Vietnam: Keeping up with merger control reforms proves critical for filing parties

In summary

This article provides an update on the implementation of the key merger control reforms brought about by the Competition Law 2018 and its guiding instruments since July 2019. It also highlights practice notes transaction parties should be aware of when filing in Vietnam. It is expected that the Vietnamese merger control practice will evolve in the years to come and gradually move closer towards internationally recognised standards.

Discussion points

• Key changes to the Vietnamese merger control regime under Competition Law 2018
• Filing thresholds
• Two-staged merger review process
• Penalties
• Practice notes transaction parties should be aware of when filing in Vietnam

Referenced in this article

• Competition Law 2018
• Decree 35/2020/ND-CP dated 24 March 2020 detailing a number of provisions of Competition Law 2018
• National Competition Commission
• Vietnam Competition and Consumer Authority

Introduction

It has been over three-and-a-half years since the Competition Law 2018^[1] came into force, replacing its 14-year-old predecessor, the Competition Law 2004, and related guiding instruments. One of the most significant changes introduced by the new law is a shift in regulatory approach from form-based to effects-based, whereby the antitrust authority will employ the substantial lessening of competition test to decide whether to green-light a merger.

Other notable reforms include the new jurisdictional thresholds and a two-phased appraisal process. Decree 35/2020/ND-CP (the Guiding Decree), which provides guidelines for the implementation of the Competition Law 2018 and sets out (among other things) filing thresholds and substantive assessment criteria, took effect on 15 May 2020. Decree 75/2019/ND-CP, dealing with competition violations, has also been promulgated, which outlines the administrative sanctions and remedies for breaches of merger control regulations, among other relevant matters. Another development that the authors expect to see in 2023 is the establishment of the National Competition Commission (NCC), which is the official competition watchdog under the current regime.

Suspensory effects

Vietnam’s merger control regime is characterised by two core features. First, it is ex ante in nature, which means parties to a contemplated transaction must notify their transaction if it qualifies as an economic concentration within the meaning of article 29 of the Competition Law 2018 and crosses any of the jurisdictional thresholds. The current regime noticeably does not provide for any filing or clearance exemption, which means that notification is mandatory if the above prerequisites are satisfied.

The second core characteristic of Vietnam’s merger control regime is the standstill obligation. This entails that merger parties are required to put the anticipated transaction on hold until it is cleared, either automatically or after a full review.^[2]

Relevant merger authorities

The NCC is Vietnam’s principal merger authority. Under the purview of the Ministry of Industry and Trade (MOIT), the NCC assumes the functions of overseeing the merger control regime and imposing fines and remedies. These were formerly discharged by the Vietnam Competition and Consumer Authority (VCCA) and the Vietnam Competition Council, respectively.

The NCC is scheduled to be established on 1 April 2023. Pending the NCC’s establishment, the MOIT has directed the VCCA to remain in charge of administering the merger control regime.

Extraterritorial application

As the merger control regime under the Competition Law 2018 adopts the effects-based approach, an offshore transaction will be caught if it has an actual or potential restrictive impact on the Vietnamese market.^[3]

In practice, as a general rule, a contemplated foreign-to-foreign transaction will trigger a filing in Vietnam if it qualifies as a statutory concentration and crosses any filing threshold, regardless of whether the target company generates any revenue or has any commercial presence on the Vietnamese market. It remains to be seen whether the NCC will adopt a different interpretation of the threshold issue once it is established.

Sector-specific merger filing requirements

Certain mergers in the insurance, finance and telecommunications sectors are regulated by sector-specific legislation. These provisions do not override merger control regulations under the Competition Law 2018, but rather exist in tandem with the latter. Mergers in the insurance, finance and banking sectors are subject to a separate set of filing thresholds under the Competition Law 2018.

Insurance

Written approval from the Ministry of Finance is required when an insurer:

• transfers shares or contributed capital resulting in a shareholder holding at least or less than 10 per cent of its charter capital;
• restructures by way of division, merger, consolidation, dissolution or conversion of legal form; or
• makes an offshore investment.^[4]

Finance and banking

A credit institution must obtain written approval from the State Bank of Vietnam when it is restructured by way of division, demerger, consolidation, merger, acquisition or conversion of legal form.^[5]

Telecommunications

An anticipated concentration resulting in the market share of a post-merger telecoms business of 30 to 50 per cent must be notified in advance to the telecommunications regulator, which is the Vietnam Telecommunications Authority under the Ministry of Information and Communications.^[6]

Filing requirement under the Competition Law 2018

Notifying parties

The Competition Law 2018 does not differentiate the filing obligation based on the type of concentration, and instead mandates that all undertakings and individuals participating in a notifiable concentration are responsible for filing, even if only one party technically crosses a jurisdictional threshold.

In practice, the regulator has treated all transaction parties as notifying parties and has requested the notification form to be signed by all such parties (for instance, the buyer – majority as well as minority – target and seller in the case of an acquisition). It also follows that the filing must contain the requisite formality documents of all parties, including the seller’s financial statements and legalised certificate of incorporation.

For each reportable concentration, the regulator only accepts one filing jointly made by the notifying parties.

Caught transactions

As mentioned above, a contemplated transaction is notifiable under the Competition Law 2018 if it qualifies as an economic concentration within the meaning of article 29 and crosses any of the jurisdictional thresholds. An economic concentration encompasses a merger, consolidation, acquisition, joint venture and other types of concentration provided by laws, as follows:

• A ‘merger’ is defined as when one or more undertakings transfers all lawful assets, rights, obligations and interests to another business and, concurrently, terminates business activities or ceases to exist.
• A ‘consolidation’ is defined as when two or more undertakings amalgamate all their lawful assets, rights, obligations and interests to establish a new entity and, concurrently, terminate their business activities or cease to exist altogether.
• An ‘acquisition’ is defined as when an undertaking acquires all or part of the capital contribution or assets of another undertaking sufficient to control the acquiree or any of its business lines.
• A ‘joint venture’ is defined as when two or more undertakings jointly establish a new undertaking by contributing a portion of their lawful assets, rights, obligations and interests.

The joint venture definition focuses on the legal form of the joint venture rather than its activities. Only joint ventures incorporated as legal entities or juridical persons are relevant under Vietnam’s merger control regime, while purely contractual joint ventures are not regarded as economic concentrations for the purposes of Vietnam’s competition law. Unlike the European Union’s full-function test, the definition is not concerned with whether the joint venture carries out any business activities or the extent of its autonomy from the parent companies. If a joint venture exists as a legal entity, it will be construed as an economic concentration subject to the merger filing requirement, irrespective of whether it is a greenfield joint venture with no actual business operation or whether it relies almost exclusively on its parent companies for sales revenue on a lasting basis.

Jurisdictional thresholds

The Competition Law 2018 no longer relies on market share as the sole jurisdictional threshold. The current regime also adds financial criteria to its filing test (ie, total assets, total turnover and transaction value). The Guiding Decree sheds light on these changes, introducing two sets of jurisdictional thresholds. One is applicable to transactions in virtually all sectors and the other is reserved for transactions involving credit institutions (CIs), insurers or securities companies.

General thresholds

A contemplated concentration, except for one involving CIs, insurers or securities companies, must be notified to the competition authority if any of the following thresholds is met.

Sector-specific thresholds

A contemplated transaction involving CIs, insurers or securities companies must be notified if it crosses any of the following thresholds.

The introduction of financial criteria, coupled with the reduction in the combined market share threshold from 30 per cent under the former regime to 20 per cent, has increased the number of transactions caught by the filing requirement. According to the VCCA’s annual reports, it received a total of 130 notifications in 2021, which is more than double the 2020 intake and approximately 10 times the annual average between 2005 and 2019.^[7] Among the 130 notifications received in 2021, 38 (30 per cent) concerned foreign-to-foreign transactions. The notifications cover various industries including real estate (most popular); services; manufacturing and trading in motor vehicles and spare parts; construction materials; food and beverage; and energy. Notable transactions include EQT’s acquisition of BPEA, AMD’s acquisition of Xilinx and Siemens Healthineers’ acquisition of Varian. We expect the VCCA to keep up the momentum in 2023.

Definition of ‘control’

An undertaking (A) is deemed to control or govern another undertaking (B) for Vietnamese merger control purposes if:

• A owns more than 50 per cent of B’s charter capital or voting shares;
• A owns or has the right to use more than 50 per cent of B’s assets in all or one of B’s business lines; or
• A has the right to:
  • directly or indirectly appoint or dismiss all or the majority of B’s board of directors or the chair of B’s ‘members’ council, members of executive management’;
  • alter B’s constitutional document; or
  • make crucial decisions with regard to B’s business.

The control concept is pivotal to the definitions of ‘acquisition’ and ‘group of affiliated undertakings’. The VCCA has clarified that the definition of ‘control’, for merger filing purposes, does not encompass negative control. Consequently, acquisition of minority interest with veto rights or other standard minority shareholder protection rights would not be deemed a concentration for Vietnamese merger filing purposes. This is a welcomed clarification as there was much uncertainty surrounding the notifiable status of, for instance, a private equity fund’s acquisition of strategic minority interests in portfolio companies. Similarly, if the purchaser already controls the target pre-concentration (for instance, by holding a more than 50 per cent interest or a less than 50 per cent interest and certain controlling rights), a buyout to increase the purchaser’s shareholding would not constitute an acquisition for merger control purposes.

However, it is noted that intra-group transactions (eg, parent/subsidiary mergers and other types of internal restructurings) remain subject to the Vietnamese merger control regime. The VCCA rationalises this view on the grounds that there is no exemption to the merger filing requirement in Vietnam, meaning that any transaction that qualifies as a statutory concentration and crosses any filing threshold must be notified to the regulator. Multinational corporations intending to streamline the businesses of its member companies should therefore be mindful of the filing requirement under the Vietnamese merger control regime. Notwithstanding this unique approach, the VCCA has recently adopted an informal fast-track approval process for intra-group transactions, which substantially simplifies the dossier requirements (such as the relevant market definition analysis and market shares calculation) and reduces the review timeline.

Group of affiliated undertakings

Determining the existence of a group of affiliated undertakings is a crucial element in the asset and turnover tests, especially in transactions that involve a member company of a corporate group. The Guiding Decree defines a ‘group of affiliated undertakings’ as a collection of businesses that are under the common control or governance of one or more undertakings within the group in question, or that shares the same management.

Calculation of jurisdictional thresholds

Asset test

The term ‘assets’, in this test, refers to assets in the Vietnamese market of each party in the anticipated merger or, where such a party belongs to a group of affiliated undertakings, the total assets in the Vietnamese market of the whole group. By taking the group’s assets into account, this test in effect nullifies any attempt to circumvent the filing requirement by simply establishing a special purpose vehicle to acquire a target business.

The asset test is applied in a non-discriminatory way. Assets of the entire corporate group on the Vietnamese market will be taken into account irrespective of whether other member undertakings carry out any business activities related to the affected market.

The current merger control regime does not define ‘assets’. In practice, references are often made to the financial statements of each relevant party for their applicable asset value.

Turnover test

In this test, the ‘relevant turnover’ refers to sales in or into Vietnam, or both, of each party in the transaction or the group of affiliated undertakings.

Transaction value test

As provided by the Guiding Decree, transactions taking place entirely outside of Vietnam are exempt from the transaction value test.^[8]

The Guiding Decree, however, is notably silent on how this test would apply in, for instance, stock swap transactions or transactions where part of the consideration is not fixed but subject to the target’s performance in the future. In these transactions, the deal value is not always clear-cut, making the application of this test a practical challenge.

Market share test

Combined market share is the sum of market share in the relevant market of all undertakings involved in the anticipated merger. The market share of the member undertaking in a group of affiliated undertakings corresponds to that of the entire group. When calculating the turnover of a group of affiliated undertakings for market share purposes, intra-group turnover should be excluded.^[9]

The application of the market share test is not easy given, on the one hand, the general lack of reliable and accessible market data in Vietnam, and, on the other, the regulator’s reluctance to accept regional market shares as proxies for local shares. Critics perceive the test as a burden on businesses and argue that it should not have been retained. However, proponents maintain that market share is a relevant filing threshold and it is inconceivable that a business cannot determine its position on the market.

The VCCA has clarified that the combined market share threshold only applies to horizontal mergers. In other words, offshore transactions where the parties do not have any overlaps or vertical relationships in Vietnam would only be notifiable if either party crosses the total local turnovers or assets thresholds. This is a much-welcomed clarification and is expected to ease the filing test for conglomerate mergers in the future. For clarity, however, the combined market share test does not require a market share increment from below to above 20 per cent, such that a Vietnam filing will be triggered if the market share on the relevant market of one undertaking to the horizontal merger is already above 20 per cent prior to the concentration.

The relevant market is determined on the basis of the relevant product and geographical markets. In practice, our experience suggests that the required level of details for the relevant market would depend more on the regulator’s familiarity with the markets in question than whether the transaction is capable of lessening competition. For instance, in cases where there is no relevant local precedent, parties should generally be prepared to provide a detailed and comprehensive relevant product market analysis – often more so than in other jurisdictions – and to answer technical questions from the VCCA about their products. While references to decisional practice of overseas regulators, such as the European Commission, would be helpful, filing parties would still be expected to discuss relevant Vietnamese regulations and categorisation systems (if any) in their analysis.

With respect to the relevant geographical market, the regulator has maintained the view that ‘nationwide’ is the widest possible relevant geographical market, reasoning that they are only concerned about the impact of the contemplated concentration on the Vietnamese market. Filing parties should thus provide national share data for review even if their position is that the relevant geographical market is regional or global in scope.

Notwithstanding the above, the authors have observed some degree of liberalisation by the VCCA in certain types of transactions. For instance, the VCCA has been more willing to accept a simplified relevant market analysis where the products in question concern a regulated industry with which it is familiar (eg, insurance). The VCCA has also accepted the argument that the transaction does not give rise to any relevant market where:

• the transaction is an intra-group restructuring; or
• the target company in the transaction has no:
  • operations in Vietnam; or
  • horizontal overlap, or vertical or complementary relationship, with the buyer’s products.

Exemptions

As mentioned above, the Competition Law 2018 does not provide for exemptions to filing or review. All reportable transactions must be notified to, and subsequently green-lit by, the competition regulator prior to implementation. This principle covers transactions that are inherently not capable of harming competition such as intra-group transactions and transactions where the target does not have any commercial presence or revenues in Vietnam.

However, in our experience, the regulator has started rolling out an informal fast-track review process for intra-group restructurings. It remains to be seen whether the fast-track procedure will be extended to other inherently harmless transactions that are only notifiable due to technicality.

Steps in the regulatory process

Filing

Neither the Competition Law 2018 nor the Guiding Decree provide for a specific notification deadline. In practice, although it has not been officially announced by the VCCA, it is understood that the parties must obtain clearance before signing the definitive transactional document (SPA). Consequently, the parties might be exposed to the risk of a gun-jumping investigation if they make the filing after signing the SPA. While there is room to argue that the transaction should not be deemed to be implemented until closing and, in practice, the VCCA still accepts filings submitted after signing provided that closing is conditional upon obtainment of Vietnam merger clearance, parties should consider submitting a filing as early as possible (ideally prior to the signing of the SPA) to mitigate the risk exposure.

Preliminary appraisal phase

The Competition Law 2018 provides for a two-stage review process. Within seven working days of receiving the notification file, the NCC must inform the filing parties whether their file is valid and complete. If the notification requires further clarification or amendment, or both, the parties will have 30 calendar days to finalise it. The notification will be returned to the parties if satisfactory responses are not submitted within 30 days of the date on which the first post-filing request for information is issued.

The preliminary appraisal or initial review phase (Phase I) formally starts once the NCC has confirmed receipt of a complete and valid notification file. A notification must be complete and valid in terms of both formalities and substance, which means that the parties must have submitted all required formality documents and the NCC must be satisfied with the parties’ responses to their substantive requests for information. After a 30-calendar-day period lapses, the NCC shall:

• issue a decision stating that the transaction either is unconditionally cleared or must undergo a more thorough assessment; or
• not issue any decision or findings at all, in which case the transaction is automatically green-lit (ie, the auto-clearance mechanism), effectively ending the regulatory process.

The Competition Law 2018 introduces, for the first time, the concept of automatic clearance, meaning merger parties may proceed with the transaction if they have not received any response from the authority within 30 days of receiving a complete and valid merger notification. The NCC cannot retroactively investigate and prosecute mergers that have been automatically green-lit even if such mergers may later be found to have a significant restrictive impact on market competition. The NCC does not have grounds to impose remedies or conditions on such a merger.

Official appraisal phase

Anticipated transactions that fail to satisfy the safe harbours (see below) will proceed to the official appraisal or full review phase (Phase II).

Depending on the complexity of a case, the NCC shall, within 90 calendar days for typical mergers or a maximum of 150 calendar days in complex cases of the announcement of Phase I findings, decide whether a proposed merger is unconditionally green-lit, conditionally cleared or entirely blocked.

The NCC in Phase II has the power to stop the clock and request the parties to provide further information. The time frame is suspended unless and until the parties have adequately satisfied all NCC’s information requests. This stopping the clock power has limitations, however, as such requests can only be made on a maximum of two occasions.

The NCC is also empowered to consult relevant industry regulators, who are mandated to respond within 15 calendar days of receiving the consultation request, and other third parties such as experts and industry associations, who are responsible for furnishing the NCC with complete and accurate information upon request and in a timely manner.

In the filings we have advised on, the NCC had reached out to the line ministry, industry association, competitors or the parties’ distributors to enquire on a wide range of matters, such as the number of undertakings active on the market in question, their market share estimates and whether the contemplated transaction poses any antitrust or consumer interest concerns. In addition, if the filing concerns imported products and the parties are unable to furnish official import data to substantiate their market share estimates, the NCC would reach out to Vietnam Customs to collect the relevant data. If Vietnam Customs is similarly unable to provide the requested data, we understand that the competition regulator will rely on all information available to it at the point of assessment to produce the final findings without making any further request for information. The notifying parties are of course responsible for the accuracy and truthfulness of any and all information provided.

Assessing the transaction

The NCC employs the ‘substantial lessening of competition’ approach to decide whether to block a merger.

In the initial review phase, the NCC primarily relies on the combined market share of the involved parties, the Herfindahl–Hirschman Index (HHI) and the delta between pre-merger HHI and post-merger HHI to determine whether a contemplated transaction should be green-lit. In the later phase, during which a more comprehensive appraisal takes place, the NCC will assess both the significant restrictive impact and the positive effects of the anticipated merger.

Safe harbours

Horizontal mergers

In the initial review phase, the NCC will unconditionally green-light a horizontal merger if:

• the combined market share is less than 20 per cent;
• the combined market share is equal to or more than 20 per cent and the post-merger HHI is less than 1,800; or
• the combined market share is equal to or more than 20 per cent, the post-merger HHI exceeds 1,800 and the delta is lower than 100.

Non-horizontal mergers

A vertical or conglomerate merger will receive unconditional clearance in Phase I if the market share of each merger party in each relevant market is less than 20 per cent. While this is the general rule, our recent experiences suggest that the VCCA is relaxing its review approach. Specifically, with respect to conglomerate mergers, the VCCA has been more willing to conclude the review process within Phase I even if the market share of one party on its relevant market exceeds the 20 per cent safe harbour. In such circumstances, the VCCA would be more willing to recommend clearance in Phase I if the parties are able to establish that the estimated market shares do not necessarily reflect their positions in the relevant local markets.

Substantive assessment

A contemplated transaction that fails to pass the safe harbour test must go through a more thorough assessment, which ascertains whether it will be green-lit (conditionally or unconditionally) or blocked as discussed below.

Assessment of significant restrictive impact

When it comes to assessing the significant restrictive impact or the ability to cause such an impact, the NCC mainly focuses on competition issues such as the ability of the post-merger undertaking to foreclose the market or raise market barriers. As mandated by the Guiding Decree, the NCC needs to take all these factors into account to the applicable extent:

• pre- and post-merger combined market share and concentration ratio;
• complementary relationship of the parties involved in the contemplated merger;
• competitive advantages brought by the merger in terms of product characteristics, chain of production and distribution, financial capacity, goodwill, technology, intellectual property rights and other factors that give the post-merger undertaking an edge over its rivals;
• the ability of the post-merger undertaking to considerably increase price or return on sales ratio, or to exclude or impede other undertakings from penetrating or expanding the market; and
• other relevant special factors in the sector or industry in question.

Assessment of positive effect or efficiencies

In assessing the positive effect, the NCC also considers efficiencies. Accordingly, the NCC is required to rely on any one or a combination of the following factors:

• the development of the industry, science and technology in alignment with the state’s master plans (by assessing, among other factors, economies of scale and the application of technological advancements and innovation);
• the development and promotion of small and medium-sized businesses; and
• the competitiveness of Vietnamese undertakings (ie, advancing national champions).

It is our understanding that, in practice, the NCC is open to expand the factors relevant to the positive effect test. The above list is not exhaustive and other factors such as contribution to gross domestic product or state budget may also be taken into account provided that the supporting data is genuine.

In general, mergers that have a net positive impact will be more likely green-lit than not, although conditions and remedies may apply. As we experienced with the former regime, this largely depends on the VCCA’s discretionary assessment as there is no specific guideline as to how each factor should be included in the equation. Until the VCCA issues a merger review guideline, pre-filing consultation with the VCCA is recommended to anticipate a reasonable timeline for closing a merger.

Appealing a merger clearance decision

There is no formal process for complaints about, or objections to, a merger clearance decision under the Competition Law 2018. An appeal can nevertheless be filed on the basis of administrative legislation, namely the Law on Complaints 2011 (as amended) and the Law on Administrative Proceedings 2015, which provide for two distinct formal appeal regimes (administrative complaint or reconsideration and administrative litigation, respectively).

Accordingly, any party (including competitors, consumers and other third parties) dissatisfied with the decision on merger clearance^[10] may choose either procedure to raise complaint or objection.

Administrative complaint

This procedure consists of two steps:

• first-instance complaint: within 90 calendar days of the NCC’s decision on merger clearance, the complainant needs to lodge a complaint to the NCC chair; and
• second-instance complaint: if still unsatisfied with the NCC chair’s resolution of the first-instance complaint or lack thereof, the complainant will have 30 calendar days from the issue date of the decision on first-instance resolution, or the expiry date of first-instance time limit, to file a complaint to the Minister of Industry and Trade.

Administrative litigation

Alternatively, a party may choose to initiate administrative proceedings before the courts. Any administrative claim must be filed within one year of the NCC’s decision on merger clearance or the decision on complaint resolution by either the NCC or the Minister of Industry and Trade. As such, this procedure can commence without or after the conclusion of the administrative complaint, but not concurrently.

Legal ramifications

Violations under the current merger control regime can be categorised into four types: failure to file, gun jumping, unlawful mergers and unfulfilled remedies.

Failure to file

Failure to file a notifiable transaction contradicts the ex ante principle of Vietnam’s merger control regime and results in a fine of up to 5 per cent of the applicable violator’s total turnover.^[11] Given that all transaction parties are subject to the filing obligation, each will be held liable for failure to file.

Gun jumping

For failure to fully observe waiting periods or standstill obligations, the violator may be fined up to 1 per cent of its total turnover.

The merger control regulations, however, do not specify which activity constitutes an implementation of concentration. We understand that it may not encompass auxiliary or preparatory actions such as the cessation or termination of an existing cooperation agreement between the target business and the seller.

Unlawful mergers

The third group of violations consists of the two following types of conduct:

• the implementation of a concentration despite being blocked by the authority after a full review (ie, Phase II), which may be fined up to 3 per cent of the total turnover; and
• the implementation of concentrations prohibited by article 30 of the Competition Law 2018, which outlaws any concentration that has an actual or potential significant restrictive impact on the domestic market – the highest fine level for this conduct is 5 per cent of the violator’s total turnover.

Given that a merger can only be blocked on the basis of unlawfulness under article 30 of the Competition Law 2018, these violations may seem similar on the surface, as they concern the unlawful completion of mergers. The key difference lies in whether a merger has been notified. If the parties fail to notify a reportable transaction and the transaction is later found to be a prohibited concentration, they will be held liable for two violations under Vietnam’s ex ante merger control regime (ie, conducting an unnotified and unlawful merger).

Unfulfilled remedies

Merger parties who are granted a conditional clearance but fail to satisfy any of the entailing conditions will face a fine as high as 3 per cent of their total turnover.

Remedies

In addition to pecuniary penalties, the Competition Law 2018 also provides for supplementary sanctions, such as revocation of certificate of incorporation, and remedies in the form of either clearance conditions or remedial measures for illegal mergers.

Essentially, like many other regimes, there are two types of remedies: structural and behavioural. The former includes mandatory demerger or divestiture while the latter is available in the form of subjection to the state’s control in terms of price or other commercial terms. The NCC may, if necessary, propose other remedies aimed at alleviating the restrictive impact or enhancing the positive effects brought by the merger, or both.

Although the Competition Law 2018 does not explicitly provide for a framework for remedy negotiation, the merger parties may nonetheless discuss with the NCC on the matter at virtually any time during the regulatory process, given the NCC’s openness to consultation requests. Any meaningful discussion rounds will most likely take place during Phase II, particularly once the NCC has gathered all necessary data and its information requests are addressed.

In addition to proposed remedies, merger parties may also, and are recommended to, bring forward ancillary restraints (eg, non-competition agreement in discussion) to avoid being challenged by the NCC in the future. Ancillary restraints are not covered by the merger clearance decision (ie, only the merger itself is green-lit) but may nonetheless be included therein as part of clearance conditions. Accordingly, as competition issues are one of the NCC’s main focuses in Phase II, the NCC may require the merger undertaking to remove or revise ancillary restraints if they give rise to competition concerns.

Given the absence of provisions on a negotiation process for proposed remedies and ancillary restraints, whether these remedies and restrictions will be accepted in whole or in part is entirely at the discretion of the NCC, which has considerable leeway to review and approve them. In general, the NCC will more likely accept proposed remedies than not if they are offered in good faith and adequately address all competition concerns.

Insofar as conditional clearances are concerned, we understand that the regulator has not specifically required any party to divest or restructure as a condition to green-light a transaction.

Expediting the review process

In many circumstances, the review process was prolonged due to the parties’ lack of experience in preparing the filing and liaising with the case team. There are a number of measures the parties should consider to expedite the review process, including:

• engage in pre-filing consultation with the competition regulator to seek guidance on the specific information that is relevant or of interest to the NCC;
• prepare a substantive filing based on the criteria in the Guiding Decree and relevant Vietnamese regulations;
• begin the legalisation process as soon as possible to minimise logistical delays; and
• maintain an active communication channel with the NCC throughout the review process to address any concerns that the case team may have pertaining to the transaction in a timely manner.

Maintaining an active communication channel with the NCC is particularly important where the parties are under time pressure to obtain clearance by a specific deadline. With insight into the regulator’s concerns, the parties would be in a better position to draw up a proper filing strategy to meet the deadline.

Conclusion

With the introduction of the Competition Law 2018 and new statutory guiding instruments, the competition landscape in Vietnam will continue to evolve. The newly adopted effects-based approach is arguably the most welcome reform as it reflects the shift in how the NCC will analyse and appraise each merger on the merit of its impact on the domestic market, rather than the sole market share of the post-merger undertaking as was the case under the former regime.

Given the VCCA’s constantly evolving practice, it is crucial to keep up with the regulator to ensure accurate assessment of the notifiable status issue and, if the transaction is indeed reportable, swift obtainment of clearance. Engaging experienced local counsel with an established working relationship with the regulator will help the parties to navigate this nascent merger control regime and ensure that global transaction timetables are adhered to, particularly during these challenging times.

Notes