “Merger Control: Key International Norms and Differences”, International Research Handbook on Competition Law, Ariel Ezrachi, p.1 11 Hoang Le Uyen Phuong (2020), supra note 8, p.27 12 Organization for Economic Cooperation and Development (OECD) (2018), “OECD Peer Reviews of Competition Law and Policy: Viet Nam”, https://www.oecd.org/daf/competition/VietNam-OECDCompetition-Review-2018-ENG.pdf, Accessed on 25 March 2021, p 11 setting up several factors for economic concentration control can put lots of pressure on the National Competition Commission (known as Vietnam’s principal competition authority and hereinafter referred to as NCC) because there will be a growing number of economic concentration cases that must be notified to the NCC However, the NCC was yet to be formally established In other words, the Vietnamese competition authority is considered “immature” and lacking experience Therefore, it is necessary to assess whether all the economic concentration notification threshold criteria are applicable enough Otherwise, the unreasonableness is a potential burden on NCC and might negatively affect economic development Secondly, in the current era of globalization, countries are making an effort to control economic concentration cases implemented in foreign countries but have an adverse impact on domestic competition Hence, the criteria defining thresholds to notify economic concentration cases need to ensure these transactions are appropriately controlled.13 Yet, the regulations under the LOC 2018 not control such economic concentration cases executed overseas but having an adverse impact on Vietnam’s market effectively Thus, this thesis with the topic “Threshold for notification of economic concentration under the law of Vietnam and lessons from international experience” aims to analyze the current Vietnamese regulations on notification threshold and provide recommendations based on foreign countries’ experiences Literature review As the LOC 2018 came into effect, many studies on the economic concentration control regime have been recorded However, the challenges and limitations of the new regulations on the economic concentration notification threshold have not been profoundly researched Ha Thi Thanh Binh (2019), “Thông báo tập trung kinh tế pháp luật cạnh tranh” (Economic concentration notification under competition law), Vietnamese Journal of Legal Sciences, No.01(122)/2019: The article focuses on the importance of economic concentration notification in competition law and the regulations of Vietnam The author then expands researching other selected countries on notification threshold and criteria to determine the anti-competitive effects of economic concentration undertakings, thereby proposing some recommendations for Vietnam’s legislation However, this article was written based on the Draft of the LOC 2018, and at that time, the Decree 35/2020/ND-CP was yet 13 See Ha Thi Thanh Binh (2019), supra note to be issued Hoang Le Uyen Phuong (2020), Evaluation of the criteria for effective economic concentration control under the competition law 2018 of Vietnam and recommendations for improvement, Bachelor thesis, Ho Chi Minh City University of Law: The thesis has a broad scope of study by evaluating the criteria for effective economic concentration control, which comprises notification threshold, assessment of substantial anti-competitive effects caused or potentially caused, assessment of positive effects, preliminary assessment, and official assessment By evaluating such criteria, some recommendations for controlling economic concentration efficiently were indicated Thus, the thesis has not in-depth focused on notification threshold and challenges in terms of applicability for both NCC and enterprises Le Van Thang (2020), “Pháp luật cạnh tranh Việt Nam kiểm soát tập trung kinh tế hoạt động M&A giai đoạn nay” (Vietnam’s Law on Competition regarding economic concentration control for M&A activities in the current period), Master Thesis, Ha Noi University of Law: This thesis analyzes and compares the situation of M&A in Vietnam and the application of the LOC 2018 to assess the regulations under the LOC 2018 Thereby the author provides general recommendations based on the analysis to complete the economic concentration control system This thesis focuses on the actual situation and law applicability; therefore, the notification threshold has not been in-depth researched Tran Linh Huan (2019), “Những điểm quy đinh luật cạnh tranh năm 2018 kiểm soát tập trung kinh tế” (New points in the provisions regulating economic concentration control under the Law on Competition 2018), State and Law Journal, No 5(373)/2019: In this article, the author focuses on analyzing, assessing, and commenting on some breakthroughs on the provisions of the LOC 2018 by comparing with the provisions of the LOC 2004 to enlighten the vitality of amendment The author Tran Linh Huan appreciates the progressive changes in Vietnam’s Competition Law However, the study has not yet been deeply researched on the notification threshold for economic concentration, the application’s challenges, and the remaining shortcomings Hoang Minh Chien (2019), “Kiểm soát tập trung kinh tế theo Luật Cạnh tranh năm 2018”, (Economic concentration control under the Law on Competition 2018), Journal of Democracy and Law, No 3(324)/2019: This paper focuses on analyzing identifying signs of economic concentration, which are (i) Economic concentration subjects are enterprises operating independently in the market, (ii) Economic concentration forms are consolidation, merger, acquisition or joint venture between enterprises, (iii) The consequences of economic concentration lead to the formation of more substantial businesses and changes in market structure as well as correlation In addition, the author points out some new provisions in the LOC 2018, which overcome some limitations of the LOC 2004 and gain experience of advanced countries’ legal control over economic concentration Hence, the notification threshold has not been researched in this paper Mai Nguyen Dung (2020), “Áp dụng số HHI pháp luật tập trung kinh tế Hoa Kỳ, Liên minh châu Âu – Một số đề xuất cho pháp luật canh tranh Việt Nam” (Applying the HHI index to economic concentration regulations based on the United States and European Union experiences and recommendations for Vietnam’s competition law), State and Law Journal, No 04/2020: The author Mai Nguyen Dung provides an overview of the HHI index, analyzes the calculation formulas, advantages and drawbacks of the HHI measure The paper introduces the relevant legislation concerning this index in the US and the EU, thereby proposing some suggestions to improve the Vietnamese Competition Law relating to the HHI index in evaluating economic concentration However, this research is written mainly based on the Draft of the LOC 2018, and at the time, the Decree 35/2020/ND-CP has not been issued This thesis will attempt to address the issues that have been left unsolved, covered, or discussed from the previous studies Purpose of the study This thesis aims to analyze the Vietnamese regulations on economic concentration notification threshold under the LOC 2018 to point out noticeable limitations of the current framework, thereby providing recommendations for improvement based on the experience of the selected foreign countries To accomplish the above purpose, this thesis performs the following tasks: First, analyze the ongoing Vietnamese regulations on notification threshold to acknowledge the achievements of the LOC 2018, and draw out the inadequacies as well as the challenges that the LOC 2018 and the Decree 35/2020/ND-CP 14 have not addressed Second, analyze the selected foreign countries’ regulations on economic concentration control regimes to find the solutions for the challenges and inadequacies posed by the Vietnamese regulations 14 Decree No 35/2020/ND-CP detailing and guiding the implementation of a number of articles of the Competition law 2018 (Decree 35/2020/ND-CP) ... FOR NOTIFICATION OF ECONOMIC CONCENTRATION UNDER VIETNAMESE LAW This chapter will introduce the notification threshold of economic concentration under the Vietnamese Law by first clarifying the. .. for notification of economic concentration under Vietnamese law Chapter Economic concentration notification threshold under the selected legislations and recommendations for Vietnam CHAPTER THRESHOLD. .. CHAPTER ECONOMIC CONCENTRATION NOTIFICATION THRESHOLD UNDER THE SELECTED LEGISLATIONS AND RECOMMENDATIONS FOR VIETNAM 29 2.1 Threshold for notification of economic concentration under the law