Problem statement
The trend of globalization and economic integration has led to a significant rise in mergers and acquisitions (M&A) across both developed and developing countries In the UK, approximately 5,200 companies engaged in M&A activities between 1986 and 1989, while the US saw its M&A expansion begin in the early 20th century, accelerating in the 1980s Vietnam has experienced a notable increase in M&A activity since the implementation of the Law on Enterprise in 1999, with around 750 deals valued at approximately 6.89 billion USD from 2009 to 2011 This growth continued, with total M&A values rising to 11.13 billion USD between 2012 and 2014 In 2015, Vietnam recorded 341 M&A cases worth 5.2 billion USD, followed by over 611 deals valued at 5.8 billion USD in 2016 The market size in 2017 surged ninefold compared to 2008, reaching a record high of 10.2 billion USD, representing a 175% increase from the previous year According to the Vietnam M&A Forum, nearly 4,000 deals have occurred over the past decade, totaling around 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,
I don't know!
2 Nguyen Thuong Lang, Nguyen Thi Quynh Nhu, supra note 1, p.1
In her 2019 article, Nguyen Thi Viet Nga explores the promising landscape of mergers and acquisitions (M&A) in Vietnam, highlighting the potential for growth and investment in the country's evolving market The piece, published in the Financial Journal, underscores the strategic importance of M&A activities for enhancing competitiveness and driving economic development in Vietnam The article can be accessed online for further insights into the future of corporate transactions in the region.
The Vietnam Competition and Consumer Authority (VCCA) published an article in 2015 titled "Overview of Economic Concentration," which can be found in Competition and Consumer News, Issue No 54 This resource provides insights into the dynamics of economic concentration in Vietnam For more information, the article is accessible online at the VCCA website.
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
In 2018, M&A activity in Vietnam exceeded 10 billion USD, marking a significant milestone in the country's economic development This surge in mergers and acquisitions highlights the growing interest of investors in the Vietnamese market The report, published by the Government electronic newspaper of the Socialist Republic of Vietnam, emphasizes the positive outlook for future M&A deals in the region Accessed on March 25, 2021, this information reflects Vietnam's expanding role in the global economy and its attractiveness for foreign investment.
Business reorganization through affiliate structures enables companies to navigate intense competition, fostering the development of highly competitive enterprises and enhancing the competitiveness of entire economic sectors Economic concentration activities strengthen a company's financial and operational capabilities by leveraging synergy gains For example, merging two companies into a single larger entity can expand their business scale, enhance competitive strength, reduce costs, and optimize financial resources.
As economic concentration becomes increasingly prominent in the context of development, it expands company dimensions and creates conditions for potential abuses of market dominance, which violate competition rules To address this, a robust legal framework is essential for assessing and regulating economic concentration transactions that significantly impact the competitive landscape Currently, over 146 jurisdictions worldwide have established various forms of economic concentration control within their antitrust laws A key tool in this control is a notification system, and Vietnam's competition law mandates an ex-ante notification system for such transactions.
On June 12, 2018, the Vietnamese Government enacted the Law on Competition 2018 (LOC 2018), replacing the previous Law on Competition 2004 (LOC 2004), with the new regulations taking effect on July 1, 2019 LOC 2018 introduces updated regulations tailored to Vietnam's current competitive landscape, addressing limitations of LOC 2004, particularly regarding economic concentration and notification thresholds Despite these improvements, the LOC 2018's notification threshold regulations still present challenges for both authorities and enterprises, highlighting areas that require further refinement for better applicability.
Firstly, in the context of developing countries like Vietnam, the new law
7 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
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
The Organization for Economic Cooperation and Development (OECD) conducted a peer review in 2018 focusing on competition law and policy in Vietnam The report highlights key findings and recommendations aimed at enhancing the effectiveness of Vietnam's competition framework Access to the full document is available online, providing detailed insights into the current state of competition policy in the country.
The establishment of multiple factors for controlling economic concentration is placing significant pressure on the National Competition Commission (NCC), Vietnam's primary competition authority, due to an increasing number of cases requiring notification However, the NCC is still in its formative stages, which raises concerns about its experience and effectiveness It is crucial to evaluate the applicability of the economic concentration notification threshold criteria to prevent unreasonable burdens on the NCC, as such issues could adversely impact economic development in Vietnam.
In today's globalized economy, nations are striving to regulate foreign economic concentration cases that negatively affect domestic competition It is essential to establish clear criteria for notifying these economic concentration transactions to ensure proper oversight However, the regulations set forth in the LOC 2018 fall short in effectively managing foreign economic concentrations that impact Vietnam's market.
This thesis, titled “Threshold for Notification of Economic Concentration under Vietnamese Law and Lessons from International Experience,” seeks to examine the existing regulations in Vietnam regarding notification thresholds for economic concentration It also aims to offer recommendations informed by the experiences of other countries.
Literature review
Since the implementation of the LOC 2018, numerous studies have emerged regarding the economic concentration control regime Nonetheless, there remains a lack of in-depth research on the challenges and limitations associated with the new regulations concerning the economic concentration notification threshold.
Ha Thi Thanh Binh (2019), “Thông báo tập trung kinh tế trong pháp luật cạnh tranh” (Economic concentration notification under competition law),
The article published in the Vietnamese Journal of Legal Sciences emphasizes the significance of economic concentration notification within Vietnam's competition law framework It explores regulations in other countries regarding notification thresholds and criteria for assessing the anti-competitive effects of economic concentration activities The author offers recommendations to enhance Vietnam's legal framework, although the analysis is based on the Draft of the LOC 2018, prior to the implementation of Decree 35/2020/ND-CP.
13 See Ha Thi Thanh Binh (2019), supra note 7
Hoang Le Uyen Phuong's 2020 bachelor thesis from Ho Chi Minh City University of Law evaluates the criteria for effective economic concentration control under Vietnam's 2018 competition law The study encompasses various aspects, including notification thresholds, the assessment of substantial anti-competitive effects, and the evaluation of positive impacts By analyzing these criteria, the thesis offers recommendations for enhancing economic concentration control However, it does not delve deeply into the notification threshold or the challenges faced by both regulatory authorities and enterprises in its application.
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
This thesis from Ha Noi University of Law examines and compares the current state of mergers and acquisitions (M&A) in Vietnam alongside the implementation of the Law on Competition (LOC) 2018 It evaluates the effectiveness of LOC 2018 regulations and offers recommendations to enhance the economic concentration control system The research emphasizes the practical application of laws, although it does not extensively explore the notification threshold related to M&A activities.
In his 2019 article, Tran Linh Huan highlights significant updates in the 2018 Law on Competition regarding the regulation of economic concentration control These new provisions aim to enhance market competition and prevent monopolistic practices, ensuring a fairer business environment The article discusses the implications of these changes for businesses and the overall economy, emphasizing the importance of compliance with the updated regulations.
In the State and Law Journal, No 5(373)/2019, author Tran Linh Huan analyzes and assesses the significant changes in Vietnam's Competition Law through a comparison of the 2018 Law on Competition (LOC 2018) with the 2004 version (LOC 2004) The article highlights the progressive advancements made in the 2018 amendments, emphasizing their importance However, it notes that the study lacks an in-depth exploration of the notification threshold for economic concentration, the challenges in application, and existing shortcomings within the law.
Hoang Minh Chien (2019), “Kiểm soát tập trung kinh tế theo Luật Cạnh tranh năm 2018”, (Economic concentration control under the Law on Competition
The paper published in the Journal of Democracy and Law (2019) examines key indicators of economic concentration, highlighting that the subjects involved are independent enterprises in the market It also outlines the various forms of economic concentration, including consolidation, mergers, acquisitions, and joint ventures.
The article discusses the impact of economic concentration on the formation of larger enterprises and shifts in market structure It highlights new provisions in the 2018 Law on Competition (LOC) that address limitations found in the 2004 version and incorporate lessons from advanced countries' regulations on economic concentration Notably, the paper does not explore the notification threshold related to these changes.
In the article by Mai Nguyen Dung (2020), titled “Applying the HHI Index to Economic Concentration Regulations Based on the United States and European Union Experiences and Recommendations for Vietnam’s Competition Law,” published in the State and Law Journal, the author explores the application of the Herfindahl-Hirschman Index (HHI) in assessing economic concentration The study draws insights from the regulatory frameworks of the U.S and EU, offering valuable recommendations to enhance Vietnam's competition law.
Nguyen Dung offers a comprehensive analysis of the Herfindahl-Hirschman Index (HHI), detailing its calculation methods, benefits, and limitations The paper discusses relevant legislation in the United States and the European Union regarding the HHI, and suggests improvements to the Vietnamese Competition Law for better assessment of economic concentration using this index Notably, the research is primarily based on the Draft of the LOC 2018, prior to the issuance of Decree 35/2020/ND-CP.
This thesis will attempt to address the issues that have been left unsolved, covered, or discussed from the previous studies.
Purpose of the study
This thesis examines the Vietnamese regulations regarding the economic concentration notification threshold established by the LOC 2018, highlighting significant limitations within the current framework It also offers recommendations for improvement, drawing on the experiences of selected foreign countries.
This thesis aims to analyze current Vietnamese regulations regarding notification thresholds, highlighting the successes of the Law on Organization of Enterprises (LOC) 2018 while identifying the shortcomings and challenges that remain unaddressed by both the LOC 2018 and Decree 35/2020/ND-CP.
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)
Third, offer problem-solving recommendations based on the experiences learned from other legislations’ competition law regarding notification thresholds.
Objectives and Scope of the study
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.
Scope of the study
This thesis examines the notification threshold for economic concentration as regulated by the Vietnamese Law on Competition (LOC) 2018 and Decree 35/2020/ND-CP, focusing solely on these existing frameworks It does not cover other related specialized laws Additionally, the research includes a comparative analysis of foreign legislation regarding economic concentration notification thresholds, specifically exploring the Merger Regulation No 139/2004 of the European Commission, Canada's Competition Act, China's Anti-Monopoly Law, the US Clayton Act (amended by the Hart-Scott-Rodino Antitrust Improvement Act), Belgium's Code of Economic Law, Turkey's Communiqué No: 2010/4 on mergers and acquisitions, and Brazil's Competition Act.
This study focuses on the notification threshold for economic concentration, emphasizing its significance and purpose, while also addressing the advancements made by the LOC 2018 regarding this threshold and the existing shortcomings However, it will not cover topics related to the evaluation of substantial anti-competitive effects, positive effects, preliminary or official assessments, procedures, national competition authorities, sanctions, or leniency policies.
Research methodologies
In this thesis, the author employs three interconnected research methods: analytical, comparative, and synthetic, emphasizing their integration rather than treating them in isolation.
The analytical method is conducted primarily in Chapter 1 to record the
The 2018 LOC regulations introduced seven key achievements regarding notification thresholds, while also highlighting potential limitations that may impose challenges on regulatory authorities and hinder economic development Additionally, Chapter 2 employs an analytical approach to examine the legislative frameworks of other countries.
The comparative method is utilized to analyze the differences between the LOC 2004 and LOC 2018, highlighting the importance of the amendments made in the 2018 version regarding the economic concentration notification threshold Additionally, this method is crucial in Chapter 2 for comparing Vietnam's competition legislation with that of other countries, allowing for the formulation of insightful recommendations.
The synthetic method is used to synthesize analyses and comparisons, thereby clarifying problems to be solved from a legal perspective and offering recommendations.
Thesis structure
This thesis comprises two chapters as follows:
THRESHOLD FOR NOTIFICATION OF ECONOMIC
Theoretical issues relating to economic concentration
1.1.1 Definition and nature of economic concentration
Economic concentration is a term defined by various legal scholars and economists globally, referring to the degree to which a small number of firms dominate a significant portion of economic activities, such as sales, assets, or employment, according to the OECD Glossary of Industrial Organization Economics and Competition Law This concept encompasses four key categories: aggregate concentration, industry or market concentration, buyer concentration, and ownership concentration In Vietnam's economic and legal context, the focus is primarily on industry or market concentration The OECD's publication, "A Framework for the Design and Implementation of Competition Law and Policy," further elaborates on this concept, highlighting its importance in understanding market dynamics.
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
Aggregate concentration assesses the relative dominance of large companies within an economy, drawing attention from economists, sociologists, and political scientists This metric is crucial for understanding the actual and potential economic and political influence that major businesses wield due to their significant economic presence in specific countries, industrial sectors, or geographic regions.
Market concentration, often known as seller concentration, assesses the dominance of large companies in delivering particular goods or services, such as automobiles or mortgage loans This metric highlights the relative position of these enterprises within their respective industries, providing insights into competitive dynamics and market power Understanding market concentration is crucial for analyzing economic conditions and regulatory implications in various sectors.
18 Buyer Concentration which measures the extent to which a large percentage of a given product is purchased by relatively few buyers
Ownership concentration refers to the distribution of stock ownership in publicly listed companies, indicating whether shares are held by a few individuals or widely dispersed among many investors This concept also highlights the control and wealth associated with corporate assets, often reflecting the influence of specific families or business entities over these resources.
Pham Tri Hung and Ha Ngoc Anh (2014) explore the essence of economic concentration and its regulation in their article, "The Nature of Economic Concentration and the Control of Economic Concentration," published in the Vietnamese Journal The authors delve into the implications of economic concentration for market dynamics and the necessity of effective control mechanisms to ensure fair competition and prevent monopolistic practices Their analysis emphasizes the importance of understanding the characteristics and impacts of economic concentration on both the economy and society.
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
Chapter 22 discusses economic concentration through mergers, highlighting various methods for companies to combine Enterprises can merge by purchasing all or part of another's outstanding securities or operating assets, or through the exchange of securities to form a new entity These transactions may arise from mutual agreements between firms or occur as unsolicited takeovers.
“hostile”- that is, resisted by the target company Established practice has been label
A merger occurs when two independent entities unite, leading to the enhancement of one entity while the other is eliminated This chapter highlights how economic concentration is often achieved through mergers and acquisitions, which are linked to the idea of centralized market power.
The UNCTAD Model Law on Competition does not define economic concentration explicitly but refers to "mergers and acquisitions" as essential elements of modern economic activities It indicates that "concentration" and "merger" can be used interchangeably, with "concentration" describing either the acquisition of control over another entity or the number of competitors in a market High concentration indicates few market players, while low concentration suggests many In corporate law, a merger is defined as the combination of two or more independent firms into a single entity, whereas competition law has a broader interpretation, encompassing acquisitions, joint ventures, and other forms of control.
According to the author Kovalkova M.V in his Ph.D thesis, economic concentration is implemented through reorganization procedures or contracts for the
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
Consolidating physical resources and management is essential for strengthening the economic position of existing business entities This strategic process can significantly influence the operational activities of other businesses and the overall market dynamics.
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 European Community, established on January 20, 2004, outlines that a concentration occurs when a lasting change of control takes place This can happen through the merger of two or more independent entities or parts thereof, or through the acquisition of control—direct or indirect—over one or more undertakings by individuals or entities that already control at least one undertaking, via methods such as purchasing securities, assets, contracts, or other means.
The Competition Act of Canada, in Article 91, defines a "merger" as the acquisition or establishment of control or significant interest in a competitor, supplier, customer, or another entity, whether through the purchase or lease of shares or assets, amalgamation, or other means This definition highlights the Act's focus on regulating economic concentrations that could impact market competition.
The Anti-Monopoly Law of the People's Republic of China does not explicitly define "concentration" but outlines specific scenarios that constitute it These include (i) the merger of undertakings, (ii) gaining control over other undertakings through the acquisition of shares or assets, and (iii) exerting decisive influence over other undertakings via contracts or other means.
Like China's Anti-Monopoly Law, Vietnam's LOC 2018 lacks a precise definition of economic concentration but outlines specific activities that qualify as such The LOC 2018 categorizes economic concentration into various operations, emphasizing its significance in regulating market practices.
26 Ковалькова М.В (2005), as cited in Pham Tri Hung and Ha Ngoc Anh (2014), supra note 20, p.20-21
The EC Merger Regulation, specifically Article 3 of Council Regulation (EC) No 139/2004, governs the control of concentrations between undertakings This regulation, established on January 20, 2004, aims to maintain fair competition within the European Union by assessing and regulating mergers and acquisitions that may significantly impede effective competition For more detailed information, refer to the official document available on the EUR-Lex website.
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
A merger of enterprises involves the transfer of all property, rights, obligations, and legitimate interests from one or more companies to another, resulting in the dissolution of the merged entities.
ECONOMIC CONCENTRATION NOTIFICATION
Threshold for notification of economic concentration under the law of
2.1.1 Periodical adjustment of notification threshold
With respect to periodical adjustment of the notification threshold based on socio-economic development, the experience of Canada, the United States, and Belgium are relatively remarkable
Under Canada's Competition Act 99, the Minister of Innovation, Science and Industry conducts an annual review of merger notification thresholds, which can be adjusted based on the Gross Domestic Product (GDP) indexing mechanism For instance, in 2020, the Canadian Competition Bureau confirmed that the pre-merger notification threshold would remain at $96 million, the same as in 2019 However, on February 11, 2021, it was announced that the threshold would decrease to $93 million for 2021 The Competition Act allows for the review of mergers across all sectors and sizes by the Commissioner of Competition.
99 See Art 91, Part VIII – Matters Reviewable by Tribunal, Canadian Competition Act, https://laws.justice.gc.ca/eng/acts/C-34/index.html, Accessed on 01 June 2021
In 2021, the Government of Canada announced a decrease in the pre-merger notification transaction-size threshold to $93 million This change aims to enhance oversight of mergers and acquisitions, ensuring that more transactions are reviewed for competitive impacts For further details, visit the official announcement on the Government of Canada's website.
In 2020, the Government of Canada announced that the pre-merger notification transaction-size threshold would remain at $96 million This decision is crucial for businesses considering mergers and acquisitions, as it determines the financial threshold for mandatory notification to the Competition Bureau For further details, visit the official announcement on the Government of Canada's website.
In Canada, advance notice of proposed transactions is required when the target's assets or sales revenues exceed $93 million, or when the combined assets or revenues of the involved parties surpass $400 million The Commissioner assesses these notifiable transactions to evaluate their potential impact on competition The new threshold will be effective from February 13, 2021 Importantly, the Commissioner retains the authority to review and challenge any mergers, regardless of whether they meet the notification criteria, up to one year after the transaction closes.
In Canada, the annual adjustment of economic concentration notification thresholds is influenced by GDP formulas The reduction in merger review thresholds in 2021 resulted from the economic contraction due to government-imposed restrictions aimed at controlling the Covid-19 pandemic Should the economy recover in 2022, an increase in the notification threshold is anticipated.
Under Section 7A of the Clayton Act, as amended by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, the Federal Trade Commission is mandated to annually revise transaction thresholds based on gross national product changes On February 2, 2021, the FTC announced updated Hart-Scott-Rodino thresholds effective March 4, 2021, which included a decrease in the minimum "size of transaction" threshold from $94 million to $92 million, along with other significant adjustments.
102 Government of Canada (2021), supra note 101
103 International Comparative Legal Guides (ICLG) (2021), “Canada: Merger Control Laws and Regulations 2021”, https://iclg.com/practice-areas/merger-control-laws-and-regulations/canada, Accessed on 01 June
104 Justine Reisler (2021), “Canada: 2021 Merger Review Threholds”, https://www.mondaq.com/canada/antitrust-eu-competition-/1038504/2021-merger-review-thresholds, Accessed on 3 June 2021
105 The Hart-Scott-Rodino Act requires premerger notification of transactions that satisfy the “size of transaction” and “size of person” tests and are not otherwise exempt
106 Federal Trade Commission (2021), “HSR threshold adjustments and reportability for 2021”, https://www.ftc.gov/news-events/blogs/competition-matters/2021/02/hsr-threshold-adjustments-reportability-
107 Federal Trade Commission (2021), “Revised Jurisdictional Thresholds for Section 7A of the Clayton Act”, https://www.federalregister.gov/documents/2021/02/02/2021-02110/revised-jurisdictional-thresholds- for-section-7a-of-the-clayton-act, Accessed on 02 June 2021
(i) The size-of-person test will decrease from $188 million to $184 million and from $18.8 million to $18.4 million, with respect to the required level of annual net sales or total assets;
The threshold for reportable acquisitions will be reduced from $376 million to $368 million, meaning that any transaction exceeding $368 million must be reported, regardless of whether the size-of-person test is satisfied.
In Belgium, The Code of Economic Law regulates that the economic concentration control provisions only apply where: 108
(i) the undertakings concerned have a turnover of more than EUR 100 million in Belgium and,
(ii) at least two of the undertakings concerned each have a turnover of at least EUR 40 million in Belgium
The Belgian Competition Authority conducts a triennial assessment of notification thresholds, considering factors such as economic impact and administrative burden on businesses This regular review stems from the early 90s, when Belgium experienced an influx of notifications for non-problematic economic concentration transactions, straining enforcement resources due to inadequate local nexus in the thresholds An impact analysis by national authorities revealed that adjusting local turnover thresholds could decrease notifiable transactions by around 80%, leading to amendments in 1999.
In the context of Belgium, it is crucial for the national competition authority to promptly adjust notification thresholds for economic concentration Regular review and re-evaluation of these thresholds are necessary to ensure they remain relevant and effective, as outdated thresholds can hinder effective competition oversight.
These countries periodically adjust their notification thresholds in response to changes in the social economy or gross national product Such regulations are essential as they ensure timely reflection of economic conditions.
108 Belgin Competition Authority (2017), Evaluation of the notification thresholds for concentrations in
Belgium, https://www.belgiancompetition.be/sites/default/files/content/download/files/20170518_press_release_10_bc a.pdf, Accessed on 8 June 2021
109 Belgin Competition Authority (2017), supra note 109
32 changes in the economy, thereby supporting the competition control of the competent authorities to be implemented more adequately
2.1.2 Control of transactions implemented outside the territory but having impacts on the domestic market
In the context of globalization, countries are increasingly focused on regulating economic concentration cases that, while originating outside their borders, negatively affect local markets Establishing clear criteria for notification thresholds is essential to manage these transactions effectively The process of controlling such transactions through economic concentration notification procedures is complex To enhance the efficiency of national competition authorities in overseeing these transactions, it is vital to identify the links between the involved parties and the domestic market Canada's regulatory framework serves as a notable example in this regard.
Under Canada's Competition Act, transactions that surpass designated thresholds must notify the Commissioner of Competition prior to executing any economic concentration Such transactions cannot be finalized until the notice is submitted and the statutory waiting period has either expired or been waived by the Commissioner In 2021, a transaction is deemed notifiable when both the "transaction-size" and "party-size" thresholds are exceeded.
In Canada, a key consideration for transactions is the transaction-size threshold, which necessitates that the target company's Canadian assets or revenues generated from those assets surpass a specific monetary value As of the current regulations, this threshold stands at $93 million, marking a decrease from the $96 million requirement in 2020.
The party-size threshold mandates that for a transaction to comply, the involved parties and their affiliates must collectively possess assets in Canada or achieve annual gross revenues from sales within, from, or into Canada that surpass $400 million.
Canada's regulation on economic concentration notification thresholds effectively manages transactions occurring outside the country that affect the Canadian market By focusing on combined revenues generated in, from, or into Canada, this provision allows for a comprehensive evaluation of enterprises' market power Consequently, it serves as a vital tool in controlling cases of economic concentration that could negatively impact the domestic economy.
110 Government of Canada (2021), supra note 101
2.1.3 Combining criteria to determine notification threshold
Recommendations for Vietnam
From international experience and practice analyzed in section 2.1, there are several recommendations for Vietnam regarding the threshold for notification of economic concentration
To ensure the notification thresholds in the LOC 2018 remain relevant, it is essential for the Vietnamese Government to implement detailed regulations for their adjustment Drawing from the experiences of Canada, the United States, and Belgium, the government should establish specific timeframes or conditions for reviewing these thresholds Additionally, empowering the National Competition Authority to conduct annual or periodic assessments will help determine the appropriateness of the current thresholds in relation to socio-economic developments Given the significant impact of the Covid-19 pandemic on Vietnam's economy and M&A market, regular adjustments to the notification thresholds are crucial for aligning them with the prevailing socio-economic conditions.
The LOC 2018 should establish specific regulations for the turnover threshold to effectively manage transactions that occur outside of Vietnam but still influence the domestic market, particularly for enterprises without a commercial presence in the country The Canadian framework, particularly the provisions in the Competition Act, serves as a valuable reference for Vietnamese lawmakers to define the turnover criteria necessary for determining the notification threshold.
The total turnover of the parties involved in a transaction, including their affiliates, is significant when considering activities in, from, or into Vietnam As discussed in Section 1.2.2, the merger between Gojek and Tokopedia, although conducted outside Vietnam, has substantial effects on the domestic market, highlighting the importance of this regulation.
39 transaction, together with their affiliates in, from or into Vietnam” can help the VCA to have a legal basis to control such cases like the merger of Gojek and Tokopedia
Vietnamese lawmakers should consider combining both nationwide and worldwide turnover criteria to establish a notification threshold, drawing from successful experiences in other regions.
The EU and China are considering the implementation of a dual-turnover threshold to regulate high-turnover firms in transactions This threshold requires that the aggregate turnover of at least two involved enterprises meets a specified limit, thereby streamlining the notification process for transactions While this approach reduces the number of cases that need to be reported, it still captures transactions that may pose potential competitive restrictions.
The market share threshold in mandatory control regimes leads to inefficiencies in investigations and compliance risks, as many economic concentration transactions require extensive market definition efforts Additionally, essential data on sales, turnover, or assets may be inaccessible, complicating the data collection process for national competition authorities and businesses alike As a result, countries like Brazil, the Czech Republic, Poland, and Turkey have removed market share criteria from their notification systems The International Competition Network (ICN) has deemed market share-based thresholds unsuitable for initial transaction notifications, suggesting they may only be relevant in later stages of the economic concentration control process The case of Grab and Uber illustrates the complications of applying market share thresholds, highlighting the need for their complete removal from notification systems to prevent unnecessary expenditure of time, costs, and resources.
The second chapter examines the legislative frameworks of various countries that offer solutions to the challenges posed by notification thresholds under the LOC 2018 Based on the insights gained from these countries, the chapter presents tailored recommendations for Vietnam Key highlights of this chapter include a thorough analysis of international practices and their applicability to improve Vietnam's regulatory landscape.
Canada, the US, and Belgium annually adjust their notification thresholds based on social and economic changes, including gross national product fluctuations Evidence from countries with frequent threshold reforms suggests that effective policies and competitive environments benefit from regular reviews and adjustments of these thresholds Therefore, it is essential to clearly outline the adjustments to the notification threshold under the LOC 2018.
Canada's regulation effectively manages transactions conducted outside its territory that affect the domestic market Vietnamese lawmakers could adopt a similar approach by defining the notification threshold based on the total turnover of all parties involved in a transaction, including their affiliates, related to activities in, from, or into Vietnam.
When establishing notification thresholds for economic concentration, Vietnamese lawmakers could benefit from the experiences of the EU, China, and Turkey These regions utilize a combination of nationwide and worldwide turnover, along with a dual-turnover threshold, to determine their notification requirements Adopting a similar approach could enhance the effectiveness of Vietnam's regulatory framework.
The abolition of the market share notification threshold is crucial, as it often leads to unnecessary investigative efforts and compliance risks within mandatory control regimes Many countries have successfully eliminated this threshold from their notification systems Therefore, Vietnamese lawmakers should seriously consider removing the market share threshold to enhance efficiency and reduce compliance burdens.
The LOC 2018 introduces significant changes to the economic concentration control regime in Vietnam, following 14 years of the LOC 2004 Notably, the notification threshold for economic concentration no longer solely depends on market share criteria; it now considers total assets, total sales or purchase volume, transaction value, and market share This shift reflects a modern approach to economic analysis aligned with global trends, contributing to a healthier and more sustainable business environment The adjustments made in LOC 2018 also showcase the innovative legal mindset of Vietnamese lawmakers, aligning with international practices.
In the era of globalization and economic integration, adjusting notification thresholds is crucial for creating a sustainable legal framework that fosters a favorable business environment and attracts foreign investment While the Law on Competition (LOC) 2018 has made significant improvements over the LOC 2004, it still faces limitations regarding notification thresholds To enhance Vietnam's regulations on economic concentration notification, it is vital to analyze and draw lessons from the advanced legal frameworks of other countries with a long history of development in this area.
To enhance the economic concentration control regimes in Vietnam, particularly regarding the notification threshold for economic concentration, it is essential for lawmakers to consider the successful practices and experiences of other countries.
To ensure effective implementation of the LOC 2018, it is essential to clearly outline the adjustments to the notification threshold Insights from various countries reveal that incorporating regular reviews and adjustments of these thresholds can enhance policy effectiveness.