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Table of Contents
PREFACE ............................................................................................. 5
List of Abbreviations .............................................................................. 7
1.
INTRODUCTION .......................................................................... 9
1.1.
Background ........................................................................................ 9
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
2. 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.
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
2.2.5.1.
Bundled discounts ........................................................................ 105
2.2.5.2.
Single-product royalty discounts .................................................. 110
2.2.6. Remarks ................................................................................................. 116
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 ........................................................ 119
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 ....................................................................... 126
2.3.2.2.
Compensation............................................................................... 128
2.3.2.3.
Legal Fees .................................................................................... 133
2.3.3. Criminalization and Incarceration: ........................................................ 134
2.3.4. Remarks ................................................................................................. 134
3.
US
ABUSIVE PRICING IN VIETNAM COMPARED WITH EU AND
.................................................................................................... 137
3.1.
Background, basic rules and concepts ......................................... 138
3.1.1. Gradual development of legislation and enforcement capacity ............. 138
3.1.1.1.
Development of Vietnamese laws ................................................ 138
3.1.1.2.
Competent Authorities for regulating abuses of dominance ........ 146
3.1.2. Recent practices related to of abuse of dominance ................................ 150
3.1.2.1.
Vinapco case ................................................................................ 151
3.1.2.2.
Megastar case ............................................................................... 153
3.1.2.3.
K+ issue ....................................................................................... 154
3.1.2.4.
“Electric pole war” ....................................................................... 157
3.1.2.5.
Medicine and milk prices ............................................................. 161
3.1.3. Basic rules ............................................................................................. 165
3.1.3.1.
Abusive conducts including abusive pricing ................................ 165
3.1.3.2.
Vietnamese Competition Law protects competition and competitors
170
3.1.4. Concepts ................................................................................................ 171
3.1.4.1.
Dominance and monopoly position.............................................. 171
3.1.4.2.
Relevant market: .......................................................................... 175
3.2.
Specific forms of abusive pricing in Vietnamese laws ................ 177
3.2.1. Excessive pricing: .................................................................................. 178
3.2.1.1.
Excessive pricing on the selling side............................................ 178
3.2.1.2.
Excessive pricing on the buying side ........................................... 180
3.2.1.3.
Fixing a minimum re-selling price ............................................... 182
3.2.2. Predatory Pricing: .................................................................................. 184
3.2.3. Price Discrimination: ............................................................................. 186
3.2.4. Foreclosing competitors ........................................................................ 187
3.2.5. Remarks ................................................................................................. 189
3.3.
Remedies to Abusive Pricing ........................................................ 190
3.3.1. Conduct and Structural Remedies.......................................................... 191
3.3.1.1.
Conduct remedies ......................................................................... 191
3.3.1.2.
Structural remedies....................................................................... 192
3.3.2. Monetary remedies ................................................................................ 192
3.3.2.1.
Fine .............................................................................................. 192
3.3.2.2.
Compensation............................................................................... 193
3.3.3. Remarks ................................................................................................. 194
3
4. SUGGESTIONS FOR IMPROVING VIETNAMESE
REGULATIONS ON ABUSIVE PRICING AND CONCLUSIONS ...... 195
4.1.
Suggestions for improving the presentation and communication
of competition matters.................................................................................... 196
4.1.1. Publication of VCAD and VCC decisions ............................................. 196
4.1.2. Categorize abuses of monopoly position along with abuse of a dominant
position
............................................................................................................... 197
4.1.3. Determination of a dominant position ................................................... 198
4.1.3.1.
Single firm dominance ................................................................. 198
4.1.3.2.
Collective dominance ................................................................... 199
4.1.4. Determination of a relevant market ....................................................... 199
4.2.
Suggestions on regulations on abusive pricing ........................... 200
4.2.1.
4.2.2.
4.2.3.
4.2.4.
4.2.5.
4.2.6.
5.
Excessive pricing ................................................................................... 200
Predatory pricing ................................................................................... 202
Price discrimination ............................................................................... 203
Market foreclosure ................................................................................. 203
Price squeeze ......................................................................................... 203
Discount and rebate schemes ................................................................. 204
4.3.
Suggestions on remedies for abusive pricing .............................. 205
4.4.
Conclusion ...................................................................................... 206
Annexes ...................................................................................... 208
1 - Extract of the VLC ......................................................................................... 208
2 - Extract of the VLC – With suggested amendments ....................................... 212
3 - Extract of Decree 116/2005 ........................................................................... 216
4 - Extract of Decree 116/2005 – with suggested amendments........................... 222
Table of Cases .................................................................................... 228
Official Documents ............................................................................ 233
List of websites .................................................................................. 235
BIBLIOGRAPHY .............................................................................. 236
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
6
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
7
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
8
SOEs
State owned enterprises
SRMC
Short-run marginal cost
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
9
1.
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.2
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
1
See e.g. European Commission’s Ninth Report on Competition Policy, 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 Edward
Cattermole, 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 Marco Lankhorst, 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 .
2
Dang, Vu Huan, Regulations on monopoly control and anti-unfair competitive activities
in Vietnam [Pháp luật về kiểm soát độc quyền và chống cạnh tranh không lành mạnh ở Việt
Nam], National Politics Publisher, Hanoi, 2004, p. 18, in Vietnamese.
11
damage to consumers and society.
1.1.2.Pricing in competition and monopoly
In a market economy, prices are one of the most important signs of the
state of competition. Prices are established and exercised by economic rules.
In a market economy prices are the result of competition. In a comparative
metaphor, if demand – supply relationship is considered as the “material
bones”, prices are considered to be the “face” and competition is the “soul”
of the market.3 Most basic economic concepts are relevant to prices. For
example, the market demand curve represents the relationship between price
and supply; elasticity of demand measures the relationship between the
price of the product and the demand for it; the relationship between prices
and costs is used to describe perfect competition as well as monopoly. The
question of whether sellers are price-takers or price-makers is applied to
identify whether the market is competitive, monopolistic, or oligarchic. In a
competitive market, prices are decided by objective economic rules,
especially by the interrelation between supply and demand. So sellers must
obey the rules and charge the most appropriate prices in the framework of
the rules which serve their competition target. Otherwise, they cannot to
exist in the long run and will be driven from the market.
Prices are also important tools used by competitors in their struggle for
existence and for a position in the market. Pricing is an extremely important
job in every enterprise in a market economy. It is the basis for the realization
of business targets. In competition, pricing is utilized at the first instance.
Strategies applied to other elements of production such as quality, functions,
or guarantees, after-sales care, etc., are, after all, of indirect relevance to
prices. Pricing can be used for pro-competitive or anti-competitive purposes.
In a monopoly market, the power to govern prices is in the hands of the
seller. There is a great tendency to exploit that power to extract benefits and
maintain the monopolist’s position. Therefore, it is necessary that the power
of regulation be in the proper “hands” in order to curb this danger to a
competitive market.
1.1.3.Monopoly control laws in US, EU and
Vietnam
The market and its self-correcting mechanisms will erode monopoly
3
Nguyen, Nhu Phat, Market and Competition [Thị trường và Cạnh tranh], Forum for
discussion about Draft of the Law on Competition, in Vietnamese, available at
http://www.vibonline.com.vn/vi-VN/Forum/TopicDetail.aspx?TopicID=839
12
power and eventually it will be eliminated. The extra profit (economic rent)
available to a monopoly is an attraction. Thus, if the barriers are low
enough, many competitors will enter or re-enter the market. A firm which
attempts to enjoy the fruits of monopoly power by increasing prices and
lowering output, will lose its monopoly power to others, since over time, its
customers will switch to more efficient firms, which undercuts prices and
eventually provides welfare benefits through better quality products and
services. Consequently, competition does come back to life. However, the
problem is that the monopolist is well aware of this threat; and will try his
best to find ways of preventing potential competitors from entering the
market. There are many situations in which the market mechanism by itself
is unable to or inefficient in checking the unfair activities of a monopolist,
who wants to maintain his position and nullify the efforts of potential
competitors. This creates a role for government intervention in the market to
ensure the operation and development of fair competition, and deal with
anti-competitive activities and abuse of monopoly power. In a nutshell,
government intervention is necessary if free competition is not to destroy
itself.
There is another aspect of the process, which we should also not neglect:
If markets are permitted to compete without any restraint this will also lead
to unfair competitive activities. This is due to the fact that there are many
ways to win and competing fairly is more difficult and requires more from
the competitor’s talents, morals, will, patience, and many other factors,
while unfair activities are easier to carry out, helping these competitors to
reach their objectives with less expense and time and more profit. Thus, if
there is no one with sufficient power to point out which activities are wrong
and take steps against them, many competitors will act unfairly regardless of
morals because of the lure of profit. “The person” with sufficient abilities
and power to ensure the benefit of society and protect market participants
cannot be other than the Government. In conditions of model market
economies, the “invisible hand” - self-correcting mechanism is, admittedly
at work but it cannot rule absolutely; the “State’s hand” is needed alongside
the “invisible hand”.
Generally, in a market economy, free competition is accepted, but the
State utilizes suitable measures to ensure the healthy development of
competition and to eliminate the disadvantages of monopoly. Measures
usually fall into two groups. Group one includes administrative and
economic measures such as taxation policies, price control, monopoly
adjustment, and nationalization. Group two include laws regulating
competition. Laws on competition include two main areas: anti-unfair
competition laws and monopoly control laws. In fact, many countries have
an act or laws bearing the name “Anti-Monopoly”. However, no country
forbids monopoly in all cases. Monopoly can be the positive result of fair
13
competition (economic monopoly), arise from objective conditions (natural
monopoly), or be established by the State to serve its purposes (state
monopoly). Therefore, even if they are titled “Anti-Monopoly Acts”, these
laws usually focus rather, on controlling the ways in which monopoly arises
and the activities of existing monopolies. Monopoly control laws normally
regulate three kinds of economic activity: (i) cartels, (ii) mergers, and (iii)
abuses of dominant position.
Cartels and mergers are activities that aim at association and unity (no
matter whether temporary or permanent, secret or open, loose or tight) in
order to create an aggregation of market power which can, under certain
conditions, overwhelm, constrain or eliminate rivals. Thus, laws on cartels
and mergers aim at preventing the dangers of this type of monopoly
formation and of the way it can constrain free competition.
The investigation of the concept of “dominant position” is one of the
central tasks of this dissertation and will be presented and analysed more
deeply in the next chapter. Understand it in shorthand, common sense way it
signifies an entity having enough market power to constrain the market.
This can, in most cases, also be called monopoly power. The majority
consensus is to permit undertakings to hold dominant positions in a market,
while strictly prohibiting abuses by them. Laws on abuses of dominant
position aim to regulate the activities of existing monopoly power and
prevent the elimination of competition and the harm of general consumers’
welfare.
Looking at the negative side of things, we can see that where a monopoly
power is abused to restrain competition, more harm is done than when mere
unfair competitive activities are at issue. Therefore, the role of monopoly
control laws is as important as anti-unfair competition laws. Abuse of
market power not only harms a competitor or some particular customers, but
impact consumers and society as a whole. Some even regard monopoly
control laws as a higher order in the hierarchical development of anti-unfair
competition laws.4 If a constitution is a tool to master political power and
force the government to heed the public, then monopoly control laws are
tools to master economic power and force that power to obey competitive
pressure. Monopoly control laws could thus be considered as one of the
main components of the “Economic Constitution”.5
4
Dang, Vu Huan, supra note 2, pp. 77-78,.
5
See e.g. Pham, Duy Nghia, Professional References for Economic Law [Chuyên khảo
Luật Kinh Tế], The Hanoi National University, Hanoi, 2004, p. 796, in Vietnamese ; see
also, U.S.v. Topco Associates, Inc. 405 U.S. 596,610 (1972)"Antitrust laws in general, and
the Sherman Act in particular, are the Magna Carta of free enterprise. They are as important
to the preservation of economic freedom and our free-enterprise system as the Bill of
Rights is to the protection of our fundamental personal freedoms. And the freedom
14
The point in time which is largely regarded as the birth of monopoly
control laws is the year 1890 with the passage of the Sherman Act in the
6
United States of America (US). After the Sherman Act, the US enacted in
turn the Clayton Act7 (1914), the Federal Trade Commission Act8 (1914),
the Webb-Pomerene Act9 (1918), the Robinson Patman Act10 (1936), the
Wheeler-Lea Act11 (1938), the Celler Kefauver Antimerger Amendment12
(1950), the Hart-Scott-Rodino Antitrust Improvements Act13 (1976), which
all constituted the anti-monopoly laws (in the US called “Anti-Trust Laws”).
guaranteed each and every business, no matter how small, is the freedom to compete-to
assert with vigor, imagination, devotion, and ingenuity whatever economic muscle it can
muster. Implicit in such freedom is the notion that it cannot be foreclosed with respect to
one sector of the economy because certain private citizens or groups believe that such
foreclosure might promote greater competition in a more important sector of the
economy.")
6
15 U.S.C. §§ 1 et seq.
Section 1"Every contract, combination in the form of trust or otherwise, or conspiracy, in
restraint of trade or commerce among the several States, or with foreign nations, is declared
to be illegal. Every person who shall make any contract or engage in any combination or
conspiracy hereby declared to be illegal shall be deemed guilty of a felony,..."
Section 2 "Every person who shall monopolize, or attempt to monopolize, or combine or
conspire with any other person or persons, to monopolize any part of the trade or commerce
among the several States, or with foreign nations, shall be deemed guilty of a felony, and,
on conviction thereof, shall be punished by fine ...or by imprisonment..."
7
15 U.S.C. § 15. "Except as provided in subsection (b) of this section, any person who
shall be injured in his business or property by reason of anything forbidden in the antitrust
laws may sue therefor in any district court of the United States in the district in which the
defendant resides or is found or has an agent, without respect to the amount in controversy,
and shall recover threefold the damages by him sustained, and the cost of suit, including a
reasonable attorney’s fee..."
8
15 U.S.C. §§ 41-58. Section 45 gives the FTC the authority to identify and condemn
unfair methods of competition.
9
15 U.S.C. §61, permitting cartels to set prices for exports.
10
15 U.S.C.§ 13
11
Pub. L. No. 75-447, 52 Stat. 111 (1938). This act was an amendment to the Federal
Trade Commission Act that added the phrase "unfair or deceptive acts or practices in
commerce are hereby declared unlawful" to the Section 5 prohibition of unfair methods of
competition, in order to provide protection for consumers as well as competition.
12
15 U.S.C. §§ 18, 21, Amending Section 7 of the Clayton Act to prohibit mergers or
acquisitions that may substantially lessen competition or create a monopoly.
13
Public Law 94-435, known commonly as the HSR Act, is a set of amendments to the
antitrust laws of the US, principally the Clayton Antitrust Act 15 U.S.C. § 18a, requiring
parties to file a Notification and Report Form with the DOJ describing the transaction in
order to assess whether the proposed transaction (over $252 Million) violates the antitrust
laws and permits States to sue companies for antitrust violations parens patriae.
15
In those Acts, Section 2 of the Sherman Act14, Sections 2 and 3 of the
Clayton Act15 and the Robinson – Patman Act16 regulate abuses of a
dominant position (in the US usually called a “monopoly power”).
In the European Union (EU)17, monopoly control laws came to life at the
same time, and as part of, the establishment of the Community.18 It resulted
from an awareness of the role of competition in the economy and the
potential dangers of monopolies. Moreover, monopoly control laws were
essential to the building and consolidation of a united common market,
preventing monopolies from fragmenting the market and imposing
unreasonable burdens on consumers.19 Therefore, provisions on competition
20
21
22
principles appeared in Articles 3 (f) , 85 and 86 of the Treaty of Rome
14
Prohibits monopolisation or attempted monopolisation.
15
Section 2 prohibits price discrimination, Section 3 prohibits restrictions on purchasers
16
15 U.S.C. §13a This is an extension of the provision of Section 2 of the Clayton Act on
price discrimination:
“It shall be unlawful for any person engaged in commerce, in the course of such
commerce, either directly or indirectly, to discriminate in price between different
purchasers of commodities of like grade and quality ... where the effect of such
discrimination may be substantially to lessen competition or tend to create a monopoly in
any line of commerce, or to injure, destroy, or prevent competition with any person who
either grants or knowingly receives the benefit of such discrimination, or with customers of
either of them.”
"By its terms, the Robinson-Patman Act condemns price discrimination only to the extent
that it threatens to injure competition." Brooke Group Ltd v. Brown & Williamson Tobacco
Corporation, 509 U.S. 209, 220 (1993).
17
In this paper, the terms “EU”, “European Community”, “European Communities” or
“EC” are used interchangeably.
18
“Initially the antitrust provisions were inserted into the Treaty in view of their role in
the process of market integration. The antitrust rules were no more than the private
counterpart to the rules, enshrined in Articles 28-30EC…Subsequently, in the second
period, antitrust policy was employed to establish a broader Community industrial
policy…The momentum created by the Commission’s “1992 programme’ provided the
occasion for expanding the scope of Community antitrust policy even further…” R.
Wessling, The Modernisation of EC Antitrust Law, (Hart 2000) pp.48-49 (Quoted in Paul
Craig, Grainne de Burca, EU Law Text, Cases and Materials , 4th Edition, Oxford Press,
2008, at p. 951.)
19
The objectives of EU Competition law are 1. To enhance efficiency in the sense of
maximizing consumer welfare, 2. To protect smaller firms and consumers from large
aggregations of economic power whether in the form of monopolistic dominance by a
single firm or through agreements whereby rival firms coordinate their activities. Paul
Craig, Grainne de Burca, Id. at pp. 950-951.
20
"For the purposes set out in Article 2, the activities of the Community shall
include,...(f) the institution of a system ensuring that competition in the common market is
16
of 25 March 1957 which established the European Economic Community.
To an extent, both Articles 85 and 86 of Treaty of Rome are monopoly
control laws since Article 85 prohibits cartels and Article 86 prohibits
abuses of a dominant position. The Treaty of Rome was amended by the
23
24
Single European Act and, the Treaty of Maastricht establishing the
European Union in 1992. This Treaty entered into force from 1 November
1993 and became the EC Treaty. Articles 85 and 86 became Articles 81 and
82 of the EC Treaty and used to be called as Article 81EC, Article 82EC.
The Treaty was further amended by the Treaty of Amsterdam25 and the
Treaty of Nice.26 Then, on 13 December 2007, the EU member states signed
the Treaty of Lisbon27 (initially known as the Reform Treaty), which entered
into force on 1 December 2009. The Lisbon Treaty amends all of the prior
Treaties. In this process, the original Treaty establishing the European
Economic Community from 1957 became the Treaty on the Functioning of
28
the European Union (TFEU). Articles 81 and 82EC now become Article
101 and 102 of TFEU (Article 101TFEU and Article 102TFEU). EU
not distorted;.." (Article 3 (f) was renumbered to Article 3 (g) EC and repealed and replaced
by Protocol 27 to the Treaty of Lisbon “ON THE INTERNAL MARKET AND
COMPETITION and amended to read "CONSIDERING that the internal market as set out
in Article 3 of the Treaty on European Union includes a system ensuring that competition is
not distorted,.."
21
"1. The following shall be prohibited as incompatible with the common market: all
agreements between undertakings, decision by associations of undertakings and concerted
practices which may affect trade between Member States and which have as their object or
effect the prevention, restriction or distortion of competition within the common market,..."
22
"Any abuse by one or more undertakings of a dominant position within the common
market or in a substantial part of it shall be prohibited as incompatible with the common
market in so far as it may affect trade between Member States...."
23
Signed in Luxembourg 17 February 1986.
24
Treaty on European Union signed in Maastricht 7 February 1992.to enter into force 1
January 1993, provided that all the instruments of ratification had been deposited.,
25
TREATY AMENDING THE TREATY ON EUROPEAN UNION, THE TREATIES
ESTABLISHING THE EUROPEAN COMMUNITIES AND CERTAIN RELATED ACTS
signed in Amsterdam 2 October 1997 in effect 1 July 1999.
26
Treaty Amending the Treaty on European Union, the Treaties establishing the European
Communities and certain related Acts signed at Nice 26 FEBRUARY 2001, effective 1
February 2003.
27
Treaty on European Union and the Treaty on the Functioning of the European Union,
as modified by the Treaty of Lisbon, with all Protocols and Declarations as signed in
Lisbon on 13 December 2007.
28
Consolidated versions of the Treaty on European Union and the Treaty on the
Functioning of the European Union O J C 83 of 30.3.2010. Available at http://eurlex.europa.eu/JOHtml.do?uri=OJ:C:2010:083:SOM:EN:HTML
17
competition law learned a great deal from the US experience, coming into
life as it did after more than sixty years of U.S. antitrust experience. There is
a correlative article in the EU legislation for every section in the anti-trust
laws of the US.29 However, there are differences between the two systems,
which make them competing models for the rest of the world. Nowadays,
EU competition law has become a popular model not only for EU member
states, but also for other European countries30 as well as many countries in
Africa and Asia.
Countries may adopt anti-unfair competition law and monopoly control
32
law in separate acts, for example Germany31, China , or adopt one act
covering all areas of regulations, such as has Vietnam.
In recent years, awareness of the importance of competition law has
grown throughout the world. Economic globalization, involving zone and
world economic integration has had a positive influence on most countries
in relation to drafting and enacting competition laws. International trade and
investment transactions to a great extent depend on the competition laws of
the country in question. In the process of drafting and improving
competition laws, each country wants to succeed on two issues. The first is
the fit between the laws and social-economic conditions, as well as its
development level. The second is to make the best use of the experiences of
countries with competition laws. In order to meet these needs, the United
Nations Conference of Trade and Development (UNCTAD) has, since
1998, drafted and issued a Model Law on Competition. This is a research
29
Le, Net, Anti-trust law in the US and Competition law in EU, Ministry level
Researching Project of Vietnamese Competition Law, Hochiminh City University of Law,
2002, p.45, in Vietnamese, not published.
30
Eastern European countries, countries of the Commonwealth of Independent States
(CIS). After having thoroughly studied the EU model, the CIS countries signed the
Intergovernmental Treaty on the Implementation of a Coordinated Competition Policy on
24 December 1993. On this basis, the CIS adopted the Model CIS law on Protection of
Economic Competition in 1996 and every other CIS state adopted its own competition laws
covering both anti-unfair competition law and monopoly control laws containing
regulations on abuse of a dominant position.
31
The German Act against Restraints of Competition - Gesetz gegen
Wettbewerbsbeschränkungen was enacted in May 1998 and came into force in January
1999. The 7th amendment to the Act came into force from 1 July 2005. The German Act
against Unfair Competition - Gesetz gegen den unlauteren Wettbewerb vom 3. Juli 2004
(BGBl. I 2004 32/1414). It entered into force the day after its publication in the Official
Journal (Bundesgesetzblatt) on July 8, 2004, and replaced to the old act dating from 1909.
32
The People’s Republic of China enacted their Anti-Unfair Competition Law on 2
September 1993 and commenced drafting an Anti-Monopoly Law in 1994. After 13 years
of drafting, China enacted its Antimonopoly Law on 30 August 2007 which became
effective 1 August 2008.
18
tool which has not only model articles but also syntheses and analyses,
examples and records from the practical experiences of many countries and
international organizations. This material is amended and supplemented
every year but, generally, the model articles evidence the strong influence of
EU competition laws.
Vietnam has been applying its system of Economic Reform for 25 years.
The great landmark in the history of the beginning of economic renovation
in Vietnam was the Sixth Congress of the Vietnamese Communist Party in
December 1986. Resolutions enacted by this Congress recognized the
existence of many sectors in the economy and memorialized the decision to
transform the Concentrate Planning Regime into the Market Regime with a
socialist orientation. One of the most important results of the Economic
Reform was the development and encouragement of market competition.
From that point till now, the Vietnamese State has carried out many reforms
to set up and develop a competitive environment for business. The
Vietnamese Constitution 1992 (as amended in 2001) recognized the freedom
of business and established a legal foundation providing for competition
among business entities. Article 15 provides for the construction and
development of a commodity economy comprised of many sectors and a
market regime managed by the State with a socialist orientation. The State
also recognizes and ensures the right of its citizens to engage in business33
on the basis of equal treatment of all business entities in all economic
sectors.34 The State undertakes to “protect rights and benefits of producers
and consumers” in Article 28. Under these principles, regardless of the
economic sector a business entity belongs to, it will be dealt with should it
engage in activity contrary to the laws, violates the right to compete of other
business entities, or harms consumer benefit.
A significant character of the Vietnamese economy is the imbalance of
market power between state and non-state sectors. This is a typical character
of countries transitioning from centrally planned economies. The
Vietnamese economy was dominated by state owned enterprises (SOEs).35
Although, the State has been re-arranging SOEs, privatizing a large number
of SOEs, and the number of non-state Vietnamese enterprises and foreign
owned enterprises (FOEs) has increased rapidly in recent years, the state
33
Constitution of Vietnam 1992, English version is available
http://www.vietnamembassy-usa.org/learn_about_vietnam/constitution , Article 57.
34
35
at
Id., Article 22.
Le, Hong Hanh , Some Vietnamese market economy’s characteristics affecting laws on
competition [Một số đặc điểm của nền kinh tế thị trường Việt Nam có ảnh hưởng tới pháp
luật về cạnh tranh], Competition and constructing laws on competition in Vietnam
nowadays, People’s Police Publisher, Hanoi, 2001, p. 27, in Vietnamese.
19
sector still has overwhelming market power in the majority of sectors of the
economy. The market power of SOEs originates from three basic sources36 :
(i) Continuation of their size and high market share from the period of
Vietnam’s planned economy; (ii) Enjoying privileges and government
sponsored policies even where they do not have a large market share which
enhances their market power in some areas; (iii) Large corporations
established according to administrative decisions of State authorities,
particularly General Corporations created under Decisions No. 90 and 91 of
the Prime Minister on 7 March 1994.
One of the biggest obstacles to the privatisation and development of
competition in Vietnam was the difficulty of State authorities in
distinguishing between a “decisive role of a state sector” and a “state
monopoly”. Many state agencies supported directly or indirectly restraining
other economic sectors from entering into markets under the view that an
absolute monopoly or at least market constraints provided by the state sector
was necessary for regulating the economy. This attitude led to
monopolization by SOEs. On the other side, local bias by some officials
hindered open competition. Some local authorities gave consumers
directions or required that they buy only local goods or tried to hinder
enterprises from other areas from selling goods in their regions. Some
ministries appointed particular parties to transact the business of certain
enterprises.37
Recognition of competition also means being aware of the negative
effects of monopoly. The realities of life in Vietnam provided clear evidence
for this problem. Almost all business fields monopolized by SOEs and
supported by the State were sluggish or inefficient. Many SOEs had not
been pressed by outside competition from their establishment and
notwithstanding their receiving privileges in the form of investment and
credits, their efficiency and business acumen accordingly had not improved
correspondingly.38 The State’s target of setting up state sectors as leaders in
technology and business effectiveness, in order to best serve the people’s
interests had not been achieved. Conversely, these SOEs had abused their
36
Dang, Vu Huan, supra note 2, p. 151,
37
UNDP and CIEM, Legal and regulation issues on competition and monopoly control
policies [Các vấn đề pháp lý và thể chế về chính sách cạnh tranh và kiểm soát độc quyền
kinh doanh], Project VIE/97/016, Transportation Publisher, 2002, p. 80-81, in Vietnamese.
38
See Le, Hong Hanh, supra note 35, pp. 26-27. (“SOEs... occupy almost all key
economic industries, use approximately 80% investment capital from National budget and
85% labour force with high scientific - technical level and practical skills.... contribute 42%
GDP of the whole country.... there are 5467 SOEs, only 39,7% of which gets interest in
business, whilst owe 102,000 billion dongs i.e. equivalent to 138% State capital invested
into SOEs.”)
20
monopoly position and harmed consumers’ welfare. Not only had they not
assisted the State in developing the economy, they had caused instability and
sudden market fluctuation. They have, instead, hindered the development of
Vietnam’s economy.
Statistics demonstrated that the prices of goods were “much higher than
the real costs, the average income of population and those prices in other
countries, even in developed countries.”39 Unreasonably high prices for
essential goods such as electricity, and petrol, with higher raw material and
service costs for the all sectors. Ironically, the result had been high prices
but poor quality. In the end, consumers had been the losers. They had to
bear the cost when water, electricity were cut off; air service was delayed or
cancelled. All of which were without advance notice, compensation or even
an apology. Meanwhile, the same suppliers or producers were permitted to
terminate supply contracts when customers do not pay on time. Many SOEs
were not only inefficient, produced poor quality goods or services, and
unfairly exploited their customers, they also abused their dominant positions
to restrict competition. Abuses of dominant position by SOEs were
sometimes obvious (e.g. through excessive pricing, price discrimination),
and sometimes accomplished through more sophisticated means such as
demanding unreasonable contract conditions, discrimination, or engaging in
a refusal to deal.40
Meanwhile, Vietnam is relying on its “Open door” policy to integrate the
nation into the world economy41. The economic transition process whose
polices encourage foreign investment has led to new competitors entering
the Vietnamese market. The foreign-investment-friendly policies of Vietnam
39
UNDP and CIEM, supra note 37, p. 77
40
See, for example, Statement No. 0067/TM-PC sent to the Government on the project of
Competition Law [Tờ trình số 0067/TM-PC gửi Chính phủ về Dự án Luật Cạnh Tranh ,
Hanoi, dated January 6, 2004, p. 2, in Vietnamese (“...abusive conducts of enterprises
dominating market are happening but not regulated by laws yet. For example, monopoly
enterprises on buying side impose low prices (such as buying agriculture products from
peasants), monopoly enterprises on selling side impose high prices or retain prices to get
huge profit, or fix selling prices below prime costs to exclude competitors. Imposing
unreasonable tying conditions in business, such as compelling to buy or to sell, buying or
selling tying with unnecessary products, services happen between processing factories or
buying companies and peasants, is raised by press many times but can not be dealt with.”),
see also Government, Proposal to Assembly on project of Competition Law, No. 487/CP-PC
dated April 4, 2004, p. 3
41
On July 17, 1995 Vietnam – EU Cooperation Agreement was signed. Then, Vietnam
officially became a member of the Association of South East Asian Nations (ASEAN) on
July 25, 1995; ASEAN Free Trade Area (AFTA) on January 1, 1996. On December 10,
2001, Vietnam – US Bilateral Trade Agreement was ratified and came into effect. Vietnam
has entered into more than 60 bilateral trade agreements. Vietnam officially became the
150th WTO member on 11 January 2007.
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