Yes. Mergers and similar transactions are subject to the provisions of the Law on Competition (Order No. 27/2004/QH11) (“VCL”), which took effect on 1 July 2005. There are also relevant decrees made pursuant to the VCL, such as Decree No 116/2005/ND-CP of 15 September 2005 (“Decree 116”).

However, for specific sectors, merger control may also be regulated by the provisions of specialized laws (e.g., Law on Enterprises; Law on Investment; Law on Credit Institutions; Law on Insurance Business; Law on Securities, etc.).

Vietnam Competition Authority (“VCA”) and Vietnam Competition Council (“VCC”).

The VCA is responsible for investigating mergers and similar transactions which are brought to its attention. Once an investigation is complete, VCA will hand the investigation report over to VCC, which will then make and enforce its decision on the case.
 

No

Yes. It is mandatory to file notifications of anticipated mergers if the threshold in Article 20 of the VCL is met. The procedural requirements for filing notifications are set out in Article 21 of the VCL.

In addition, mergers which meet the criteria in Article 18 of the VCL are prohibited. Should the merger parties nevertheless wish to implement the merger, they must do so by applying for an exemption. Procedural requirements for application of exemptions are set out in Article 29 of the VCL.

Mergers, together with consolidations, acquisitions and creation of joint ventures, are collectively termed ‘cases of economic concentration’ under VCL, and they are all subject to the provisions of the VCL.

Yes, if the parties participating in the mergers have a combined market share in the relevant market of 30% to 50%. The VCL currently provides notification requirements based on the threshold of a combined market share of parties to the mergers rather than the transaction value.

Foreign-to-foreign transactions are captured by the VCL as long as one of the merger parties has sales into Vietnam. The physical presence of the parties in Vietnam is not required for the merger control regime to apply. The test for local effects is based on the resulting combined market share from the merger.
 

Article 20 of the VCL mandates notification of economic concentration if the combined market shares of the participating enterprises in the relevant market amount to between 30% and 50%. However, if the participating enterprises remain small or medium-sized under Vietnamese law even after the economic concentration, notification will not be required.  

Article 18 of the VCL prohibits the economic concentration itself if the combined market shares of participating enterprises in the relevant market exceed 50%. Again, if participating enterprises remain small or medium-sized after the concentration, this prohibition will not apply.
 

Filing of notification is mandatory if the threshold in Article 20 of the VCL is met. 

Application for an exemption is required if the economic concentration is prohibited under Article 18 of the VCL, but it falls into the exempted cases and the parties involved still wish to implement the economic concentration.

Notification and/or exemption has to be filed before implementing the economic concentration.

Yes, interested enterprises cannot implement economic concentration until clearance by the relevant authorities is given.

Initial filing of notification or exemption is done by submitting an application and other supporting documents to the VCA. The form of application is prescribed by the VCA. Supporting documents include: 

1. Incorporation certificates of the participating enterprises;
2. Recent financial information of participating enterprises (audited financial statements for the last 2 consecutive years);
3. List of kinds and quantities of goods and/or services dealt by each participating enterprise;
4. List of subsidiaries of the participating enterprises; and
5. Market shares of the participating enterprises for the last two consecutive years.

If the filing is for an exemption, a report elaborating the satisfaction of the cases eligible for the Article 19 exemptions is also required.

There are no prescribed filing fees for notification. However, there is an evaluation fee of fifty million dong which is payable for applications for exemption.

For notifications, the VCA will verify the completeness of the notification within 7 working days of its receipt. Following proper notification, VCA generally has to convey its decision to the participating enterprises in writing within 45 days. For complicated cases, VCA may extend this period no more than twice and each time no more than 30 days, stating the reason for an extension. Hence in all cases, enterprises can expect a response within 105 days. 

For exemptions, the VCA will verify the completeness of the notification within 7 working days of its receipt. The time limit for issuance of a decision depends on the ground of exemption:

1. For applications based on the danger of dissolution or bankruptcy, the Minister of Ministry and Industry and Trade generally has to issue his decision within 60 days after receiving a complete application. For complicated cases, he may extend this period no more than twice and each time no more than 30 days, bringing the maximum period to a total of 120 days.
2. For applications based on positive economic benefits, the Prime Minister generally has to issue his decision within 90 days after receiving a complete application. For complicated cases, he may extend this period to 180 days.

The key indicators for clearance are market share and dominance. For an economic concentration to fall outside the prohibition, the resulting market share from the concentration must be less than 50% in the relevant market. Whether this requirement can be met depends on how the relevant market is characterized. 

Market share of an enterprise with respect to a certain type of goods or services is currently defined by the percentage of turnover from sales of such enterprise over the total turnover of all enterprises conducting business in such type of goods or services in the relevant market or the percentage of turnover of inwards purchases of such enterprise over the total turnover of inwards purchases of all enterprises conducting business in such type of goods or services in the relevant market for a month, quarter or year. Combined market share means the total market share in the relevant market of the enterprises participating in an agreement in restraint of competition or in an economic concentration.

The relevant market is defined by the relevant product market and the relevant geographical market. 

The relevant product market covers goods or services that are substitutable to those offered by the merged entity. In turn, substitutability of products may be determined by an assessment of similarities in product characteristics, and willingness of consumers to switch to one of the products when the other faces a small but significant and stable increase in price. 

The relevant geographical market is a specific geographical area in which there exist such relevant products, and which area is significantly different from neighboring areas. 

In order to obtain an exemption from the prohibition, the proposed economic concentration has to fulfill either one of the following criteria in Article 19 of VCL:

1. one or more of the participants is/are in danger of the dissolution of bankruptcy; or 
2. the economic concentration has an effect of expanding export or contributing to socio-economic development, technical and technological advance.

Note that satisfaction of either criterion is necessary for an exemption to be considered, but does not guarantee a grant of exemption. The merits of each case will be assessed by the competition authorities.

Following a notification, the VCC can either:

1. Approve the merger; or
2. Decide that it is prohibited under Article 18 of the VCL.

Following an application for exemption, the VCC can either:

1. Grant the exemption; or
2. Reject the application.

Note that the VCC may also approve the merger or grant the exemption with conditions imposed on parties.

No. While the VCA can grant exemptions that are conditional upon certain obligations imposed on the parties, parties generally cannot proactively offer commitments.

For failing to file a notification, a fine of up to 10% of the total revenue of the merger parties in the financial year prior to the year of the breach will be imposed. If the VCA deems the notification was incorrect or incomplete, it will point out the content that is to be supplemented and allow for amendment of the application.  

Separately, note that in relation to an application for exemption, VCC is entitled to cancel its grant of exemption if fraud in the application is detected. Errors amounting to fraud may include those related to data in financial statements and those which change the basic data in the explanatory report filed in the application for exemption.

Specifically for mergers, a fine of up to 10% of the total revenue of the merger parties in the financial year prior to the year of the breach will be imposed. In addition to the fine, depending on the nature and seriousness of the breach, additional penalties such as revocations of business licenses, compulsory de-merger or sale of acquired assets may also be imposed.

Yes. The VCA may conduct its own investigations if it detects signs that a merger may be prohibited under Article 18 of the VCL or subject to notification under Article 20 of the VCL but it received no notification. The VCA may also receive third-party complaints regarding such prohibited mergers.

The VCA will first conduct preliminary investigations before deciding to either stop investigations or to conduct an official investigation. If an official investigation is to be conducted, the parties subject to the investigation will be notified of the decision to investigate. If a hearing is to be held, parties will be notified no later than ten days before the hearing.

Currently, the prohibition of mergers is solely based on the market shares of participating enterprises. Under this approach, small or medium enterprises that remain so post-merger are generally exempt from the merger control regime. However, following the recent Draft Law on Competition (“Draft Law”) that was issued in April 2017, it is expected that the more qualitative test of “considerable competition restraint” may become operative in the near future. This means that currently exempted enterprises may soon be subject to merger reviews, since other factors such as financial powers of the enterprises and creation of barriers to entry will come into play. 

Besides the market share criteria, the Draft Law introduces other additional criteria including the transaction value and total turnover of the merger parties for determining the notification responsibility. If this comes into effect, it seems that more merger transactions would fall into such scopes.

In addition, the Draft Law also contemplates a leniency programme which is absent under the current regime. There is demonstrated intent by Vietnamese authorities to strictly regulate anti-competitive behavior.

In addition to the effects of the merger, it is also important that merging entities review in detail the transaction documents as certain clauses, such as non-compete clauses or compulsory purchase clauses, may potentially infringe the prohibition against anti-competitive agreements contained in the VCL. Where this is the case, the merging entities may be subjected to an investigation and potential financial penalties.