Abuse of dominance and monopolization
01/02/2019
PROVISIONS RELATED TO ABUSE OF A DOMINANT POSITION, ABUSE OF A MONOPOLY POSITION
Clause 5, Article 3, Vietnam Competition Law 2018 stipulates: “Abuse of a dominant position, abuse of monopoly position means behavior of enterprises with dominant position, monopoly position which causes or may cause anti-competitive effects”.
Article 24, Vietnam Competition Law 2018 stipulates the Enterprises, groups of enterprises holding a dominant position on the market, as following:
“1. An enterprise shall be considered to hold a dominant position on the market if it has substantial market power as specified in Article 26 of this Law or has market shares of 30% or more on the relevant market.
2. A group of enterprises shall be considered to hold a dominant position on the market if they jointly cause anti-competitive effects and have substantial market power as specified in Article 26 of this Law or their total market shares fall into one of the following cases:
a) Two enterprises having the total market share of 50% or more on the relevant market;
b) Three enterprises having the total market share of 65% or more on the relevant market;
c) Four enterprises having the total market share of 75% or more on the relevant market;
d) At least five enterprises having the total market share of 85% or more on the relevant market.
3. A group of enterprises holding a dominant market position prescribed in Clause 2 of this Article excludes an enterprise holding market share of less than 10% of the relevant market”.
Article 25 defines the Enterprises holding a monopoly position.
“Article 25. Enterprises holding a monopoly position
An enterprise shall be considered to hold the monopoly position if there is no enterprise competing on the goods or services dealt in by such enterprise on the relevant market”.
Article 26 clarifies the factors in order to determinate the substantial market power.
“Article 26. Determination of substantial market power
1. Substantial market power of an enterprise or group of enterprises is determined based on some of the following factors:
a) Market shares of enterprises on the relevant market;
b) Financial strength and size of the enterprise;
c) Barriers to market entry and expansion to other enterprises;
d) Ability to obtain, assess, control the goods distribution/consumption market or sources of supply;
e) Advantages in technology and technical infrastructure;
f) Right to own, obtain and assess infrastructure;
g) Right to own or use subject matters of intellectual property;
h) Ability to transfer to other sources of supply or demand associated with other goods and related services;
i) Particular factors in the sector that the enterprise runs the business.
2. The Government shall provide guidelines for Clause 1 of this Article”.
Article 27 stipulates the Prohibited abuse of a dominant position or abuse of a monopoly position.
“Article 27. Prohibited abuse of a dominant position or abuse of a monopoly position
1. An enterprise or group of enterprises holding a dominant position on the market is prohibited from:
a) Selling goods or providing services below costs that drives or probably drives competitors out of the market;
b) Imposing irrational buying or selling prices of goods or services or establishing minimum resale price maintenance (RPM), which causes or possibly causes damage to customers;
c) Restricting production and distribution of goods, services, limiting markets, preventing technical and technological development, which causes or possibly causes damage to customers;
d) Applying dissimilar commercial conditions in similar transactions, which leads to or possibly leads to prevention of other enterprises from market entry or expansion or exclusion of other enterprises;
e) Imposing conditions on other enterprises to conclude goods or services purchase or sale contracts or requesting customers to accept obligations which have no direct connection with subjects of such contracts, which leads to or possibly leads to prevention of other enterprises from market entry/expansion or exclusion of other enterprises;
f) Preventing other enterprises from market entry or expansion;
g) Other prohibited abuse of a dominant position prescribed in other laws.
2. An enterprise holding a monopoly position is prohibited from:
a) Performing acts prescribed in Points b, c, d, dd and e Clause 1 hereof;
b) Imposing unfavorable conditions on customers;
c) Taking advantage of the monopoly position to unilaterally modify or cancel the contract already signed without justifiable reasons;
d) Other prohibited abuse of a monopoly position prescribed in other laws.
And in the Article 28, Vietnam Competition Law 2018 regulates the Control of enterprises operating in state-monopolized domains.
“Article 28. Control of enterprises operating in state-monopolized domains
1. The State controls enterprises operating in state-monopolized domains with the following measures:
a) Deciding buying prices, selling prices of goods, services in state-monopolized domains;
b) Deciding the quantity, volume and market scope of goods, services in state-monopolized domains;
c) Directing, organizing the markets related to goods, services in state-monopolized domains prescribed by this Law and other relevant laws.
2. When undertaking other business activities outside state-monopolized domains, enterprises shall not be subject to the provisions of Clause 1 of this Article but be still subject to the application of other provisions of this Law”.
In order to identify enterprises or groups of enterprises with dominant market positions and monopoly positions, it is necessary to identify relevant markets. Therefore, the Article 9 in Vietnam Competition Law 2018 stipulates the determination of the relevant market.
“Article 9. Determination of relevant market
1. Relevant market is defined on the basis of relevant product market and relevant geographic market.
A relevant product market comprises all those products and/or services which are regarded as interchangeable or substitutable by reason of the products' characteristics, their prices and their intended use.
A relevant geographic market is a specific geographical area in which provided goods and services are interchangeable under homogeneous conditions of competition, and which is considerably differentiated from neighboring geographic areas.
2. The Government shall provide guidelines for Clause 1 of this Article”.
SANCTIONS AGAINST VIOLATIONS OF COMPETITION LAW
1. Principles of handling violations for conducts of abusing a dominant market position, abusing a monopoly position.
1.1. Any entity consisting of both organizations and individuals, committing violation of prohibited abuse of a dominant position or abuse of a monopoly position shall, depending on the nature and seriousness of their violations, be disciplined, incur penalties for administrative violations or face a criminal prosecution; in case of damage to the interests of the State, legitimate rights and interests of organizations and individuals, compensation must be paid according to the provisions of law.
1.2. For each act of abusing a dominant market position, abusing a monopoly position, the violating organization or individual shall be subject to one of the following main sanctioning forms:
a) Warning;
b) Fines.
1.3. Depending on nature and severity of the violation, the violator may be subject to one of the following additional penalties:
a) Revocation of enterprise registration certificates or equivalent, deprivation of licenses and practicing certificates;
b) Confiscation of the exhibits and means used for violations of competition law;
c) Confiscation of the profit earned from the violations of competition law.
1.4. Apart from penalties prescribed in Clauses 2 and 3 hereof, the violator may be subject to the application of one or more of the following remedial measures:
a) Restructure the enterprises having abused their dominant position on the market or abused their monopoly position;
b) Remove illegal provisions from business contracts, agreements or transactions;
c) Divide, split or sell a part or all paid-in capital, assets of the enterprise which is established after economic concentration;
d) Subject to the control of competent authority related to purchase prices and sale prices of goods, services or other transaction conditions in contracts of the enterprise which is established after economic concentration;
e) Make public correction;
f) Other necessary measures to overcome anti-competitive effects of the violation.
2. Fines for violations of regulations on controlling acts of anti-competitive.
The maximum fine for violations of regulations on anti-competitive agreements, abuse of the dominant position on the market, abuse of the monopoly position shall be equal to 10% of the total turnover of violating enterprises on the relevant market in the fiscal year preceding the year of violation, but not less than the minimum fine imposed on violations prescribed by the Penal Code.
3. Related to prohibited abuse of dominant market position
3.1. A fine ranging from 1% to 10% of the total turnover in the relevant market in the fiscal year immediately preceding the year in which the violation is committed by an enterprise having a dominant position in the market or each enterprise belonging to a group of enterprises with a dominant position in the market. dominant position in the market for one of the following acts:
a) Selling goods or providing services below costs that drives or probably drives competitors out of the market;
b) Imposing irrational buying or selling prices of goods or services or establishing minimum resale price maintenance (RPM), which causes or possibly causes damage to customers;
c) Restricting production and distribution of goods, services, limiting markets, preventing technical and technological development, which causes or possibly causes damage to customers;
d) Applying dissimilar commercial conditions in similar transactions, which leads to or possibly leads to prevention of other enterprises from market entry or expansion or exclusion of other enterprises;
e) Imposing conditions on other enterprises to conclude goods or services purchase or sale contracts or requesting customers to accept obligations which have no direct connection with subjects of such contracts, which leads to or possibly leads to prevention of other enterprises from market entry/expansion or exclusion of other enterprises;
f) Preventing other enterprises from market entry or expansion;
g) Other prohibited abuse of a dominant position prescribed in other laws.
3.2. Additional penalties:
Confiscate profits earned from the commission of violations.
3.3. Remedial measures:
a) Forcible removal of illegal terms from contracts or business transactions;
b) Forcible restructuring of enterprises with a dominant market position.
4. Related to prohibited abuse of a monopoly position
4.1. A fine ranging from 01% to 10% of the total turnover in the relevant market in the fiscal year preceding the year in which the violation is committed by an enterprise having an exclusive position for one of the following abusive acts:
a) Performing acts prescribed in Points b, c, d, e and f, Clause 1, Article 27 of this Law;
b) Imposing unfavorable conditions on customers;
c) Taking advantage of the monopoly position to unilaterally modify or cancel the contract already signed without justifiable reasons;
d) Other prohibited abuse of a monopoly position prescribed in other laws.
4.2. Additional penalties:
Confiscate profits earned from the commission of violations.
4.3. Remedial measures:
a) Forcible restructuring of enterprises with a monopoly position;
b) Forcible removal of illegal terms from contracts or business transactions;
c) Forcible restoration of technical and technological development conditions that enterprises have hindered;
d) Forcible removal of adverse conditions imposed on customers;
e) Forced reinstatement of changed or canceled contract terms or conditions without plausible reasons.
Antitrust Division, Vietnam Competition and Consumer Authority.