4.1 The development of competition law in Vietnam
4.1.2 Competition legislation before the enactment of the Competition Law
The significance of the Doi Moi policy and the following changes in terms of economic thinking were the recognition of the private sector, the reconstruction and equitisation of SOEs, the liberalisation of both internal and external trade regimes, the encouragement of foreign investment and the confirmation of freedom to do business inscribed in the Constitution 1992 and numerous other laws.96 In parallel with this process, a massive legislation transformation was undertaken to set up a regulatory system based on universally applicable legislative norms and macroeconomic principles.97
Prior to the Competition Law 2004, competition provisions were embodied in a number of legislations. Even though most of them were concerned with unfair competition behaviour, some provisions, in principle, could be applied to deal with anti-competitive behaviour.98 Many of them were issued after the adoption of the Constitution 1992 to recognise and ensure market economy principles,99 while they expressed state attitudes towards acts in restraint of competition. After the Competition Law 2004 came into effect, some of them remained in place. Such provisions can be found in a number of laws
95 Joanna Harrington, Constitutional Revision in Vietnam: Constitution Renovation but No Revolution (1994) <www.capi.uvic.ca/pubs/oc_papers/harrington.pdf>.
96 The right of freedom to do business is recognised in Article 57 of the Constitution of 1992, amended in 2001 and numerous laws such as the Civil Law, Investment Law and Enterprises Law. See Pham, above n 3, 549.
97 Pham, above n 3, 548.
98 See further in this chapter at sub-section 4.2.2.
99 For example, Article 15, 22, 28 of the Constitution 1992.
124 regulating aspects of the economy such as commercial law,100 pricing,101 tendering,102 intellectual property103 and securities.104 In addition, important legislation concerning the
100 One of the important laws passed after the Constitution 1992 was the Commercial Law 1997, which defined a number of detrimental acts to fair competition. The Commercial Law 1997 provided provisions aimed to: (i) protect consumers, including prohibitions on increasing or reducing prices to harm producers and consumers, deceiving or misleading customers, using deceptive advertisements or conducting unlawful commercial promotions; (ii) prevent unhealthy competitive acts, including speculation for market control, dumping of goods, defamation, obstructing, enticing, bribing or threatening customers and infringing industrial property rights.
101 Pricing is an area of law that was under regulation soon after the Constitution 1992. The foremost one, Decree No. 137/HDBT issued in 1992, set out the legal basis for the state management of pricing and a mechanism for the state management bodies to control monopoly prices. In 2002, the Ordinance on Prices promulgated on 26/4/2002 marked another step in this direction. This Ordinance was given guidance for its implementation by Decree No. 170/2003/ND-CP. Highlighted in both legislations were provisions
concerning the control of monopoly prices by the state (Article 19 ) and a list of assets, goods and services for which prices must be decided by the state (Article 7(1)). The Ordinance also prohibited dumping as an illegal pricing activity (Article 22) and contained provisions on handling of violations related to dumping (Article 26). Another important content was the prohibition of the conduct of coordinating with other production or business organizations and individuals in order to enter into price monopoly co-operation (Article 28). However, it is observed that many of provisions of the Ordinance on Prices 2002 referred primarily to unfair competition acts in pricing and did not aim to address conducts concerning pricing as forms of anti-competitive behaviour such as collusion for price fixing, dumping or imposition of predatory prices and the intention to exclude rivals.
102 Provisions on tendering were specified in the Commercial Law 1997, followed by the Regulation on Bidding issued together with Decree No. 88/1999/ND-CP of the Government on 01/9/1999 (this Regulation was later amended and supplemented by the Regulation on Bidding issued together with Decree
14/2000/ND-CP of the Government on 05/5/2000).This was important to set out the legal basis for bidding activities and to address violations of bidding. The Law on Tendering was adopted on 19/11/2005 and came into effect from the April, 01 2006. Together with the Competition Law, this law formed a legal framework to deal with anti-competitive actions in the field of tendering. The Law provides a number of important provisions namely: requirements for ensuring competition in tendering activities (Article 11(1)), prohibited conducts in tendering (Article 12(3), (6), (12), (13), (14)), regulations with regard to open tendering (Article 18 (2)) and limited tendering (Article 19(2)), competitive quotation in procurement of goods (Article 22(2)) and particular requirements for selecting contractors in certain special tendering cases that cannot use the normal forms of selection of contractors (Article 24). The Law also includes provisions for dealing with breaches of tendering law (Article 75).
103 Before the adoption of the Competition Law 2004, there were several provisions concerning aspects of intellectual property relating to competition, such as technology transfer. Laws concerning technology transfer contained provisions aimed at controlling anti-competitive behaviour in this domain. For example, according to Article 13 of the Decree No. 45/1998/ND-CP dated 01/7/1998 providing details in technology transfer, particular acts were considered as acts of restraint of competition and could not be included in technology transfer contracts such as to force the licensee to buy or receive from the licensor, or a third party stipulated by the licensor, raw materials, parts, manufacturing equipment, means of transportation, intermediate products, industrial property rights and employees with low levels of technical skills; to force the licensee to accept some limitations relating to quantity of products, price fixing, buyers and agents of licensees; to restrict the local market, export market, quantity and types of exported products of the licensee, etc. (Article 13). In addition, Decree No. 16/2000/ND-CP provided some administrative sanctions against violations of Decree No. 45/1998/ND-CP in the field of technology transfer concerning competition law (Decree No. 16/2000/ND-CP on 10/5/2000 art 7(1)(c)).
125 organisation and activities of enterprises and of investment were adopted during this time, containing competition provisions. The law in this area was concerned with the legal status of market participants, including the determination of monopoly positions and with the adjustment of behaviour related to market structure (economic concentration activities). Such provisions could be found in legislations governing state enterprises,105 non-state enterprises,106 and foreign investment.107
104 A number of acquisition activities conducted through the stock market had been regulated by Decree No.
144/2003/ND-CP before the Competition Law 2004 came into effect. Decree No. 144 contained provisions on state control over acquisition activities in the stock market which might lead to adverse effects on competition. For example, Article 36 (1) of Decree No. 144, the required the notification of the State Securities Commission, the Securities Trading Center, the Stock Exchange and the listed organization in cases where an institution or individual undertaking, or together with other affiliated persons, undertook transactions that made their shareholding position reach 5 per cent, 10 per cent, 15 per cent, or 20 per cent of a listed organization's equity and where there was any change of these levels. Besides, a number of acts relating to unfair competition were prohibited, such as using inside information to buy or sell securities for oneself or for a third party; disclosing, providing inside information to, or advising a third party to buy or sell securities based on inside information (Decree No. 144/2003 Art 103 (1)); undertaking securities transactions without transferring the ownership attached to those securities; conspiring with others to buy or sell securities to thereby create a false supply of and demand for securities; buying, selling or enticing others to continuously buy or sell securities in order to manipulate securities prices (Decree No. 144/2003 art 104); and selling securities they did not own at the time of transactions (Decree No.
144/2003 art 106). In addition, violations in the field of securities were handled by Decree No.
161/2004.ND-CP on 07/9/2004 in Articles 10 and 11.
105 Legislation in this regard mostly supported SOE reform. A number of laws concerning state-owned enterprises paved the way for the formation of state monopolies. Some of the important legislations provided a legal basis for the re-organisation of state enterprises, including: the restructuring of state enterprises into state corporations, the application of a parent – subsidiary model and state business groups (State-owned Enterprises Law 1995; Ordinance No.39/CP on 27/06/1995; Decisions 90/91 on 7/3/1994;
Decree No.153/2004/ND-CP on 09/8/2004); measures to reorganize state enterprises without changing ownership such as a merger, consolidation with another state enterprise (Decree No. 180/2004/ND-CP on 28/10/2004) and provisions on transferring, selling, contracting or leasing SOEs (Decree No. 103/199/ND- CP on 10/9/1999 and Decree No. 49/2002/ND-CP on 24/4/2002). Most of the legislations focused on the re-organisation of SOEs and measures were not considered as supporting forms of economic concentration and the impacts on competition were not properly identified.
106 Since Doi Moi a series of legislations concerning the non-state economic sector were also introduced, laying a legal framework for business activities and market behaviour. Some of them mentioned economic concentration activities among private firms, but they were not considered from a competition law perspective. In fact, they were regarded as the recognition of the basic rights of business freedom of enterprises. For example, the Company Law 1990 and Law on Cooperatives 1997 contained provisions on company mergers, transfer of shares of members of limited liability and joint stock companies or mergers of cooperatives. See Company Law 1990 and Cooperatives Law art 44. The Enterprise Law 1999 provided more comprehensive and detailed regulations that created a legal framework for the implementation of economic concentration. However, effects on competition and the control of economic concentration were not mentioned.
126 Before the adoption of the Competition Law 2004 a legal framework recognising and ensuring the right of freedom to do business in all sectors had been set up on a continuous basis. However, the absence of a set of unified regulations regulating competition could show that the regulation of market activities by a competition law was not taken seriously into consideration. As a result, many forms of anti-competitive behaviour were not regulated properly by a competition law.
Anti-monopoly law in particular and competition law in general, were only passed after the legal framework for the regulation of market behaviour had basically been set up. This created the situation that several provisions existed in different legislations. The problem arose as the Competition Law 2004 came to effect that there might be conflicts in selecting the applicable law and that there could be inconsistency in the application of relevant provisions to a particular behaviour.108 There were two basic causes for this situation. Firstly, as a remnant of the former mechanism, state monopolies easily evolved, while an anti-monopoly concept had never existed. It must be understood that the awareness of competition and acceptance of competition principles cannot be achieved in a short time. Secondly, it is understandable that when the state cannot identify the boundary between regulation over the market activities and the pursuit of its political determination and when the interaction between state competition policy and other policies concerning equality and socio-economic development cannot be defined clearly, the existence of a state monopoly in many areas remains inevitable.109
It was not until the late 1990s that movement for the preparation of a competition law in
107 The Foreign Investment Law was promulgated for the first time in 1987 and amended several times in 1990, 1992, 1996 and 2000. The Law recognised fundamental forms of economic concentration in which foreign firms were partners, including joint-ventures, transfer of capital contribution, consolidation and merger among foreign invested firms. It is noted that the law governing foreign investment appeared stricter towards these economic entities, as compared with domestic firms and concentrated on the control of investment activities of this sector, rather than on the regulation of behaviour in restraint of competition committed in this domain. It was not until 2005 when the unified law on investment was promulgated (the Unified Law on Investment was adopted on 29/11/2005), that provisions regulating investment were concerned with competition law issues. For example, Article 25 of the Law on Investment 2005 provides that „the conditions for merger and acquisition of companies and branches shall be regulated by this Law, the law on competition and other provisions of the relevant laws‟. Similarly, the new Law on Enterprises adopted in 2005 has provisions relating to control of economic concentration that correspond to provisions in competition law (Article 152(3)).
108 To solve this problem, Article 5(1) of the Competition Law 2004 stipulates that „where there is any disparity between the provisions of this Law and those of other laws on competition restriction acts or unfair competition acts, the provisions of this Law shall apply‟.
109 Phat, „Bao cao Tong hop‟, above n 1, 40.
127 Vietnam started, together with talks and discussions for introducing such a law with the technical assistance of international institutions such as the United Nations Development Programme (UNDP), the World Bank (WB) and the International Monetary Fund (IMF).110 After several years of drafting, begun in 2000,111 with 9 drafts, the Competition Law was finally adopted in 2004.112 It was the outcome of the working process of the Drafting Committee, with reference to other countries‟ competition laws, contributions from international experts and contributions from business.113