Tài liệu Threshold for notification of economic concentration under the law of vietnam and lessons from international experience

BẠCH NGỌC VÂN MINISTRY OF EDUCATION AND TRAINING HO CHI MINH CITY UNIVERSITY OF LAW *** MANAGING CENTER OF SPECIAL AND INTERNATIONAL PROGRAMS BẠCH NGỌC VÂN BACHELOR THESIS THRESHOLD FOR NOTIFICATION OF ECONOMIC CONCENTRATION UNDER THE LAW OF VIETNAM AND LESSONS FROM INTERNATIONAL EXPERIENCE BACHELOR THESIS Faculty: Commercial Law School year: 2016 - 2021 YEAR 2021 HO CHI MINH CITY YEAR 2021 MINISTRY OF EDUCATION AND TRAINING HO CHI MINH CITY UNIVERSITY OF LAW *** MANAGING CENTER OF SPECIAL AND INTERNATIONAL PROGRAMS BẠCH NGỌC VÂN THRESHOLD FOR NOTIFICATION OF ECONOMIC CONCENTRATION UNDER THE LAW OF VIETNAM AND LESSONS FROM INTERNATIONAL EXPERIENCE BACHELOR THESIS Faculty: Commercial Law School year: 2016 - 2021 Supervisor: LLM Nguyen Thi Phuong Ha Student: Bach Ngoc Van Student ID: 1651101030163 Class: 74-CLCQTL4 HO CHI MINH CITY YEAR 2021 DECLARATION I declare that this thesis is the result of my research, which is implemented under the supervision of LL.M Nguyen Thi Phuong Ha, ensures honesty, and complies with rules and regarding quotation, the note of references. Therefore, I hereby take full responsibility for this declaration. LIST OF ABBREVIATIONS Decree 35/2020/ND-CP Decree 35/2020/NĐ-CP detailing and guiding the implementation of a number of articles of the Competition law 2018 EC European Commission EU European Union GDP Gross Domestic Product ICC International Chamber of Commerce ICN International Competition Network ICLG International Comparative Legal Guides LOC 2004 Law on Competition 2004 LOC 2018 Law on Competition 2018 M&A Mergers and Acquisitions MOIT Ministry of Industry and Trade NCC National Competition Commission OECD UK Organization for Economic Cooperation and Development The United Kingdom US The US United States UNCTAD VCA United Nations Conference Development Vietnam Competition Authority VCCA Vietnam Competition and Consumer Authority on Trade and TABLE OF CONTENTS INTRODUCTION ...................................................................................................... 1 1. Problem statement............................................................................................... 1 2. Literature review ................................................................................................. 3 3. Purpose of the study ............................................................................................ 5 4. Objectives and Scope of the study ...................................................................... 6 4.1. Objectives of the study .................................................................................... 6 4.2. Scope of the study ........................................................................................... 6 5. Research methodologies ...................................................................................... 6 6. Thesis structure ................................................................................................... 7 CHAPTER 1. THRESHOLD FOR NOTIFICATION OF ECONOMIC CONCENTRATION UNDER VIETNAMESE LAW .............................................. 8 1.1 Theoretical issues relating to economic concentration .................................... 8 1.1.1. Definition and nature of economic concentration ......................................... 8 1.1.2. Definition and meaning of notification threshold for economic concentration ....................................................................................................... 13 1.2. Threshold for notification of economic concentration under the Law on Competition 2018 .................................................................................................. 15 1.2.1. Regulations on notification thresholds under the Law on Competition 2018 ..................................................................................................................... 15 1.2.2. The limitations of notification threshold regulations under the Law on Competition 2018 ................................................................................................ 22 CONCLUSION OF CHAPTER 1 ............................................................................ 28 CHAPTER 2. ECONOMIC CONCENTRATION NOTIFICATION THRESHOLD UNDER THE SELECTED LEGISLATIONS AND RECOMMENDATIONS FOR VIETNAM ............................................................. 29 2.1. Threshold for notification of economic concentration under the law of other countries ....................................................................................................... 29 2.1.1. Periodical adjustment of notification threshold ........................................... 29 2.1.2. Control of transactions implemented outside the territory but having impacts on the domestic market ........................................................................... 32 2.1.3. Combining criteria to determine notification threshold ............................... 33 2.1.4. Abolition of market share as a criterion for notification threshold .............. 36 2.2. Recommendations for Vietnam ..................................................................... 38 CONCLUSION OF CHAPTER 2 ............................................................................ 40 THESIS CONCLUSION .......................................................................................... 41 INTRODUCTION 1. Problem statement In the trend of globalization and economic integration, the wave of mergers and acquisitions (M&A) in developed and developing countries is rising rapidly. In the United Kingdom (the UK), between 1986 and 1989, approximately 5,200 industrial and commercial companies implemented M&A.1 M&A activities in the United States (the US) initiated in the early 20th century following with a prompt expansion in the 1980s.2 In Vietnam, since the Law on Enterprise 1999 came into effect, corresponding M&A activities have been concerned and become active in recent years with immense growth in both quantity and value.3 From 2009-2011, there were around 750 M&A deals in Vietnam with an estimated total trading value of 6.89 billion USD. Between 2012 and 2014, the total value of M&A cases increased significantly up to 11.13 billion USD.4 The Institute of Mergers, Acquisitions, and Alliances (IMAA) statistics recorded that in 2015, Vietnam executed 341 M&A cases with the total value up to 5.2 billion USD, followed by more than 611 M&A deals accounted for 5.8 billion USD in 2016.5 The market size in 2017 increased nine times compared to 2008. In 2017 alone, the total value of M&A in Vietnam reached 10.2 billion USD, the highest level recorded, and 175% growth compared to 2016.6 Following the Vietnam M&A Forum research team, in the past ten years, there have been nearly 4,000 deals, with a total value of about 48.8 billion USD. Economic concentration transactions, especially M&A, have accelerated enormously all over the world. Economic concentration is a form of capital accumulation that contributes to growing enterprises’ value. In the open economy, Nguyen Thuong Lang, Nguyen Thi Quynh Nhu, “Một số vấn đề về sáp nhập, mua lại doanh nghiệp và tình hình Việt Nam” (Some issues on mergers and acquisitions and the situation in Vietnam), https://www.sbv.gov.vn/webcenter/contentattachfile/idcplg%3FdDocName%3DSBV281431%26filename%3 D283199.doc, Accessed on 25 March 2021 2 Nguyen Thuong Lang, Nguyen Thi Quynh Nhu, supra note 1, p.1 3 Nguyen Thi Viet Nga (2019), “Triển vọng hoạt động mua bán và sáp nhập doanh nghiệp tại Việt Nam” (Prospects of mergers and acquisitions in Vietnam), Financial Journal, https://tapchitaichinh.vn/tai-chinhkinh-doanh/trien-vong-hoat-dong-mua-ban-va-sap-nhap-doanh-nghiep-tai-viet-nam-301760.html, Accessed on 25 March 2021 4 Vietnam Competition and Consumer Authority (VCCA) (2015), Tổng quan về tập trung kinh tế (Overview of Economic concentration), Competition and Consumer News, No. (54)/2015, http://vcca.gov.vn/Newsletter.aspx?CateID=99&page=1, Accessed on 25 March 2021 5 Nguyen Hong Hiep (2018), “Thực trạng hoạt động mua bán, sáp nhập doanh nghiệp tại Việt Nam” (Actual situation of mergers and acquisitions in Vietnam), Business and Finance Journal, p.85 6 Hien Minh (2018), “M&A tại Việt Nam vượt mốc 10 tỷ USD” (M&A in Vietnam surpasses 10 billion USD), Government electronic newspaper of the Socialist Republic of Vietnam, http://baochinhphu.vn/Thitruong/MA-tai-Viet-Nam-vuot-moc-10-ty-USD/342105.vgp, Accessed on 25 March 2021 1 1 business reorganization under affiliate forms helps businesses deal with fierce competition. This constitutes to establish highly competitive enterprises and improve the competing capability of an economic branch.7 In general, economic concentration activities enhance the existing financial and operation power of one company by hunting synergy gains.8 For instance, merging two companies’ cooperation into one big enterprise can enlarge their business scale, boost competition ability, cut down on costs, and optimize financial capacity. However, “as the economic concentration is a reality more and more well-defined in the context of economic development, it increases the dimensions of the companies and sets up the prerequisites premise for an abuse of dominant position on the market, what is strongly against competition rules.”9 Therefore, it is necessary to develop a solid and reasonable legal framework to assess and control the economic concentration transactions which seriously affect the competition landscape. More than 146 jurisdictions in the world currently have certain forms of economic concentration control regime under their antitrust laws.10 One of the practical tools for economic concentration control is a notification system. Without exception, the Vietnamese competition law adopts a mandatory ex-ante notification system.11 On 12 June 2018, the Vietnamese Government issued the new Law on Competition 2018 (hereinafter referred to as LOC 2018), which replaced the old version of Law on Competition 2004 (hereinafter referred to as LOC 2004), and took effect on 1 July 2019. The LOC 2018 has brought new regulations that are more suitable and applicable in Vietnam’s current competition environment, thereby improving the old LOC 2004’s limitations, especially those related to economic concentration12 and notification threshold. However, the new regulations on the notification threshold in the LOC 2018 remain certain drawbacks that may cause several challenges, especially in terms of applicability. Such deficiencies are associated with not only competent authorities but also enterprises. Firstly, in the context of developing countries like Vietnam, the new law Ha Thi Thanh Binh (2019), “Thông báo tập trung kinh tế trong pháp luật cạnh tranh” (Economic concentration notification under competition law), Vietnamese Journal of Legal Sciences, No.01(122)/2019 8 Hoang Le Uyen Phuong (2020), Evaluation of the criteria for effective economic concentration control under the Competition Law 2018 of Vietnam and recommendation for improvement, Bachelor thesis, HCMC University of Law, p.1 9 Berinde Mihai (2008), “Economic concentration in the context of the world economy globalization”, Annals of the University of Oradea: Economic Science, Vol 1(207)/2008, p. 203 10 Daniel Sokol & William Blumenthal (2012), “Merger Control: Key International Norms and Differences”, International Research Handbook on Competition Law, Ariel Ezrachi, p.1 11 Hoang Le Uyen Phuong (2020), supra note 8, p.27 12 Organization for Economic Cooperation and Development (OECD) (2018), “OECD Peer Reviews of Competition Law and Policy: Viet Nam”, https://www.oecd.org/daf/competition/VietNam-OECDCompetition-Review-2018-ENG.pdf, Accessed on 25 March 2021, p. 11 7 2 setting up several factors for economic concentration control can put lots of pressure on the National Competition Commission (known as Vietnam’s principal competition authority and hereinafter referred to as NCC) because there will be a growing number of economic concentration cases that must be notified to the NCC. However, the NCC was yet to be formally established. In other words, the Vietnamese competition authority is considered “immature” and lacking experience. Therefore, it is necessary to assess whether all the economic concentration notification threshold criteria are applicable enough. Otherwise, the unreasonableness is a potential burden on NCC and might negatively affect economic development. Secondly, in the current era of globalization, countries are making an effort to control economic concentration cases implemented in foreign countries but have an adverse impact on domestic competition. Hence, the criteria defining thresholds to notify economic concentration cases need to ensure these transactions are appropriately controlled.13 Yet, the regulations under the LOC 2018 do not control such economic concentration cases executed overseas but having an adverse impact on Vietnam’s market effectively. Thus, this thesis with the topic “Threshold for notification of economic concentration under the law of Vietnam and lessons from international experience” aims to analyze the current Vietnamese regulations on notification threshold and provide recommendations based on foreign countries’ experiences. 2. Literature review As the LOC 2018 came into effect, many studies on the economic concentration control regime have been recorded. However, the challenges and limitations of the new regulations on the economic concentration notification threshold have not been profoundly researched. Ha Thi Thanh Binh (2019), “Thông báo tập trung kinh tế trong pháp luật cạnh tranh” (Economic concentration notification under competition law), Vietnamese Journal of Legal Sciences, No.01(122)/2019: The article focuses on the importance of economic concentration notification in competition law and the regulations of Vietnam. The author then expands researching other selected countries on notification threshold and criteria to determine the anti-competitive effects of economic concentration undertakings, thereby proposing some recommendations for Vietnam’s legislation. However, this article was written based on the Draft of the LOC 2018, and at that time, the Decree 35/2020/ND-CP was yet 13 See Ha Thi Thanh Binh (2019), supra note 7 3 to be issued. Hoang Le Uyen Phuong (2020), Evaluation of the criteria for effective economic concentration control under the competition law 2018 of Vietnam and recommendations for improvement, Bachelor thesis, Ho Chi Minh City University of Law: The thesis has a broad scope of study by evaluating the criteria for effective economic concentration control, which comprises notification threshold, assessment of substantial anti-competitive effects caused or potentially caused, assessment of positive effects, preliminary assessment, and official assessment. By evaluating such criteria, some recommendations for controlling economic concentration efficiently were indicated. Thus, the thesis has not in-depth focused on notification threshold and challenges in terms of applicability for both NCC and enterprises. Le Van Thang (2020), “Pháp luật cạnh tranh Việt Nam về kiểm soát tập trung kinh tế đối với hoạt động M&A trong giai đoạn hiện nay” (Vietnam’s Law on Competition regarding economic concentration control for M&A activities in the current period), Master Thesis, Ha Noi University of Law: This thesis analyzes and compares the situation of M&A in Vietnam and the application of the LOC 2018 to assess the regulations under the LOC 2018. Thereby the author provides general recommendations based on the analysis to complete the economic concentration control system. This thesis focuses on the actual situation and law applicability; therefore, the notification threshold has not been in-depth researched. Tran Linh Huan (2019), “Những điểm mới trong các quy đinh của luật cạnh tranh năm 2018 về kiểm soát tập trung kinh tế” (New points in the provisions regulating economic concentration control under the Law on Competition 2018), State and Law Journal, No. 5(373)/2019: In this article, the author focuses on analyzing, assessing, and commenting on some breakthroughs on the provisions of the LOC 2018 by comparing with the provisions of the LOC 2004 to enlighten the vitality of amendment. The author Tran Linh Huan appreciates the progressive changes in Vietnam’s Competition Law. However, the study has not yet been deeply researched on the notification threshold for economic concentration, the application’s challenges, and the remaining shortcomings. Hoang Minh Chien (2019), “Kiểm soát tập trung kinh tế theo Luật Cạnh tranh năm 2018”, (Economic concentration control under the Law on Competition 2018), Journal of Democracy and Law, No. 3(324)/2019: This paper focuses on analyzing identifying signs of economic concentration, which are (i) Economic concentration subjects are enterprises operating independently in the market, (ii) Economic concentration forms are consolidation, merger, acquisition or joint 4 venture between enterprises, (iii) The consequences of economic concentration lead to the formation of more substantial businesses and changes in market structure as well as correlation. In addition, the author points out some new provisions in the LOC 2018, which overcome some limitations of the LOC 2004 and gain experience of advanced countries’ legal control over economic concentration. Hence, the notification threshold has not been researched in this paper. Mai Nguyen Dung (2020), “Áp dụng chỉ số HHI trong pháp luật về tập trung kinh tế tại Hoa Kỳ, Liên minh châu Âu – Một số đề xuất cho pháp luật canh tranh Việt Nam” (Applying the HHI index to economic concentration regulations based on the United States and European Union experiences and recommendations for Vietnam’s competition law), State and Law Journal, No. 04/2020: The author Mai Nguyen Dung provides an overview of the HHI index, analyzes the calculation formulas, advantages and drawbacks of the HHI measure. The paper introduces the relevant legislation concerning this index in the US and the EU, thereby proposing some suggestions to improve the Vietnamese Competition Law relating to the HHI index in evaluating economic concentration. However, this research is written mainly based on the Draft of the LOC 2018, and at the time, the Decree 35/2020/ND-CP has not been issued. This thesis will attempt to address the issues that have been left unsolved, covered, or discussed from the previous studies. 3. Purpose of the study This thesis aims to analyze the Vietnamese regulations on economic concentration notification threshold under the LOC 2018 to point out noticeable limitations of the current framework, thereby providing recommendations for improvement based on the experience of the selected foreign countries. To accomplish the above purpose, this thesis performs the following tasks: First, analyze the ongoing Vietnamese regulations on notification threshold to acknowledge the achievements of the LOC 2018, and draw out the inadequacies as well as the challenges that the LOC 2018 and the Decree 35/2020/ND-CP14 have not addressed. Second, analyze the selected foreign countries’ regulations on economic concentration control regimes to find the solutions for the challenges and inadequacies posed by the Vietnamese regulations. 14 Decree No. 35/2020/ND-CP detailing and guiding the implementation of a number of articles of the Competition law 2018 (Decree 35/2020/ND-CP) 5 Third, offer problem-solving recommendations based on the experiences learned from other legislations’ competition law regarding notification thresholds. 4. Objectives and Scope of the study 4.1. Objectives of the study The regulations and provisions relating to the economic concentration notification threshold under the LOC 2004, the LOC 2018, and the Decree 35/2020/ND-CP. The regulations and provisions relating to economic concentration notification threshold under the competition law of Canada, the US, the European Union (EU), China, Turkey, Belgium, and Brazil. 4.2. Scope of the study The thesis studies on the notification threshold for economic concentration regulated in Vietnamese LOC 2018 and the Decree 35/2020/ND-CP as the existing structure. Other related specialized laws will not be under the scope of this thesis. Also, this thesis concentrates on researching foreign countries’ legislations on economic concentration notification threshold, including Merger Regulation No.139/2004 of the European Commission (EC); Competition Act of Canada; AntiMonopoly Law of the People’s Republic of China; Clayton Act, as added by the Hart-Scott-Rodino Antitrust Improvement Act of the US; Code of Economic Law of Belgium; Communiqué concerning the mergers and acquisitions calling for the authorization of the Competition Board (Communiqué No: 2010/4) of Turkey; Competition Act of Brazil. In terms of this study’s limitation, this thesis will concentrate on the notification threshold for economic concentration, the importance, the purpose of notification threshold, the breakthroughs of the LOC 2018 on notification threshold followed with the remaining drawbacks. Thus, this thesis will not discuss any issues relating to the assessment of substantial anti-competitive effects caused or potentially caused, assessment of positive effects, preliminary assessment, official assessment, procedure, national competition authority, sanctions, and leniency policy. 5. Research methodologies Throughout the thesis, the author will utilize three main research methods: analytical, comparative, and synthetic. These three research methods are determined not to be set to isolation but in interweavement. The analytical method is conducted primarily in Chapter 1 to record the 6 achievement of new regulations of the LOC 2018 on notification threshold and point out the feasible limitations that could cause a burden on competent authorities and economic development. However, the analytical method is also applied in Chapter 2 for analyzing other countries’ legislations. The comparative method is implemented for comparing the LOC 2004 and the LOC 2018 (in Chapter 1), thereby emphasizing the significance and necessity of the amendment included in the LOC 2018 to the matter of economic concentration notification threshold. In Chapter 2, the comparative method is essential to be applied in comparing the competition legislation of Vietnam and other countries to propose recommendations. The synthetic method is used to synthesize analyses and comparisons, thereby clarifying problems to be solved from a legal perspective and offering recommendations. 6. Thesis structure This thesis comprises two chapters as follows: Chapter 1. Threshold for notification of economic concentration under Vietnamese law Chapter 2. Economic concentration notification threshold under the selected legislations and recommendations for Vietnam 7 CHAPTER 1. THRESHOLD FOR NOTIFICATION OF ECONOMIC CONCENTRATION UNDER VIETNAMESE LAW This chapter will introduce the notification threshold of economic concentration under the Vietnamese Law by first clarifying the theoretical issues relating to economic concentration and notification threshold. Subsequently, this chapter will analyze the regulations on notification threshold under the LOC 2018 of Vietnam, thereby acknowledge the achievement and point out the limitations under this framework. 1.1 Theoretical issues relating to economic concentration 1.1.1. Definition and nature of economic concentration The concept of economic concentration is approached and defined by several legal researchers and economists worldwide. According to the OECD Glossary of Industrial Organization Economics and Competition Law,15 concentration “refers to the extent to which a small number of firms or enterprises account for a large proportion of economic activity such as total sales, assets or employment.” There are at least four distinct concepts embodied within this term: (i) Aggregate concentration16, (ii) Industry or Market Concentration,17 (iii) Buyer concentration,18 and (iv) Ownership concentration.19 In the field of economics and legal science in Vietnam, the concept of economic concentration is considered industry or market concentration.20 However, in the book “A Framework for the Design and Implementation of Competition Law and Policy”21 issued by the OECD, a specific 15 Organization for Economic Cooperation and Development (OECD) (1993), “Glossary of Industrial Organization Economics and Competition Law”, http://www.oecd.org/regreform/sectors/2376087.pdf, Accessed on 21 April 2021 16 Aggregate concentration which measures the relative position of big companies in the economy. This measure has economists, sociologists and political scientists mainly in the context of theories relating to actual (and potential) economic-political power which big business may be able to exercise because of their economic importance in a country/industrial sector/geographic region. 17 Industry or Market Concentration (also often referred to as seller concentration) which measures the relative position of large enterprises in the provision of specific goods or services such as automobiles or mortgage loans. 18 Buyer Concentration which measures the extent to which a large percentage of a given product is purchased by relatively few buyers 19 Ownership Concentration which measures the extent to which shares of stock exchange listed companies are widely or narrowly (closely) held. This concept is often extended to describe the wealth or control of corporate assets among individual families or business entities. 20 Pham Tri Hung and Ha Ngoc Anh (2014), “Bản chất của tập trung kinh tế và kiểm soát tập trung kinh tế” (The nature of economic concentration and the control of economic concentration), Vietnamese Journal of Legal Sciences, No. 05(84)/2014, p.20 21 OECD (1999), “A Framework for the Design and Implementation of Competition Law and Policy”, https://www.oecd.org/regreform/sectors/aframeworkforthedesignandimplementationofcompetitionlawandpoli cy.htm, Accessed on 22 May 2021 8 chapter22 refers to economic concentration under the name Mergers. According to the chapter Mergers, companies can combine in several ways. One enterprise might purchase from another enterprise all or part of its outstanding securities, all or part of its operating assets. Alternatively, two enterprises can exchange securities to establish one enterprise. “Such transactions may be the result of an agreement between two firms, or the takeover may be unsolicited, unexpected, or even “hostile”- that is, resisted by the target company. Established practice has been label “any transaction in which two independent actors are combined into one” a merger, resulting in the strengthening of one actor and elimination of the other.” 23 This chapter demonstrates that the common approach to economic concentration is through the activities of mergers and acquisitions that are associated with the concept of centralized market power. The Model Law on Competition of United Nations Conference on Trade and Development (UNCTAD)24 does not introduce a specific definition of economic concentration. Still, it utilizes the term “mergers and acquisitions,” which “are an integral part of economic activities today. From an economic perspective, different types of mergers can be distinguished according to their motivation”. This document also states that the terms “concentration” and “merger” can be used interchangeably. The term “concentration” can be used to (i) describe the acquisition of control over another undertaking through merger and acquisition activity or otherwise, or (ii) describe the number of players in a given market (the concentration is at a high level when there are few players in the market the concentration is at a low level when there are numerous market players). In comparison, the term “merger” is approached from two legal perspectives, namely corporate law and competition law. In corporate law, the term “merger” is generally defined as a fusion between two or more independent enterprises, whereby the existence of one or more disappears and the result is one single enterprise. In competition law, this term is more broadly utilized than in corporate law. The term can comprise an acquisition or takeover, a joint venture, or even other acquisitions of control.25 According to the author Kovalkova M.V in his Ph.D. thesis, economic concentration is implemented through reorganization procedures or contracts for the 22 OECD (1999), supra note 21, p.41-68. OECD (1999), supra note 21, p.41 24 United Nations Conference on Trade and Development (UNCTAD) (2018), “Model Law on Competition: Revised chapter VI”, https://unctad.org/meetings/en/SessionalDocuments/ciclpL10_en.pdf, Accessed 25 April 2021. 25 UNCTAD (2018), supra note 24 23 9 process of concentrating physical resources and management to consolidate the economic position of the existing business entities, which may have an impact on the business activities of other entities or the relevant market.26 The term “economic concentration” or “merger” under the legislation of other countries is also variably defined and approached. For example: The Merger Regulation No.139/2004 of the EC issued on 20 January 2004 defines that “a concentration shall be deemed to arise where a change of control on a lasting basis results from: (i) the merger of two or more previously independent undertakings or parts of undertaking, or (ii) the acquisition, by one or more persons already controlling at least one undertaking, or by one or more undertakings, whether by the purchase of securities or assets, by contract or by any other means, of direct or indirect control of the whole or parts of one or more other undertakings.27 The Competition Act of Canada Article 91 does not use the term “economic concentration” but the term “merger” to demonstrate “the acquisition or establishment, direct or indirect, by one or more persons, whether by purchase or lease of shares or assets, by amalgamation or by combination or otherwise, of control over or significant interest in the whole or a part of a business of a competitor, supplier, customer or another person.”28 The Anti-Monopoly Law of the People’s Republic of China does not give a specific definition of concentration but provides a list of situations where the concentration of undertakings means (i) merger of undertakings; (ii) control over other undertakings gained by undertaking through acquiring their shares or assets; and (iii) control over other undertakings or the ability capable of exerting a decisive influence on the same gained by an undertaking through signing contracts or other means.29 Similar to the Anti-Monopoly Law of the People’s Republic of China, the LOC 2018 of Vietnam does not provide such specific definition but provides a list of operations which can be considered as economic concentration. According to the LOC 2018, economic concentration includes the following categories:30 Ковалькова М.В. (2005), as cited in Pham Tri Hung and Ha Ngoc Anh (2014), supra note 20, p.20-21. Article 3, Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation), https://eur-lex.europa.eu/legalcontent/en/ALL/?uri=CELEX%3A32004R0139, Accessed on 25 April 2021 28 Article 91, Canada Competition Act, https://laws.justice.gc.ca/eng/acts/C-34/index.html, Accessed on 26 April 2021 29 Article 20, Anti-Monopoly Law of the People’s Republic of China (2007), http://english.mofcom.gov.cn/article/policyrelease/Businessregulations/201303/20130300045909.shtml, Accessed on 26 April 2021 30 Article 30, the LOC 2018 26 27 10 Merger of enterprises means an act whereby one or several enterprises transfer all its/their property, rights, obligations, and legitimate interests to another enterprise, and at the same time terminate the existence of the merged enterprises. Consolidation of enterprises means an act whereby two or more enterprises transfer all of their property, rights, obligations, and legitimate interests to form a new enterprise and, at the same time, terminate the existence of the consolidating enterprises. Acquisition of enterprises means an act whereby an enterprise acquires the whole or part of property or shares of another enterprise sufficient to control or dominate all or one of the trades of the acquired enterprise. Joint venture between enterprises means an act whereby two or more enterprises jointly contribute part of their property, rights, obligations, and legitimate interests to establishing a new enterprise. Apart from the categories mentioned above of economic concentration, the LOC 2018 also leaves open the possibility of other forms of economic concentration prescribed by law. This listing has clarified the forms of economic concentration. In practice, the economic concentration can be performed by acquiring or dominating other businesses through the activities of the stock market, the capital market. Thus, it is not coincidental that enterprises or securities law regulates the issue of limiting the percentage of capital contribution to a business or the rate of ownership that each investor can acquire. So other forms of investment in companies, to a certain extent, can be considered as another form of economic concentration.31 To summarize, economists define economic concentration via M&A activities of businesses, while some scientific researchers prefer the term “mergers”. In some countries, there has not been a concrete definition, but discrepant circumstances were listed relating to the concentration of undertakings. Despite various approaches of defining, economic concentration could be considered as enterprises’ activities, which may restrict or distort competition. Such activities are business tools in order to overcome the market’s fierce competition and enable firms to strengthen their market power, expand the scope of business, and develop new product lines. The result of economic concentration is the formation and change in the market structure. Hanoi Law University (2006), Commercial Law Curriculum, Publisher. People’s Police, Ha Noi, p.372 (as cited in Ha Ngoc Anh (2018), Pháp luật kiểm soát tập trung kinh tế ở Việt Nam (Legislation on economic concentration control in Vietnam), Ph.D. thesis, Ho Chi Minh City University of Law, p.52) 31 11 From the above statement, there are several ways to approach and define the term “concentration” or “merger”. Despite different perspectives and opinions under various legislations, the nature of economic concentration can be described as follows: First, the subjects of economic concentration are the enterprises operating in the market. The enterprises participating in economic concentration can be operating in the same or not the same relevant market.32 However, depending on the legislation of each country, there are certain requirements. For example, the LOC 2018 regulates that the scope of enterprises includes organizations and individuals doing business activities (hereinafter referred to as enterprises).33 However, it does not mean that not all enterprises can participate in economic concentration. The limit on subjects participating in economic concentration depends on the provisions of Law on Enterprises. 34 For example, joint-stock companies, limited liability companies, and partnerships are subjects of a merger or a consolidation.35 Second, the typical forms of economic concentration include merger, consolidation, acquisition, and joint venture between businesses. Enterprises can accumulate capital to gain considerable market power but this process takes a long period of time to obtain. Whereas the economic concentration, which also demonstrates signs of accumulation, is not the result gained from business activities but from business behaviors.36 This sign helps legal science to distinguish economic concentration from capital accumulation in economics.37 Third, the result of economic concentration is the formation of a company with a higher competitive capacity and enormous market power, or the association into groups of businesses and economic groups, which leads to the change in market structure and existing competitive correlation in the market.38 Particularly, mergers and consolidations will change the market structure by reducing the number of existing enterprises. Acquisitions or joint ventures will form the connection between independent companies under the ownership model to create a group-style 32 VCCA (2009), Economic concentration report in Vietnam: Current situation and forecast, Ha Noi, p.14 Article 2.1, the LOC 2018 34 Ministry of Industry and Trade (MOIT) (2018), Báo cáo kinh nghiệm quốc tế: Kinh nghiệm quốc tế về các quy định kiểm soát tập trung kinh tế để xây dựng hướng dẫn chi tiết thi hành các quy định về tập trung kinh tế trong luật cạnh tranh 2018 của Việt Nam (International experience report: International experience on economic concentration control regulations to develop detailed guidance on the implementation of provisions on economic concentration in the competition law 2018 of Vietnam), ttp://st.aus4reform.org.vn/staticFile/Subject/2019/01/08/kinh-nghiem-quoc-te-ve-kiem-soat-tap-trung-kinhte_81540499.pdf, Accessed 27 April 2021 35 Article 199 and Article 200, Law on Enterprises 2020 36 Hoang Le Uyen Phuong (2020), supra note 8, p.11 37 VCCA (2009), supra note 32, p.15 38 Le Vu Quynh Trang (2014), Hoàn thiện pháp luật Việt Nam về kiểm soát tập trung kinh tế (Completing Vietnam’s law on economic concentration control), Master Thesis, Hanoi Law University, p.7 33 12 business. Whether the concentration is implemented through the model of accumulation or linking business competency will ultimately change the competitive landscape in the market. Because at this time, the market suddenly appears enterprises or groups of enterprises with tremendous business potential without going through the capital accumulation process. As a result, the position of the remaining enterprises will decrease.39 1.1.2. Definition and meaning of notification threshold for economic concentration One of the fundamental pillars of a competition system is the control of economic concentration, together with the antitrust rules, which prohibit collusive agreements and abuses of dominant position companies.40 Since it is difficult and complicated to determine the effects of concentration on the market’s competition, a control policy is an essential and costly mission of the legal system in every country. In order for the competition authorities to improve the economic concentration operation assessment, it is vital to set up a notification system for such business operations. “There are many existing designs; some are voluntary and others mandatory, while some are a priori (based on a prospective analysis) and others, fewer in number, are ex-post. There are also mixed regimes.”41 According to the Model Law on Competition of UNCTAD, the notification is a “must” when the mergers, takeovers, joint ventures, or other acquisitions of control, including interlocking directorships, whether it’s a horizontal, vertical, or conglomerate nature meet the following criteria: (i) At least one of the enterprises is set up within the nation, (ii) The resultant market share in the country, or any substantial part in the nation, referring to any service or product, is likely to create market power, especially in the high degree of market concentration industries, where the entry barriers are high and lack substitutes.42 In terms of the threshold for notification of economic concentration, the thresholds are utilized “to determine the scope of economic concentration control as they identify transactions with economic significance that could potentially harm competition.”43. On this issue, the competition control regimes need to be designed 39 Economics and Law University (2010), Competition Law Curriculum, Publisher. Ho Chi Minh city National University, p.150 40 UNCTAD (2017), “Challenges in the design of a merger control regime for young and small competition authorities”, https://unctad.org/system/files/official-document/ciclpd45_en.pdf, Accessed on 27 April 2021 41 UNCTAD (2017), supra note 40, p.6 42 UNCTAD (2018), supra note 24, p.2 43 World Bank (2018), “Merger control: Policy guidance to strengthen the Indonesian competition framework”, http://documents1.worldbank.org/curated/pt/318741540796956792/pdf/131397-WP-PUBLIC2018-WBG-Merger-Note-Indonesia.pdf, Accessed on 30 April 2021 13 to accurately identify several factors such as the applicable timeframe and the practical measurement tool, which could be assets, sales, turnover, the geographic scope to which the measurement tool is to be applied, for instance, national or worldwide.44 In summary, the threshold for notification of an economic concentration is the threshold at which enterprises participating in an economic concentration must notify the national competition authority if their transactions reach or exceed the threshold. Notification thresholds are often set by national competition authorities based on the socio-economic situation of each country. In practice, there are several categories of notification threshold: some are voluntary and others mandatory, while some are a priori and others are ex-post, and there are also mixed regimes. The notifications bring concentration to the national competition authorities’ attention and facilitate the economic concentration control enforcement. The obligations to notify economic concentration transactions differ across the law on competition regimes. These variations fall into three broad categories: (i) mandatory ex-ante regimes that mandate notification before the implementation of a transaction, (ii) mandatory ex-post regimes that permit parties taking part in a transaction to notify the competent authority after the completion of an economic concentration transaction, (iii) voluntary regimes that let the concerned parties decide whether to notify or not.45 Most countries have set up a mandatory ex ante notification threshold.46 And Vietnam also has adopted this approach to control economic concentration transactions. The roles of setting up threshold for notification of economic concentration are: First, the notification threshold’s primary purpose is “to identify the most anti-competitive effects, to have the possibility to correct problems and to allocate resources efficiently.”47 However, unlike the market power abuses and anticompetitive agreements that are ex-post investigates, the concentration notification threshold provides competition authorities chances to assess before any economic concentration cases re-implemented. Thus, it helps the competent jurisdiction prevent any ex-ante potential damage to the consumers and the market.48 International Competition Network (ICN) (2017), “ICN Recommended Practices for Merger Notification and Review Procedures”, https://www.internationalcompetitionnetwork.org/wp content/uploads/2018/09/MWG_NPRecPractices2018.pdf, Accessed on 30 April 2021 45 UNCTAD (2018), supra note 24, p.7 46 World Bank (2018), supra note 43 47 UNCTAD (2017), supra note 40, p.9 48 MS Gal and EM Fox (2014), “Drafting competition law for developing jurisdictions: Learning from experience”, New York University Law and Economics Working Paper No. 374 44 14 Second, the notification threshold helps to eliminate the economic concentration cases that do not cause anti-competitive effects on the market, thereby reducing procedural and transaction costs for the enterprises and cutting down on resources. Setting the level of the notification threshold is crucial to wellfunctioning economic concentration control systems. If the competent authority sets the notification thresholds too high, there is a number of anti-competitive transactions evading economic concentration control scrutiny. But if the thresholds are set too low, there might be an excessive number of notifications, which would impose unnecessary costs on parties involving in economic concentration transactions and the authorities.49 Third, the notification threshold helps to create a fair market, especially for small and medium enterprises. But for the regulations on notification threshold, large enterprises might conduct economic concentration in order to gain a dominant position in the market, thereby raising higher entry barriers to eliminate small and medium competitors. In other words, setting up the threshold for economic concentration notification facilitates competition and protect consumers. To conclude, the ultimate objective in setting notification thresholds is to minimize the number of economic concentration notifications that raise no competition concerns while simultaneously capturing the maximum number of economic concentration cases that raise competition concerns.50 Hence, it is necessary to establish the notification threshold to be coherent, accessible and based on objectively quantifiable criteria to allow enterprises to determine whether economic concentration transactions must be notified. 1.2. Threshold for notification of economic concentration under the Law on Competition 2018 1.2.1. Regulations on notification thresholds under the Law on Competition 2018 On 1 July 2019, the LOC 2018 came into effect and replaced its 14-year-old predecessor (the LOC 2004) as well as the related guiding instruments (Decree No. 116/2015/ND-CP). Unlike the LOC 2004, combined market share is no longer the solely applicable notification threshold under the LOC 2018. Instead, the LOC 2018 has added the criteria for determining the notification threshold: total assets, total OECD (2016), “Local Nexus and Jurisdictional Thresholds in Merger Control”, https://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DAF/COMP/WP3(2016)4&docLa nguage=En, Working Party No.3 on Cooperation and Enforcement, p.7 50 Gavin Roberts (2014), “Merger Control Procedure and Enforcement: An International Comparison”, , European Competition Journal, No. (10)/2014, p.523-524. 49 15