Decree 116 on implementation of the Competition Law (2)

As previously reported by D&N International, Decree 116/2005/ND-CP providing detailed regulations on implementation of a number of articles of the Competition Law has been issued by the Vietnamese Governement on September 15, 2005 and came into force as of October 10, 2005.

It is worth reminding that the Competition Law was promulgated by the National Assembly of Vietnam on December 3, 2004 and became effective on July 1st, 2005. The Competition Law ensures the right of individuals and companies to compete in the market. However, it states that such competition must be in compliance with the law, meaning that it must be carried out in a proper manner and must not harm the national interest, the rights and legitime interests of consumers and enterprises. Aiming at creating a legal framework for competition, the Competition Law deals with two broad categories of competitive practices including (i) practices in restraint of competition and (ii) unfair competitive practices. The Competition Law aslo includes provisions on competition legal proceedings and violation remedies.

To effectively implement the Competition Law, the Government has issued three implementing items, including Decree 116, Decree 110 dated August 24, 2005 on multi-level selling and Decree 120 dated September 30, 2005 on dealing with breaches of the Competition Law.

Decree 116 is considered as an important legal basis for implementation of the Law on Competition, however, in order for it to be effectively enforced, it is necessary to establish a Competition Commission (to consider applications for exemptions from the Competition Law and to investigate competitive practices) and a permanent Competition Council (to deal with competition case concerning practices in restraint of competition, after completion of investigation by the Competition Commission). It is still unknown when these two instruments will be established. At present, the only infrastructure for implimentation of the Competition Law is the Competition Administration Department under the Ministry of Trade.

Below are the main features of Decree 116.

Relevant market, turnover and market share are important elements to determine whether or not there are restrictive practices or abuses of a dominant position and monopoly position. The Competition Law provides only a general definition of what relevant market is. Decree 116 specifies how to determine the relevant market with seperate provisions on (i) relevant product market; and (ii) relevant geographic market.

Decree 116 clearly defines market access barriers which can be used for determining the relevant geographic market (Article 8). It is noted that industrial property objects such as patent, industrial design, trademark, geographical indication may also be considered as market access barriers, among others.

Decree 116 stipulates that a company’s turnover is determined based on the tax law and the Vietnamese accounting standards. It provides also special provisions for insurance companies and credit institutions.

Decree 116 interprets eight types of agreement in restraint of competition prohibited under the Competition Law. One of them, for example, agreement in restraint of technical and technological development and investment, is defined as: (i) agreement to purchase inventions, utility models, industrial designs for destruction or not for use; and (ii) agreement not to provide additional capital to expand production or improve quality of goods and services.

Regarding practices in abuse of dominant market position and monopoly position, Decree 116 provides that capability of a company to substantially restrain competition is determined on the basis of its financial capacity or that of its founders (individual or entity) or of those controlling its activities, the financial capacity of its parent company, technological capacity, rights over industrial property objects and scale of distribution network.

Decree 116 provides in more details on what constitutes each practice in abuse of dominant market position and monopoly position prohibited by the Competition Law. It enumerates expenses which may be included in the cost of product/service permitting to determine whether or not there exists practice of selling below the cost of product/service.

3. Aggravating and extenuating circumstances

Extenuating circumstances in dealing with practices in restraint of competition include: voluntary disclosure of offence; implementation of preventive measures, reduction of damage, voluntary remedying of the consequences, compensation for damage; voluntary provision of evidence and information concerning the offence; and positive effect of the offence on development of the economy.

Aggravating circumstances in dealing with practices in restraint of competition include: multiple offences, recidivism, commit offences when there is a notification of the relevant authority refusing exemption or revoking decision on acceptance of exemption; continuance of an offence despite request to desist; evasion and concealment of an offence.

In respect with unfair competitive practices, the Competition Commission may apply aggravating and extenuating circumstances in compliance with Articles 8 and 9 of the Ordinance on dealing with administrative offences.

According to Decree 116, a complaint must include at least the following information: filing date, name and address of the complainant, definition of the competition problem which the complainant requests the Competition Commission to resolve, evidences, signatures and seal of the complainant.

Within 15 days from the receiving date of the Competition Commission’s Notification, the complainant must deposit an amount of money equal to 30% of the total fee prescribed by law for dealing with the case.

Fee for dealing with a competition case is fixed by Decree 116 at VND10 millions (US$ 650) in case of unfair competitive practices, and VND100 millions (US$6500) in case of restrictive practices. With respect to an independant request by a concerned party, a fee of VND10 millions (US$650) is prescribed. Fee for considering an application for exemptions from the Competition Law is VND50 millions (US$3250).

In addition, Decree 116 includes provisions regulating other fees such as examination fee, witnesse, translator and laywer fees.

The Complainant has obligation to submit evidences to prove that his/her complaint is well-founded and in compliance with the law. In case that the act of violation has been revealed by the Competition Commission, obligation to submit evidences is incumbent on the Commission. The Defendant has the right to file a counter statement with supporting evidences.

Decree 116 provides more details regarding 4 sources of evidences indicated in the Competition Law. All evidences must be published and used equally by the public, except those belonging to State’s secrets, business, professional and personal secrets in case of legitime request by a concerned party.

In order to timely prevent breaches of the Law on Competition or to ensure that a competition case be effectively dealed with, the following administrative measures can be applied: (i) arrest and temporary detention of persons in accordance with administrative procedure; (ii) temporary detention of things used in the alleged offence; (iii) search of person; (iv) search of means of transport and other things; and (v) search of places. Procedure for each measure is stipulated in details in Decree 116.

According the Competition Law, the Competition Commission is competent to settle unfair competition cases. Decree 116 states that the Competition Commission can make a decision on settlement of an unfair competition case only after having conducted investigations. Furthermore, such decision must be based on the content of official investigations, investigation report, aggravating and extenuating circumstances and other legal regulations.

The Competition Commission’s decision on settlement of an unfair competition case must include: (i) Number and date of decision; (ii) Names and addresses of the Complainant, the Defendant and parties concerned; Legal representatives of the Complainant, the Defendant and parties concerned; (iii) Articles of the Competition Law which have been breached (if any); (iv) the content of the case in brief; (v) Analysis of the case; (vi) Conclusion; analysis of evidences; aggravating and extenuating circumstances. In case where the Defendent has not breached the Law on Competition, the decision should include reasons for such conclusion and measures to compensate the Defendent. (vii) Decision must include remedies decided by the Competition Commission, the amount of fee for dealing with the case and appeal avenue.