Regulations against abusive princing a comparison of eu, us, and vietnamese laws and an application of its results to vietnam

LUND UNIVERSITY HOCHIMINH CITY FACULTY OF LAW UNIVERSITY OF LAW TRAN HOANG NGA REGULATIONS AGAINST ABUSIVE PRICING – A COMPARISON OF EU, US, AND VIETNAMESE LAWS AND AN APPLICATION OF ITS RESULTS TO VIETNAM Field of Study: International and Comparative Law Code: 62.38.60.01 DOCTORAL DISSERTATION OF LAW Swedish Supervisor Vietnamese Supervisor Prof Hans Henrik Lidgard Asst Prof Le Thi Bich Tho HO CHI MINH CITY - 2011 Table of Contents PREFACE List of Abbreviations CHAPTER - INTRODUCTION 1.1 Background 1.1.1 1.1.2 1.1.3 Relationship of competition and monopoly .9 Pricing in competition and monopoly 11 Monopoly control laws in US, EU and Vietnam 11 1.2 Purposes 25 1.3 Definition and delimitation 26 1.4 Methods 29 1.5 Value of the research 31 1.6 Outline 31 CHAPTER - REGULATIONS AGAINST ABUSIVE PRICING UNDER EU AND US LAW 33 2.1 Basic rules and concepts on abusive pricing in EU and US 33 2.1.1 Basic rules .33 2.1.1.1 EU Competition Law and US Anti-Trust Law are directed against abusive conduct, which includes abusive pricing 33 2.1.1.2 Laws against abusive pricing in the EU and the US protect Competition, not Competitors 45 2.1.2 Concept of Dominant position, Market power and Monopoly power .48 2.1.2.1 General approach 48 2.1.2.2 Identification 51 2.1.3 The Relevant Market concept 57 2.1.3.1 The relevant product market 59 2.1.3.2 The relevant geographic market .62 2.2 Specific forms of abusive pricing 64 2.2.1 Excessive pricing .64 2.2.1.1 Excessive pricing on the selling side 65 2.2.1.2 Excessive pricing on the buying side .73 2.2.1.3 Remarks 75 2.2.2 Predatory pricing .76 2.2.2.1 US test of predatory pricing 79 2.2.2.2 EU test of predatory pricing 83 2.2.3 Price Squeeze 86 2.2.3.1 Price squeeze in the US 88 2.2.3.2 Price squeeze in the EU 92 2.2.4 Price Discrimination 98 2.2.4.1 Price discrimination in the US .99 2.2.4.2 Price discrimination in the EU .102 2.2.5 Discount or rebate schemes 104 2.2.5.1 Bundled discounts 105 2.2.5.2 Single-product royalty discounts 110 2.2.6 Remarks 115 2.3 Remedies to abusive pricing in EU and US laws 117 2.3.1 Conduct and Structural Remedies 118 2.3.1.1 Termination of infringement 118 2.3.1.2 Behavioural remedies 120 2.3.1.3 Structural Remedies .121 2.3.2 Monetary Remedies .125 2.3.2.1 Fines and penalties .125 2.3.2.2 Compensation .128 2.3.2.3 Legal Fees 133 2.3.3 Criminalization and Incarceration: 133 2.3.4 Remarks 134 CHAPTER - ABUSIVE PRICING IN VIETNAM COMPARED WITH EU AND US 135 3.1 Background, basic rules and concepts 136 3.1.1 Gradual development of legislation and enforcement capacity .136 3.1.1.1 Development of Vietnamese laws 136 3.1.1.2 Competent Authorities for regulating abuses of dominance 144 3.1.2 Recent practices related to abuse of dominance 148 3.1.2.1 Vinapco case 149 3.1.2.2 Megastar case .151 3.1.2.3 K+ issue .153 3.1.2.4 “Electric pole war” .156 3.1.2.5 Medicine and milk prices .159 3.1.3 Basic rules .163 3.1.3.1 Abusive conducts including abusive pricing 163 3.1.3.2 Vietnamese Competition Law protects competition and competitors .168 3.1.4 Concepts 169 3.1.4.1 Dominance and monopoly position 169 3.1.4.2 Relevant market: 173 3.2 Specific forms of abusive pricing in Vietnamese laws 176 3.2.1 Excessive pricing: 176 3.2.1.1 Excessive pricing on the selling side 176 3.2.1.2 Excessive pricing on the buying side 179 3.2.1.3 Fixing a minimum re-selling price .180 3.2.2 Predatory Pricing: 182 3.2.3 Price Discrimination: .184 3.2.4 Foreclosing competitors 185 3.2.5 Remarks 187 3.3 Remedies to Abusive Pricing 188 3.3.1 Conduct and Structural Remedies 189 3.3.1.1 Conduct remedies 189 3.3.1.2 Structural remedies .190 3.3.2 Monetary remedies 190 3.3.2.1 Fine 190 3.3.2.2 Compensation .192 3.3.3 Remarks 192 4 CHAPTER - SUGGESTIONS FOR IMPROVING VIETNAMESE REGULATIONS ON ABUSIVE PRICING AND CONCLUSIONS 193 4.1 Suggestions for improving the presentation and communication of competition matters 194 4.1.1 Publication of VCAD and VCC decisions .194 4.1.2 Categorize abuses of monopoly position along with abuse of a dominant position .195 4.1.3 Determination of a dominant position 196 4.1.3.1 Single firm dominance 196 4.1.3.2 Collective dominance 197 4.1.4 Determination of a relevant market .197 4.2 Suggestions on regulations on abusive pricing 198 4.2.1 Excessive pricing 198 4.2.1.1 Excessive pricing on the sales side 198 4.2.1.2 Excessive pricing on the buy side 199 4.2.1.3 Fixing a minimum re-sale price 200 4.2.2 Predatory pricing 200 4.2.3 Price discrimination .201 4.2.4 Market foreclosure 201 4.2.5 Price squeeze 201 4.2.6 Discount and rebate schemes 202 4.3 Suggestions on remedies to abusive pricing 203 4.4 Conclusion 204 Annexes 206 - Extract of the VLC 206 - Extract of the VLC – With suggested amendments .210 - Extract of Decree 116/2005 214 - Extract of Decree 116/2005 – with suggested amendments 220 Table of Cases 226 Official Documents 231 List of websites 233 BIBLIOGRAPHY 234 PREFACE This dissertation is the visible result of my Ph.D research within the framework of the joint doctoral program between Lund University Faculty of Law and Ho Chi Minh City University of Law, supported by SIDA‟s “Strengthening legal education in Vietnam” project The research focuses on laws against abuse of a dominant position in the EU, the US and Vietnam utilizing a comparative law approach This dissertation would not have been accomplished without the help and contribution of several individuals, to whom I would like to express my deepest appreciation First, it was my great honour to be supervised by Professor Hans Henrik Lidgard and Associate Professor Le Thi Bich Tho Professor Lidgard has given me invaluable guidance, advice and encouragement from the very first to the final steps of the research He spent a great deal of his precious time reading and commenting my writing, and discussing the issues raised in my drafts Associate Professor Le Thi Bich Tho provided me not only with warm encouragement throughout the whole process, but also with insightful comments, especially with regard to the approach to Vietnamese law in my dissertation I would like to express my deep gratitude to Prof Lidgard and Asst Prof Le Thi Bich Tho for being my teachers and supervisors throughout both my masters and doctoral degree programs I am indebted to them for much of the professional legal content of my dissertation Any remaining errors are entirely my own Second, I would like to send my special thanks to Mr Robert Schwartz, who helped me to improve my writing in the English language Moreover, he provided me with many practical comments and relevant and valuable information Without his help, my dissertation would not reach the standard for international academic writing Third, I would like to thank Dr Nguyen Thanh Tu, Professor Katarina Olsson, and all the other professors, doctors who were opponents or members of examining boards of annual prolongation seminars, during the course of which they gave me many meaningful comments and feedback on the content of drafts of this dissertation Fourth, one thing I will never forget is the support and encouragement of the Lund University Faculty of Law and Ho Chi Minh City University of Law during my research I would like to express my gratitude to Prof Christina Moell, Prof Bengt Lundell, Prof Traskman, Asst Prof Mai Hong Quy, Dr Bui Xuan Hai, and many other professors, lecturers, administrative staff and librarians of the two universities In addition, I also would like to send my thanks to Suffolk Law School, where I was aided in US antitrust law research In particular my thanks go to Professor Stephen C Hicks, Mr Jonathan D Messinger and Suffolk‟s administrative staff and librarians Finally, I would like to thank my parents, my children, my friends and my students for their warm support, encouragement, care and love Ho Chi Minh City, August 31, 2011 Tran, Hoang Nga List of Abbreviations ASEAN Associations of South East Asian Nations AAC Average avoidable cost ATC Average total cost AVC Average variable cost CCHC Competition Case Handling Council (Vietnam) CIEM Central Institute for Economic Management (Vietnam) CJEU Court of Justice of European Union DOJ Department of Justice (US) EC European Community (Communities) EPL English Premier League EU European Union EVN Electricity of Vietnam Group FOEs Foreign owned enteprises FTAIA Foreign Trade and Antitrust Improvements Act (US) FTC Federal Trade Commission (US) GC General Court (EU) HCTV Hanoi Cable Television IDRC International Development Research Centre ICN International Competition Network LIRC Long run incremental cost LRAIC Long run average incremental cost MoF Ministry of Finance (Vietnam) MoIC Ministry of Information and Communication (Vietnam) MoIT Ministry of Industry and Trade (Vietnam) MPC Minimum – per – cap policy OECD Organization for Economic Cooperation and Development SOEs State owned enterprises SRMC Short-run marginal cost SSNIP Small but Significant and Non-transitory Increase of Price UN United Nations UNCTAD United Nations Conference on Trade and Development UNDP United Nations Development Programme US United States of America VCA Vietnam Competition Authority VCAD Vietnam Competition Administrative Department VCC Vietnam Competition Council VFF-FAN Vietnam football supporters association Viettel Army Telecom Group VLC Vietnam Law on Competition VNPT Vietnam Post and Telecommunications Group VSTV Viet Nam Satellite Digital Television VTV Vietnam National Television WTO World Trade Organization CHAPTER INTRODUCTION 1.1 BACKGROUND Competition and monopoly are integral issues to deal with in a market economy While many other countries have long experience in dealing with these issues, Vietnam only commenced the process of transitioning from a planned to a market economy a little more than two decades ago Thus, Vietnam currently faces many theoretical and practical challenges involved in protection of effective competition Due to its own unique circumstances, abuses of dominance are one of the most serious problems for the Vietnamese market Research in this field, therefore, has a significant potential for improving the Vietnamese economy This part of the dissertation presents different perspectives on the relevant issues, in order to explain the importance of the subject It begins with a discussion on relationship between competition and monopoly Then a description of economic theories on relationship of prices and competition is briefly presented in order to describe the influence of pricing by enterprises on various kinds of market It concludes with a description of the legal and practical situation of Vietnam in order to demonstrate the importance of research into the regulation of abusive pricing for the country 1.1.1.Relationship of competition and monopoly Competition is an essential feature of a market economy Fair competition benefits society Within the overall framework of an intense struggle among suppliers for resources and economic benefit, competition motivates them to improve their performance at all times Practical benefits are the result, such as the improvement of goods and the quality of service, with consumers getting more reasonable prices day by day However, competition in the long run may also lead to another result, because, as is 10 often said, “competition sows the seeds of its own destruction”.1 Competition encourages the economic development, but there are always winners and losers, and when winners are too successful and grow in strength beyond a certain limit, they may achieve monopoly positions whereby they are able to prevent others from competing and damage the process as a whole Especially, monopoly positions contain ability of independently decide, or even govern, prices From a philosophical perspective, competition and monopoly are considered to be two dialectically connected sides of a perfect whole Monopoly is the opposite pole of competition: where monopoly exists, competition does not Like other economic phenomena, monopoly has advantages and disadvantages When monopoly is the reward for successful competition, it motivates competitors, thus encouraging the development of production and the economy Enterprises approaching monopoly size by way of successful competition usually have financial and technical strengths, and are often leaders in researching and applying advanced techniques Their size and economies of scale may help to minimize the fixed costs of each unit, and the monopoly enterprise can satisfy market demand at a low price, fulfil market demand with less waste and free the otherwise wasted resources for other uses However, once monopoly exists stably and firmly, the market may lose its ability to motivate Customers are forced to depend on the monopoly enterprise, so any element of balance may be lost This leads to the enterprise becoming over-confident, ignoring the demands and interests of customers Furthermore, monopolists may be attempted to abuse their monopoly position by keeping output at a level lower than demand in order to push prices up and maximize profit In the long term, monopoly may deny consumers and society the ability to choose from among the best alternatives for their demands Personnel and financial allocation will not be able to maximize efficiencies resulting in serious damage to consumers and society See e.g European Commission‟s Ninth Report on Competition Policy (1979), p.10 ("It is an established fact that competition carries within it the seeds of its own destruction."), available at http://ec.europa.eu/competition/publications/annual_report/index.html: ; See also Cattermole, Edward, The Development and Implications of 'Collective Dominance' in EC Competition Law, Lund University Centre for European Studies Working Paper No 14 (2002) p 14, available at http://www.cfe.lu.se/publikationer/cfe-working-papers-series: ; and Lankhorst, Marco, Increasing the Requirements to Show Antitrust Harm in Modernised Effects-Based Analysis: An Assessment of the Impact on the Efficiency of Enforcement of Art 81 EC, (2010) (Ph.D dissertation University of Amsterdam Center for Law & Economics), p.20 ("Yet, competition carries within it the seeds of its own destruction."), available at http://dare.uva.nl/document/159558 Dang, Vu Huan, Regulations on monopoly control and anti-unfair competitive activities in Vietnam [Pháp luật kiểm soát độc quyền chống cạnh tranh không lành mạnh Việt Nam], National Politics Publisher, Hanoi, 2004, p 18, in Vietnamese 226 Table of Cases EU cases A Ahlstrom Oy v Commission, Joined Cases 89, 104, 114, 116, 117, and 125-9/85, [1988] ECR 5193, [1988] CMLR 901, Cases C 89/85 [1993] ECR I-1307, [1993] CMLR 407 BBI/Boosey & Hawkes: interim measures 87/500 (1987) OJ L286/36 British Airways Plc v Commission, Case T219/99, upheld by British Airways Plc v Commission, Case C95/04 P [2007] ECR I-2331 British Leyland Plc v Commission ,Case 226/84 [1986] ECR 3263 Comité des industries cinématographiques des Communautés européennes (CICCE) v Commission , Case 298/83 [1985] ECR 1105 Commission v AssiDoman Kraft Products AB and Others, 310/97 P, [1999] ECR I-5363, [1999] CMLR Case C- Commission Re the Cartel in Aniline Dyes [1969] OJ L195/11, [1969] CMLR D23 Compagnie maritime belge transports and Others v Commission, Joined Cases T-24/93 to T-26/93 and T-28/93 [1996] ECR II-1201 Commission v Solvay, Cases C-286-8/96 P, [2000] ECR I-2391, [2005] CMLR 454 Cooperative Vereniging ‟Suiker Unie‟ UA v Commission, Joined cases 40-48/73, 50/73, 54-56/73, 111/73, 113-114/73 [1976] ECR 445 Deutsche Telekom AG v Commission, Case T-271/03, [2008] ECR II477, upheld in Deutsche Telekom AG v Commission, Case C-280/08 P, [2010] ECR I-0000 ECS/AKZO [1985] OJ L374/1, [1986] CMLR 273; on appeal Case C62/86, AKZO Chemie BV v Commission [1991] ECR I-3359, [1993] CMLR 215 Europemballage Corp and Continental Can Co Inc v Commission, case 6/72 [1973] CMLR 199 Europemballage Corp and Continental Can Co Inc v Commission, case T 6/36 [1973] ECR 215, [1973] CMLR 199 France Télécom v Commission, Case T-340/03 [2007] ECR II-107, upheld on appeal in France Telecom SA v Commission, Case C-202/07 P 227 [2009] ECR I-2369 General Motors Continental NV v Commission , Case 26/75 [1975] ECR 1367 Hoffmann-La Roche & Co AG v Commission, Case 85/76 [1979] ECR 461, [1979] CMLR 211 Imperial Chemical Industries Ltd v Commission, [1972] ECR 619 Case 48/69 Industrie des Poudres Spheriques SA v Commission, Case T-5/97, [2000] ECR II-3755 (note 281) Irish Sugar v Commission Case T-228/97 [1999] ECR II-2969 Italy v Commission, Case 13/63 [1963] ECR 165 Konkurrensverket v TeliaSonera, Case C-52/09 [2011] Lucazeau v SACEM , Joint cases 110/88, 241/88, 242/88, [1989] ECR 2811 Manufacture francaise des pneumatiques Michelin v Commission, Case 203/01 [2003] ECR II-4071 (Michelin II) Microsoft C(2004) 900 final, [2005] CMLR 19 Ministere Public v Tournier , Case 395/87, [1989] ECR 2521 National Carbonising Company Ltd v Commission Case 109/75R, [1975] ECR 1193 and National Coal Board, National Smokeless Fuels Ltd and the National Carbonising Company Ltd, OJ 1976 L 35/6 Napier Brown - British Sugar, Case IV/30.178, OJ 1988 L 284/41 Nederlandsche Banden-Industrie Michelin N.V v Commission, Case 322/81 [1983] ECR 3461 CMLR 282 (Michelin I) Scandlines Sverige AB v Port of Helsingborg, Case COMP/A.36.568/D3, Commission Decision of July 23, 2004 Soda-Ash-Solvay, OJ 1991 L 152/21 Solvay v Commission, Case T-30/91 [1995] ECR II-1775, [1996] CMLR 57 and 91 Sundbusserne v Port of Helsingborg, Case COMP/A.36.568/D3, Commission Decision of July 23, 2004 Tetra Pak International v Commission Case T-83/91 [1994] ECR II-755, upheld on appeal in Tetra Pak International v Commission Case C-333/94 P [1996] ECR I-5951 United Brands Company and United Brands Continental v Commission, 228 Case 27/76 [1978] ECR 207, [1978] CMLR 429 Van den Bergh Foods Ltd 98/531 (1998) OJ L246/1 Welded Steel Mesh, 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Articles 81 and 82 of the EC Treaty, consolidated version, OJ L 001 of January 4, 2003 EU Commission, Guidance on the Commission's enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, OJ 2009 C 45/02 EU Commission, Guidelines on the assessment of horizontal merger under the Council Regulation on the control of concentrations between undertakings, OJ 2004 C 31/5 EU Commission, Guidelines on cooperation between the Commission and the National Courts OJ 2004 C101/54 EU Commission, Notice on the handling of complaints by the Commission under arts 81 and 82 EC OJ 2004 C101/65 EU Commission, Notice on the application of the competition rules to access agreements in the telecommunications sector framework, relevant markets and principles, OJ 1998 C 265/2 EU Commission, Notice on the Definition of the Relevant Market for the Purposes of Community Competition Law, OJ 1997 C 372/03 US Sherman Act, 26 Sta 209 (1890), codified as amended, 15 U.S.C §§1-7 Clayton Antitrust Act, (1914), 15 U.S.C §§12-27 Robinson-Patman Act, (1936), 15 U.S.C §13 DOJ and FTC, Horizontal Merger Guidelines, issued April 1992, revised April 1997 DOJ and FTC, Horizontal Merger Guidelines 2010 VIETNAM Constitution of 1992, amended in 2001 232 Civil Code of 2005 (Law No 33/2005/QH11 of 14 June 2005) Law on Commerce (Law No 36/2005/QH11 of 14 June 2005) Law on Competition (Law No 27/2004/QH11 of December 2004) Law on Telecommunications (Law No 41/2009/QH12 of 23 November 2009) Ordinance on Price (Ordinance No 40/2002/PL-UBTVQH10 of 26 April 2002) Decree No 25/2011/NĐ-CP of 06 April 2011 detailing the implementation of a number of articles of the Law on Telecommunications Decree No 75/2008/NĐ-CP of 09 June 2008 amending and supplementing a number of articles of Decree No 170/2003/NĐ-CP Decree No 37/2006/NĐ-CP of April 2006 detailing the implementation of the Law on Commerce in respect of sale promotion Decree No 120/2005/NĐ-CP of 30 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Tran, Hoang Nga List of Abbreviations ASEAN Associations of South East Asian Nations AAC Average avoidable cost ATC Average total cost AVC Average variable cost CCHC Competition Case Handling... books are simply not an adequate to provide an understanding of the content, purpose and meaning of such a complicated and important law as the VLC Many more academic treatments of the subject are