Impact of Vietnam’s new Competition Law on mergers


On 12 June 2018, the National Assembly of Vietnam updated its primary competition legislation through the passage of Law No. 23 (2018 Competition Law), replacing an earlier version of the law which had been active since 2004. The 2018 Competition Law took effect on 1 July 2019. A draft decree is expected to be released within this year to provide further guidance. This article aims to explore the new law’s impact on “economic concentration” activity, which includes mergers, acquisitions, consolidations and joint ventures.

Applicability offshore

Diep Hoang
Partner at Dilinh Legal
in Ho Chi Minh City
Tel: +84 28 7300 0864

The 2018 Competition Law applies to anti-competitive practices occurring outside Vietnam that have the effect of restraining competition within Vietnam, and the law has extended its governing scope to “Foreign agencies, organizations, and individuals.” Consequently, foreign companies involved in offshore economic concentrations impacting Vietnam will be subject to the 2018 Competition Law.

This extraterritorial reach is not entirely new, because it has been applied by the Vietnam Competition Authority (VCA) in practice for many years, based on their interpretation of the old competition law. With any ambiguity on this issue removed, the VCA is expected to be more active in asserting jurisdiction over offshore economic concentrations having an impact on the domestic market.

Merger notification

The 2018 Competition Law has added three new types of quantitative measures in economic concentrations that would trigger merger notification – based on turnover, assets, and transaction value. Under the previous law, only economic concentrations resulting in equal or greater than 30% market share in the “relevant market” triggered merger notification, while economic concentrations of equal to or greater than 50% were prohibited.

The 2018 Competition Law states that the relevant authorities are to provide thresholds for the new types of quantitative measures in economic concentrations that would trigger merger notification. Under the draft decree of the government detailing and guiding implementation of the 2018 Competition Law (draft decree), the following thresholds would require notification:

  • Either party’s total turnover in Vietnam exceeds VND1 trillion (US$44 million);
  • Either party’s total asset value in Vietnam exceeds VND500 billion;
  • The transaction value of the economic concentration exceeds VND500 billion; or
  • The combined market share of the parties in the relevant market is 30% or more.

To date, the draft decree has yet to become law, hence the above-mentioned thresholds might be subject to amendment before its passage into law.

Prohibited economic concentration

Under the 2018 Competition Law, the assessment of prohibited economic concentrations is no longer based solely on the “combined market share” in the “relevant market”. Instead, “economic concentration shall be prohibited if it causes, or is likely to cause, substantial anti-competitive effects on the Vietnamese market.” The combined market share is now only one factor among other factors to consider when assessing the economic concentration’s impact on competition.

The new factors are:

  • The extent of the concentration in the relevant market before and after economic concentration;
  • The relationships between the companies engaged in economic concentration in the chain of production, supply and distribution of a particular type of product or service;
  • The competitive advantages in the relevant market caused by economic concentration;
  • The ability of companies after the economic concentration to significantly increase their prices or profit on sales;
  • The ability of companies after the economic concentration to remove or prevent other companies from market entry or expansion; and
  • Other particular factors of the relevant market.

The subjective nature of the new test for prohibited economic concentrations, and the corresponding new factors, will make competition clearance assessment much more challenging than it has been in the past, unless the concentration clearly qualifies for a safe harbour.

Safe harbours and clearance

Trang Nguyen
Associate at Dilinh Legal
in Ho Chi Minh City
Tel: +84 28 7300 0864

The 2018 Competition Law replaces a single-phase review process for economic concentrations with a two-phase review process, which includes a preliminary review of 30 days followed by an official investigation of 90 days, if required. The official investigation can be extended by 60 days in complex cases.

Under the draft decree, an economic concentration will be given clearance if: (1) the combined market share of the parties is less than 20%; or (2) if the post-merger entity does not fall into a group of five entities accounting for 85% or more of the relevant market.

Also, under the 2018 Competition Law, instead of outright rejection, economic concentrations can be given conditional clearance, such as granting clearance contingent upon the division or sale of a portion of the capital or assets of the companies participating in economic concentration.

Tips on merger filings

Relevant market determination. Despite the change in the law, the determination of the “relevant market” will remain a critical part of any merger control analysis. Generally, the determination of the relevant market in Vietnam’s Competition Law is also consistent with the principles that are commonly used by other countries, which are based on the evaluation of demand and supply substitutability. The two products/services are deemed capable of being substituted for each other only when they can be substituted in terms of “characteristics, use purpose, and price”.

If two of these criteria cannot be substituted for each other, it means that the two products lie in two different relevant markets. The VCA’s approach to determining the “relevant market” has been to define it as narrowly as possible.

Take the VCA’s recent ruling in the case of gypsum board products as an example. There, the relevant market was defined as not just “gypsum board”, but has been divided into the market of “standard gypsum board”, “market of fire-resistant gypsum board”, and “market of moisture-resistant gypsum board”.

The relevant market determination will be more difficult for non-traditional business models. For example, it is unlikely that the market for retail sales of certain products on e-commerce platforms will be a substitute for the entire retail market, or that real estate rentals under an Airbnb-type business model will be a substitute for the complete rental market, or that ride-hailing platforms will be a substitute for traditional taxi services.

Market share determination. Parties to the mergers usually have their own market share data. However, the parties are typically required to use the data from independent and reliable resources to generate their market share reports. Therefore, parties should engage independent consultants to produce or procure independent market share data, and to prepare market share reports.

Legalization of the foreign documents. The VCA takes a conservative view on the adequacy of dossier filings. For timely preparation of notification filing, offshore entities involved in the M&A transactions in Vietnam should procure the legalization of the documents produced by foreign government bodies before their submission to the VCA.

Impact of the law on mergers

With its extraterritorial reach, expanded grounds for mandatory notification, and a multi-pronged subjective test for what constitutes a prohibited economic concentration, the 2018 Competition Law will result in increased voluntary merger notifications and requests for informal opinions from the VCA.

In 2017 and 2018, the VCA received a total of eight merger notifications. Given the size of the Vietnamese economy, the VCA should have invariably received many more merger notifications than it did. One of the primary reasons for low compliance with Vietnam’s merger rules is the malleable concepts of “market share” and “relevant market” under the old competition law. Another reason is the VCA’s perceived lack of enforcement of the merger rules. It appears to the authors that the situation has changed, and merger counsel should take note.


Dilinh Legal
3/F Broadway C,
150 Nguyen Luong Bang Street
Tan Phu Ward, District 7
Ho Chi Minh City, Vietnam
Tel: +84 28 7300 0864