KENFOX IP & Law Office > Case Studies  > Case Study 22: Typical competition restriction cases in Vietnam

Case Study 22: Typical competition restriction cases in Vietnam

Abusing dominant position in the market:

Case 1: In 2007 THP filed a complaint with the Vietnam Competition Authority (VCA) against Vietnam Brewery Limited (VBL) – a producer of Tiger and Heineken beer. THP alleged that VBL had abused its dominant position in the premium beer market in some big cities in Vietnam to deter new competitors.

The VCA’s investigation mainly focused on identifying the relevant market, determining if VBL had a dominant position in that market and collecting evidence to prove the exclusive dealing conduct. The relevant market in this case was identified by the VCA as the beer market for the whole country, wider than the “premium beer” market definition proposed in THP’s complaint.

The VCA decided that all kinds of beer distributed in Vietnam are interchangeable in terms of their characteristics, use and prices. Beer is an alcoholic drink and the VCA did not find out any clear boundary between price levels of different kinds of beer. In addition, beer products of VBL and other competitors are distributed across almost the whole of the country and under similar conditions in the different geographical areas in Vietnam without entry barriers.

In the Vietnam beer market, VBL had a market share of about 20%, Per Article 11 VCL 2004, Enterprises and groups of enterprises in dominant market position/ 1. An enterprise shall be deemed to be in a dominant market position if such enterprise has a market share of thirty (30) per cent or more in the relevant market or is capable of substantially restraining competition./ 2. A group of enterprises shall be deemed to be in a dominant market position if they act together in order to restrain competition and fall into one of the following categories:….Therefore, VBL was deemed not to have dominant position in Vietnam beer market because VBL had a market share lower than the 30% threshold.

During the investigation the VCA discovered that VBL had signed exclusive dealing contracts with over 190 of the more than 8,600 beer sale partners in Vietnam (i.e. about 2% of total sale volume). Based on that number of exclusive dealing contracts, VBL could not significantly restrict competition.

Conclusion

Evidence on exclusive dealing by VBL in this case was not sufficient to constitute a violation as prescribed in Clause 6, Article 13 of Vietnam Competition Law, as VBL was not dominant in the relevant market. As a result, VCA proposed to the Vietnam Competition Council that it issue a decision to suspend the case.

Case 2: This case relates to a complaint of a number of enterprises, operating in film industry, in which they accused that Megastar Media Company Limited abused its dominant position in the market of distribution of imported motion pictures or movies.

 Abusing monopoly position in the market

Case 1: Vietnam Air Petrol Company (VINAPCO), a Vietnam Airline (VNA) subsidiary, functions as a distributor of aviation fuel to all airliners operating in Vietnam. VINAPCO holds a monopoly position in the provision of aviation fuel because it is the only company authorized to import and provide JET A1 oil for aircraft.

In March 2008, a proposal for raising its pumping fee was released by VINAPCO. This proposal was not accepted by Pacific Airlines (“PA”) on the ground that VNA, its major competitor, continued to be charged at the old rate. PA argued this proposal should apply equally to both carriers and the fact that PA had to pay a higher fee than VNA was unacceptable. It also argued that this unfair treatment would force PA to raise airfares, thus reducing its competitiveness while it was undergoing a restructuring process.

In early April 2008, VINAPCO unilaterally disrupted fuel supply to PA, causing damage to its finances and reputation.

The acts by VINAPCO seems to meet requirements on abusing monopoly position in the market under Article 14 of VCL 2004, Article 32 of Decree No.116/2005/ND-CP and Article 33 of Decree No. No.116/2005/ND-CP

In detail:

 [Article 14 of VCL 2004: Practices constituting abuse of monopoly position which are prohibited/ Any enterprise in a monopoly position shall be prohibited from carrying out the following practices:…/ 2. Imposing disadvantageous conditions on customers;/ 3. Abuse of monopoly position in order to change or cancel unilaterally a signed contract without legitimate reason.

 Article 32 of Decree No.116/2005/ND-CP: Detailing the implementation of a number of articles of the Competition Law. Imposition of unfavorable conditions on customers by enterprises having monopoly positions/ Imposition of unfavorable conditions on customers by enterprises having monopoly positions is an act of forcing customers to unconditionally accept obligations causing difficulties to customers in the process of performing contracts.

 Article 33 No.116/2005/ND-CP, DECREE Detailing the implementation of a number of articles of the Competition Law, Abuse of monopoly position to unilaterally modify or cancel signed contrasts without plausible reasons/ Abuse of monopoly position to unilaterally modify or cancel signed contracts without plausible reasons is an act performed by an enterprise holding a monopoly position in one of the following forms:/ 1. Unilaterally modifying or canceling signed contracts without having to notify in advance customers thereof and without facing any penalty./ 2. Unilaterally modifying or canceling signed contracts on the basis of one or more grounds not related to the conditions necessary for the continued performance of the contract, without facing any penalty.]

After an urgent official letter by PA was submitted to the MoT, the Ministry sent a dispatch ordering VNA to instruct VINAPCO to resume supplying fuel to PA and apply the same price to both airlines.  The case was then submitted to the Competition Administration Department (VCAD).

The dispute between VINAPCO and Jetstar Pacific Airlines (JPA), the successor of PA, was finally handled by the Vietnam Competition Council on 14 April 2009. VCC considered VINAPCO had abused its monopoly position when it unilaterally stopped pumping aviation oil for PA in April 2008, which caused the delay of flights run by this airline. The VCC held that VINAPCO’s behavior constituted a breach of Article 14(2) and (3) of the Competition Law 2004–abusing dominant and monopoly position. A fine of 3.37 billion VND (168,000 USD) was imposed on VINAPCO, together with a recommendation to separate VINAPCO from its parent company (VNA)