Vietnam: Merger Control

The principal regulator: The National Competition Commission (NCC) is Vietnam’s principal merger control 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 formerly discharged by the Vietnam Competition and Consumer Authority (VCCA) and the Vietnam Competition Council (VCC), respectively. To date, the NCC has not been established. As such, the MOIT has directed the VCCA to remain in charge of administering the merger control regime until the new competition watchdog is instituted. The VCCA is preparing a draft Decree to pave way for establishment of the NCC. The NCC is expected to be established within next year (2023) as a functional department under the administration of the MOIT.

Main legislation: The primary merger control legislation is the Competition Law 2018 (Chapter V), which came into force on 1 July 2019. The Competition Law 2018 provides for, among others, a definition of concentration, notification thresholds, dossier requirements, the appraisal process, and violations of the merger control regime.

A number of provisions of the Competition Law 2018 are guided by Decree No. 35/2020/ND-CP dated 24 March 2020 (Guiding Decree), which sets out, among others, specific thresholds for merger filings and appraisal criteria. The Guiding Decree took effect from 15 May 2020. Notably, a degree detailing the NCC’s powers, duties and organisational structure is slated to effectuate in 2023.

Notification is compulsory for any proposed transaction that (i) qualifies as an economic concentration within the meaning of the law and (ii) crosses any filing threshold (see questions 4 and 6). Since there is no exemption to filing, notification may still be triggered by intra-group restructuring, foreign-to-foreign transactions and transactions involving a target or joint venture with no local nexus (see question 11).

Yes, the Competition Law imposes a standstill obligation on merger parties which means they have to put the contemplated transaction on hold until it is cleared, either automatically or after a preliminary/full review.

There are no explicit provisions on derogation or carve out. In our experience, the competition authority’s current approach suggests that carve-out would be possible provided that global completion does not change the physical structure of the domestic market (i.e., the number of incumbents). For instance, in a horizontal merger, carve-out would arguably be permitted if after global completion the local subsidiaries of the purchaser and the target remain separate and independent until local clearance is granted. However, parties should be cautious as the authority’s view is subject to change.

A transaction will be notifiable if it qualifies as an economic concentration for Vietnamese filing purposes and crosses any applicable filing threshold (see question 6). An economic concentration occurs when there is a merger, consolidation, acquisition, or joint venture.

• Merger: one or more undertakings transfer all of their lawful assets, rights, obligations and interests to another business and, concurrently, terminate their business activities or cease to exist.
• Consolidation: two or more undertakings transfer all of their lawful assets, rights, obligations and interests to establish a new entity and, concurrently, terminate their business activities or cease to exist altogether.
• Acquisition: an undertaking directly or indirectly acquires all or part of the capital contribution or assets of another undertaking sufficient to control the acquiree or any of its business lines.
• Joint venture: two or more undertakings jointly establish a new entity by contributing a portion of their lawful assets, rights, obligations and interests (see also question 9).

As for the control test, an undertaking (A) is deemed to control another undertaking (B) if A (i) owns more than 50% of B’s charter capital or voting rights; (ii) owns or has the right to use more than 50% of B’s assets; or (iii) has any of the following rights:

• directly or indirectly appoint or dismiss all or the majority of B’s executive management, or the Chairperson of the Members’ Council [and] executive-level officers;
• alter B’s constitutional documents; or
• make crucial decisions with regard to B’s business.

“Control” is broadly defined to also include de facto control. However, the current interpretation of the competition regulator is that the control concept does not encompass joint control, negative control or veto rights, which means acquisition of minority interest with veto rights or other standard minority shareholders protection rights would not be deemed a concentration for Vietnamese merger filing purposes and therefore not subject to the notification obligation.

An acquisition of a minority interest will qualify as an economic concentration if the minority purchaser can unilaterally decide on any matter listed in question 4 above, that is, the composition of the target’s executive management, the target’s constitutional documents or crucial matters relating to the target’s business.

The Guiding Decree provides for two sets of jurisdictional thresholds, one set reserved for transactions involving credit institutions, insurance companies and/or securities companies, and one applicable to transactions in all other sectors.

General thresholds

A contemplated concentration, except for one in the insurance, banking or securities sectors (further discussed below), must be notified to the competition authority if any of the following thresholds are met:

Sector-specific thresholds

A contemplated transaction involving a credit institution, insurance company and/or securities company must be notified if it crosses any of the following thresholds:

A so-called “group of affiliated undertakings” refers to a group of undertakings which are under the common control or governance of one or more undertakings within said group, or which share the same management. For the definition of “control”, see question 4.

Asset and turnover tests

The thresholds apply to the assets or turnovers (i.e., sales in and/or into Vietnam) in the domestic market of each relevant party or, where such party belongs to a group of affiliated undertakings, the total local assets/turnovers of the whole group.

The Competition Law 2018 and the Guiding Decree do not define “assets”. There has also been no official guidance on turnover calculation. In practice, the regulator would accept asset and turnover values based on the relevant financial statements.

Market share test

In this regard, “market” corresponds to the “relevant market”, which is determined based on relevant product market and relevant geographical market.

• Relevant product market refers to the market of goods and services that are interchangeable in terms of characteristics, intended use, and price. All of these factors are relevant to the authority’s assessment. Where necessary, the NCC may also consider additional factors, especially where there is no price interchangeability, such as switching costs, consumption habits, and the differentiation between selling and purchasing prices for different customer groups.
• Relevant geographical market refers to a particular geographical area where interchangeable goods and services are supplied on similar competitive conditions and such territory is significantly different from neighbouring areas. The boundary of the geographical area is identified on the basis of, inter alia, costs and time of transporting goods or providing services, market barriers, and consumption habits. In our experience, the regulator only accepts the national market as the widest possible relevant geographical market and accordingly applies the combined market share test on the basis of the parties’ national shares. Filing parties are therefore advised to submit national share data for review even if they position the relevant geographical market as regional or global in scope.

Under Article 10.1 of the Guiding Decree, the relevant turnover of the group of affiliated undertakings for market share calculation purposes refers to the group’s turnover of the goods or services in question, less intra-group turnover generated from the same. Under Article 10.2, the market share of a member undertaking in a group of affiliated undertakings is that of the whole group.

The combined market share test only applies to horizontal mergers but does not require a market share increment from below to above 20%. In other words, a Vietnam filing will be triggered if the market share of one undertaking to the horizontal merger is already above 20% before the transaction.

Transaction value test

This test does not apply to offshore transactions.

No. There is no official guidance on this issue and parties may generally refer to the Reference Exchange Rate (https://www.sbv.gov.vn/TyGia/faces/ExchangeRate.jspx?_afrLoop=32264197278612224&_afrWindowMode=0&_adf.ctrl-state=htxqnvlls_4) at the Operations Centre of the State Bank of Vietnam.

By definition, only greenfield joint ventures are caught by the current merger control regime. In addition, since the definition of joint venture places emphasis on the creation of a new legal entity, establishment of a purely contractual joint venture would not qualify as a joint venture for Vietnamese filing purposes.

On the other hand, it is not relevant whether the joint venture will be full-function or not. For example, a joint venture which will supply goods and/or provide services only to its parents could still qualify as a concentration for Vietnamese filing purposes if it exists as a new legal entity jointly formed by the contribution of assets of its parents.

Likewise, a joint venture which is a newly established start-up not having previously traded and not acquiring an existing business from its parents (or an independent vendor) would also constitute a concentration for the same reason. This is the case irrespective of whether the joint venture in question has commenced business.

The Competition Law 2018 and the Guiding Decree do not specify any principles on multi-stage transactions. Therefore, whether a multi-stage merger will be identified as a single transaction or a series of transactions will be decided on a case-by-case basis, taking into account factors such as the structure of the merger and the identities of the parties.

In our experience, the regulator tends to be flexible where a merger takes place in stages. For example, if a buyer contemplates a two-phased acquisition in which it would acquire the target in two tranches of 20% and 80%, respectively, the parties will only be required to notify the anticipated merger before commencing the second tranche. In addition, the regulator has also accepted submission of a single filing where the buyer must conduct several transactions to acquire the target’s business.

Any foreign-to-foreign transaction which (i) qualifies as a concentration for Vietnamese filing purposes and (ii) crosses any applicable threshold will be caught by the Vietnam merger control regime. Although it may be argued that the Competition Law 2018 only applies to foreign-to-foreign transactions which have an actual or potential restrictive impact on the domestic market (Article 1), in practice the regulator does not consider this factor or the extent of local nexus and only looks at the aforementioned conjunctive test when assessing whether a foreign-to-foreign transaction is notifiable.

As a rule of thumb, if any party to the contemplated transaction has revenues and/or assets in Vietnam, they will be required to file if any of the jurisdictional thresholds is met (see question 6). However, the authors understand that after the NCC is established, there would be a “fast-track” review process or an auto-clearance mechanism for, among others, foreign-to-foreign transactions which do not have any local nexus.

Vietnam does not adopt a voluntary filing regime.

The NCC employs the “substantial lessening of competition” test to determine whether to clear a contemplated concentration in any sector.

In Phase I, the NCC primarily relies on the combined market share (on the Vietnamese market), post-merger Herfindahl–Hirschman Index (HHI) and Delta. Accordingly, a concentration will be greenlit if:

• For horizontal mergers: the combined market share is less than 20%, or the combined market share is equal to or over 20% and either (i) the post-merger HHI is less than 1,800, or (ii) the post-merger HHI is greater than 1,800 and Delta is lower than 100;
• For non-horizontal mergers, the market share of each transaction party on its respective the relevant market is less than 20%.

In Phase II, the NCC will thoroughly assess the restrictive and positive impact of the transaction, and their correlation. Assessment of the negative impact on competition will consider:

• the combined market share and pre- and post-merger extent of concentration on the relevant market (not applicable to assessment of non-horizontal mergers);
• the relationship in the supply chain of the parties to the anticipated merger;
• the competitive advantages of the post-merger undertaking;
• the ability to considerably increase the price or return on sales (ROS) ratio after the merger;
• the ability to exclude or impede other undertakings from penetrating or expanding the market; and/or
• other relevant special factors in the sector or industry in question.

When assessing the above factors, the regulator will rely on information and data furnished by not only the filing parties but also relevant stakeholders such as industry regulators, industry associations or competitors through consultation.

Efficiency arguments are also taken into consideration. In particular, the NCC will assess the positive impacts brought about by the merger on:

• the development of the industry in question, science and technology in line with the government’s master plans (by assessing, among others, economies of scale and the application of technological advancements and innovation);
• the development of small and medium-sized businesses; and/or
• the competitiveness of domestic businesses (i.e., advancing national champions).

In general, mergers which have a net positive impact will more likely be greenlit than not.

Generally, non-competition issues are relevant when it comes to assessing the positive impact of the transaction, such as promoting national champions. Assessment of the restrictive impact only involves competition issues (see question 13).

The competition law is silent on this matter. In principle, ancillary restrictions will not be covered in the authority’s clearance decision if the authority does not have any particular concern about the restrictions post-merger. Such restrictions may nonetheless be included in the clearance decision as part of the greenlight conditions if the transaction is subject to Phase II review. Accordingly, since in Phase II one of the factors the NCC needs to assess is the post-merger undertaking’s ability to prevent or hinder another undertaking from entering or expanding the market, the NCC may request the parties to remove or revise these unlawful restrictive agreements.

If ancillary restrictions are not notified along with the merger but later become known to the NCC, they may be challenged as a prohibited cartel. As such, the parties may consider informing the NCC of these restrictions during the exploration phase, in the notification file or in the rounds of discussion during the appraisal process for the NCC’s consideration, thereby potentially avoiding any concerns raised in the future.

The Competition Law 2018 (Article 33.1) only generally states that reportable transactions must be filed before implementation without providing further guidance on when a transaction would be deemed implemented. A conservative construction of this provision in the context of other provisions in the legislation (specifically Article 34.1(b)) arguably suggests that the parties must submit a notification prior to signing. In practice, the VCCA still accepts filings submitted after signing provided that closing is subject to regulatory approvals, although, according to a verbal statement of a VCCA officer, there remains a risk that the NCC may later on investigate the transaction for gun-jumping. Therefore, considering the residual risk of a gun jumping investigation and pending official guidance from the competition authority, parties should consider submitting a filing prior to signing (if possible) to mitigate the risk exposure.

The Competition Law 2018 is silent on this issue. Given that in the preliminary appraisal phase the NCC will only focus on the parties’ combined market share and the HHI/concentration ratio, notification should be filed once the transaction structure and principal terms are sufficiently clear to identify the relevant parties and market.

The authority accepts filings made on the basis of a draft transactional document or even a memorandum of understanding (MOU). As a practical matter, parties are advised to file as soon as the transaction structure and the identity of filing parties are sufficiently clear to avoid any delay in the transaction timetable.

In practice, the parties may engage in pre-notification discussions with the authority on a range of issues such as the notifiability of the transaction and, if the transaction is notifiable, which specific information is relevant and of interest to the authority. As far as the authors are aware, the NCC welcomes pre-notification consultation requests. However, since the consultation is not a regulatory procedure, the timeline for the NCC to respond will vary depending on, for instance, the NCC’s workload, the complexity of the merger and the content of the inquiries.

The review process comprises two phases. Upon receipt of a notification file, the NCC has seven business days to inform the notifying parties of whether such file is valid and complete. If the file is not and the NCC issues a request for further documents and/or information, the parties will have 30 calendar days to complete the notification file. In practice, the competition authority usually issues a request for information (RFI) a week after the initial submission if it does not consider the filing to be complete.

Phase I: The preliminary review phase starts upon the authority’s receipt of a complete and valid file in terms of both formalities and substance, that is, once the authority receives all required formality documents and satisfactory responses to their RFI(s). Within 30 calendar days of the receipt thereof, the NCC will either (i) issue a decision either clearing the transaction or stating that the next phase is required, or (ii) not issue any decision at all. In the latter case, the transaction is automatically greenlit, effectively ending the review process.

Phase II: If the review moves to the official review phase, the NCC shall, within 90 calendar days (typical mergers) or 150 calendar days (complex cases) of the announcement date of the Phase I result, decide whether the transaction should be unconditionally cleared, conditionally greenlit, or blocked.

According to the VCCA’s annual report 2021, approx. 98% (or 127/130) notifications the authority received in 2021 were cleared within Phase I. Only three notifications were subject to Phase II review.

In practice, Phase I will generally run without interruption because the authority only officially commences Phase I once the parties have satisfactorily addressed all of their concerns. In other words, once Phase I officially commences without any indication that a Phase II review is necessary, the authority will not issue any further RFI and will use the 30-day clock to consult relevant stakeholders for verification purposes (if necessary) and go through the internal procedure to issue clearance.

As for Phase II, the authority is entitled to issue a maximum of two RFIs. In such case, the review clock is effectively paused until the authority receives a satisfactory RFI response. The actual timeline would thus depend on how responsive the parties are to the RFI.

There is no official expedited procedure for any type of mergers. Fundamentally, Phase I can be regarded as a simplified procedure due to the relatively short waiting period and auto clearance mechanism (see question 19).

In our experience, there are a number of measures which the parties may take to reduce the risk of receiving RFI from the authority, thereby expediting the review process.

• Engage in pre-notification consultation with the competition regulator to seek guidance on whether the transaction is notifiable and, if so, which specific information is relevant and of interest to the authority;
• Prepare a substantive filing based on the criteria in the Guiding Decree and relevant Vietnamese regulations (if any);
• Commence the legalisation process as soon as possible to minimise logistical delays; and
• Maintain an active communication channel with the authority throughout the review process to promptly address any concerns they may have.

Given the VCCA’s constantly evolving practice, it is crucial to keep up with the regulator to ensure accurate assessment of the notifiability issue and, if the transaction is indeed reportable, swift obtainment of clearance. Having an experienced local counsel with an established working relationship with the regulator would also help the parties navigate this nascent merger control regime and ensure the global transaction timetable.

If a filing threshold is crossed by any party to the proposed transaction, the VCCA will treat all parties (e.g., the purchaser, seller, and target if the concentration is an acquisition) as notifying parties and require them to sign the filing form irrespective of which party exceeds the threshold. In any case, the VCCA only accepts one submission for each reportable transaction.

The notification form must follow a prescribed template published on the VCCA’s website (http://vcca.gov.vn/data/ec84ff2e-887c-4a2f-8c60-c919696e3f1d/userfiles/files/2_%20M%E1%BA%AAU%20TB-TKT.docx). The form requires the parties to provide their basic corporate information, the transaction structure, transaction value and anticipated timetable, and to indicate which notification threshold(s) is(are) applicable.

In addition to the filing form, the parties must also submit:

• a draft transactional document in its full form (e.g., a Framework Agreement or a Share Purchase/Subscription Agreement; an MOU is also acceptable);
• each merger party’s certificate of incorporation;
• each concentration party’s audited financial statements for the two fiscal years preceding the notification;
• a list of each concentration party’s parent companies, subsidiaries, member companies, branches, representative offices and other dependent entities (if any) in Vietnam;
• a list of all goods and services currently provided in Vietnam by each concentration party;
• information about each concentration party’s market share on the relevant market for the two years preceding the notification;
• remedial plans for potential restrictive impact caused by the concentration (if any); and
• an assessment report on the positive impact of the concentration and measures for enhancing such effect.

The notification file must be submitted in Vietnamese. Certificates of incorporation issued abroad must be (i) legalised by the relevant Vietnamese embassy or consular office, and (ii) translated into Vietnamese; the translation must then be notarised by a licensed notary in Vietnam. Given that the legalisation process can be time-consuming in some jurisdictions, parties should commence legalisation as soon as practicable to avoid delaying the review process (see also question 21).

No.

No, unless the transaction is subject to a Phase II review, in which case the regulator may issue a press release to invite public comments.

The involvement of third parties in the review process is relatively limited and passive as it is only relevant through consultation which is initiated at the discretion of the competition regulator. Since the NCC is not obliged to publish the filing at the time of submission, there is no formal mechanism for third parties to proactively give opinion on the contemplated transaction. However, the NCC is entitled to consult relevant third parties (e.g., industry regulators, industry association, the parties’ competitors and distributors, and experts) on the filing. In recent cases we advised on, the VCCA has enquired a line ministry and an association about a wide range of matters (e.g., 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). Notably, the regulator is not mandated to follow, consider, or even solicit third-party information or recommendations as it is for reference only. In our experience, the regulator conducts merger review independently from third party’s feedback, which means negative third-party feedback does not automatically imply the transaction will be blocked entirely or conditionally greenlit. However, this procedural step may considerably delay the review timeline.

The NCC is obliged to keep confidential all information provided during the review process, including the term sheet and draft SPA/SSA/SHA. In practice, if there is any specific information in the filing which the parties wish to keep confidential, they should submit a separate Request for Confidential Treatment, specify therein the information which must be kept confidential, and highlight the same in the filing for the regulator’s attention.

On the other hand, the NCC is mandated to publish their final review outcome (which is either a clearance or a blocking decision) save for such parts concerning State or business secrets. In practice, the VCCA does not publish the clearance decision and its reasoning for granting clearance in full, but instead publishes a press release announcing the clearance. The press releases, which are publicly available on VCCA’s website (http://vcca.gov.vn/?page=news&do=browse&category_id=e0904ba0-4694-4595-9f66-dc2df621842a&current_id=48caff09-211e-4400-b9b8-ab2de0dfe989) are often light on details, providing only the dates of filing submission and clearance, the names of the transaction parties, a brief transaction description, and a general reason for granting clearance (e.g., the proposed transaction is either not prohibited under Article 30 of the Competition Law 2018 or cleared under Article 14.2 of the Guiding Decree (i.e., the safe harbour provision)). Clearance conditions and remedies (if any) are only mentioned in passing without elaboration.

Interplay with other jurisdictions involves consultation, information exchange and other international cooperation activities as provided by Article 108.2 of the Competition Law 2018. In principle, the regulator conducts merger review independently and rarely liaises with their overseas counterparts when appraising a notified transaction. To the authors’ best knowledge, there has been no case where international cooperation has a significant impact on the review process.

To date, the VCCA has engaged in various multilateral and bilateral cooperation programmes with multiple agencies and organisations, such as the Japan Fair Trade Commission (JFTC), German Corporation for International Cooperation GmbH (GIZ), the Australian Embassy, and the Australian Competition and Consumers Commission (ACCC). For the time being, such programmes centre primarily on enhancing antitrust enforcement (such as developing guidelines and handbooks and hosting advocacy workshops) and promoting consumer welfare.

Notwithstanding the above, decisional practice of overseas regulators (such as the European Commission, the JFTC, or the Korean Fair Trade Commission (KFTC)) have proven useful to the Vietnamese regulator in their assessment of the relevant product market, as well as in substantiating that the notified transaction does not raise any significant competition concerns globally, much less in Vietnam. It is expected that the NCC will continue and deepen these cooperative relations in the years to come.

Both types of remedies, i.e., structural and behavioural, are available in the forms of restructuring, divestment and price control. The Competition Law also contains blanket provisions covering any other remedies that lessen the restrictive impacts or enhance the positive effects brought about by the merger.

The current regime is silent on remedy application and only stipulates generally the remedies that must be implemented before or after the implementation of the transaction.

In principle, structural remedies must be fulfilled prior to closing, whereas behavioural remedies, e.g., price commitments, can usually be observed thereafter. It is possible, however, that the NCC may allow the parties to implement the restructuring and/or divestment schemes after completing the merger if there are reasonable grounds to believe that prior implementation is not viable. As no guideline on this matter is provided, the final decision is at the NCC’s discretion. In any event, if the anticipated transaction is conditionally greenlit, the clearance decision will specify whether the merger parties may complete the transaction before or after fulfilling all applicable conditions and remedies.

For failure to file, each concentration party may be fined 1% – 5% of its local revenues on the relevant market in the fiscal year preceding the year of closing. The fine bracket for gun jumping is 0.5% – 1% of the total local turnover of each concentration party.

If the parties have notified the transaction and proceed with closing after the authority blocks the transaction, each will be fined 1% – 3% of their respective local revenues on the relevant market in the financial year prior to the year of closing.

If the violating party has no revenues in Vietnam, the fine will be fixed at VND 100 million – 200 million.

Parties are statutorily responsible for the truthfulness of all information submitted during the review process, although the law is silent on the legal consequences of violating this obligation. Nonetheless, the regulator may, at its discretion, review the notification again based on the updated information and impose sanctions on the parties if it then found any breach of merger control regulations.

Whilst there is no formal process for complaints about, or objections to, the merger under the Competition Law 2018, an appeal can be made on the basis of the Law on Complaints 2011 (as amended) and the Law on Administrative Proceedings 2015. Any party (including third parties, e.g., consumers or competitors) dissatisfied with the clearance decision may lodge an appeal to the NCC (first-instance complaint) or the Minister of Industry and Trade (second-instance complaint) or initiate administrative proceedings before the courts (administrative litigation).

Recent enforcement trend suggests that the VCCA monitors M&A activities in the country and has proactively requested information on a number of transactions. In 2019, for instance, the regulator requested relevant parties to provide information on two high-profile transactions, viz., Masan Group’s acquisition of VinCommerce and VinEco, and Taisho’s acquisition of a controlling stake in DHG Pharma. More recently, in August 2020, the VCCA initiated an inquiry into Indo Trans Logistics Corporation’s acquisition of Ho Chi Minh City Stock Exchange (HoSE)-listed warehousing and transportation services provider Sotrans.

On the other hand, there are no public records of any sanction imposed on parties for failure to file or for conducting unlawful mergers. Public records also suggest that no transaction has been blocked under the current merger control regime.

It is expected that the competition authority will ramp up their enforcement efforts moving forward. According to their 2021 annual report, the VCCA has compiled a database on Vietnam’s Top 500 companies, including information on their revenues, assets and scope of operations. The authority has also produced research reports on key sectors such as e-commerce, automobiles and real estate, which should expedite the regulator’s review process in these sectors in the future. The internal merger control guideline the VCCA is working on is also expected to pave way for a more streamlined review process for certain mergers.

No further reforms are being considered at the time of writing, although a decree on the NCC’s establishment is on the horizon. As the NCC will assume the functions of overseeing the merger control regime after establishment, its autonomy is expected to significantly streamline the review process. Specifically, at least two procedural changes are expected to be rolled out after the NCC is established, namely an official e-submission portal for all filings, and a fast-track review or auto clearance process for transactions which pose no inherent competition concerns such as intragroup restructuring, pure conglomerate mergers or foreign-to-foreign mergers with limited local nexus (e.g. the target does not generate any revenues in Vietnam).