Vietnam Merger Control Guide

By INDOCHINE COUNSEL

In June 2018, Vietnam introduced a new Competition Law, which came into effect in July 2019, bringing about significant changes to the country’s merger control regime. This guide prepared by FiinGroup and Indochine Counsel offers a succinct overview of Vietnam’s M&A market data, complemented by an in-depth examination of the broad reporting requirements for M&A transactions, formally termed as “economic concentration” transactions in the legislation. Additionally, the guide delves into the inclusion of the qualitative “substantial lessening of competition” (SLC) test. It is vital for parties involved in M&A transactions to familiarize themselves with these extensive filing mandates and understand the severe legal consequences of noncompliance
within Vietnam’s jurisdiction.

Key Takeaways:

M&A parties must be mindful of the comprehensive reporting requirements, the qualitative substantial lessening of competition test, and the significant legal consequences of non-compliance. With that in mind, here are the ten key takeaways to help you navigate the updated merger control landscape in Vietnam:

1. M&A transactions, including mergers, consolidations, asset and share acquisitions, and (incorporated) joint ventures, may require notification and competition scrutiny, even when carried out entirely outside Vietnam.
2. Notification thresholds vary depending on industry-specific criteria related to total revenue, total assets, transaction value, or combined market share.
3. M&A parties should be prepared for a thorough review process and potential challenges from competitors.
4. The merger review process consists of two phases: preliminary appraisal and official appraisal.
5. Market definition, market share calculation, and market concentration assessment are crucial during the review process.
6. Safe harbors are identified based on combined market share, post-deal Herfindahl-Hirschman Index (HHI), and change in HHI (i.e., delta) which determine whether a transaction can proceed without second-phase scrutiny.
7. The competition authority employs the Substantial Lessening of Competition (SLC) test to assess a transaction’s impact on competition. Specifically, a transaction will be prohibited if it is determined to cause, or is likely to cause, substantial anticompetitive effects in a Vietnamese market.
8. During the official appraisal phase, the competition authority evaluates potential anticompetitive effects, remedies, positive economic impacts, and other relevant factors.
9. Pre-closing remedies, such as divestiture or behavioral measures, may be applied to allow a transaction to proceed. Post-closing remedies can include fines, divestiture, or behavioral remedies, depending on the type of violation.
10. Ongoing compliance is vital, as the post-merger entity remains subject to other provisions of Vietnam’s Competition Law, including market dominance abuse regulations.