Below is a guest post by Tân Bùi Thọ Minh. Mr. Bui is a Vietnamese attorney who has just completed his L.L.M at George Mason University. He is currently working with Former Feds, a compliance/investigative organization that works with foreign vendors seeking to do business in the United States to help bring them into compliance with US law. firstname.lastname@example.org
Vietnam has become an increasingly important trading partner with the United States as shown by the US Census Bureau’s figures in “Trade in Goods with Vietnam.” According to the United States Trade Representative, Vietnam is currently the 27th largest goods trading partner of the United States with $29.7 billion in total (two ways) goods trade during 2013. Goods exports totaled $5.0 billion; Goods imports totaled $24.6 billion. The U.S. goods trade deficit with Vietnam was $19.6 billion in 2013. Increasing trade means increasing focus on compliance efforts both for American companies importing goods into Vietnam and especially for Vietnamese companies seeking to build export relationships with U.S. partners.
Competition law will become an increasing focus of an overall compliance program that includes other topics such as FCPA, and customs and export regulations. Companies trading goods into Vietnam should be familiar that the Vietnam Competition Law applies to all “foreign organizations operating in Vietnam.” The Vietnam Competition Authority website publishes an overview of Vietnam competition law.
The monetary penalties for a violation of the Competition Law include fines of up to 10% of the enterprise’s total revenue. There are other possible penalties, however, such as revocation of business licenses, sub-licenses and/or professional practicing certificate and/or confiscation of materials and facilities used to commit a breach of the Competition Law.
Vietnam is also one of the most recent countries to take up criminalizing serious (hard-core) cartel conduct. Vietnam has had a competition regime that provides administrative sanctions against anticompetitive behavior since the Competition Law was enacted in 2005. Soon, however, cartel participation will be subject to criminal prosecution under Article 217 of Vietnams’ penal code. Criminal sanctions can apply to both individuals and organizations.
The new Criminal Code, which was supposed to take effect on July 1st, 2016, was delayed. On June 29th, 2016, the National Assembly legislated that the new Criminal Code will take effect at the time the “Law of amending and supplementing some articles of the Penal Code No. 100/2015 / QH13” takes effect. Vietnam is a Civil Law System countries, known as Statutory Law Country. Precedent is not available in Vietnam and everything is regulated by the Law. However, the Law contains general conduct such as listing illegal conduct without any details about how to determine whether certain conduct is illegal. Because the Court does not have the right to create new law, everything that the Court applies must be consistent with the Law. When a new Law releases, it always comes with a new Decree which explains detail about most of complex provisions in the new Law. At the moment, cartel conduct has not been criminalized but it will be in a near future when the Decree is issued.
Article 8 of the Competition Law prohibits the following:
Article 8 competition restriction agreements:
- Agreements on directly or indirectly fixing goods or service prices;
- Agreements on distributing outlets, sources of supply of goods, provision of services;
- Agreements on restricting or controlling produced, purchased or sold quantities or volumes of goods or services;
- Agreements on restricting technical and technological development, restricting investments;
- Agreement on imposing on other enterprises conditions on signing of goods or services purchase or sale contracts or forcing other enterprises to accept obligations which have no direct connection with the subject of such contracts;
- Agreements on preventing, restraining, disallowing other enterprises to enter the market or develop business;
- Agreements on abolishing from the market enterprises other than the parties of the agreements;
- Conniving to enable one or all of the parties of the agreement to win bids for supply of goods or provision of services.
According to Competition Law, it is per se illegal if someone engages in conduct prohibited by sections 6,7,8 Article 8. All conduct from section 1 to 5 Article 8 is considered illegal if executed by entities with a combined market share of 30% or above. The same requirements are applied into new Criminal Code 2015, “Any person who participates in or commits any of the following violations against regulations on competition and earns an illegal profit of from VND 500,000,000 to under VND 3,000,000,000 or causes damage of from VND 1,000,000,000 to under VND 5,000,000,000 shall be liable to a fine of from VND 200,000,000 to VND 1000,000,000 or face a penalty of up to 02 years’ community sentence or 03 – 24 months’ imprisonment.” (Article 217 Section 1 Criminal Code 2015). There are a few differences between convicting a crime and proving a violation in Competition. To be more specific, in Competition Law, Section 6,7,8 Article 8 are per se illegal but in Criminal Law, only Section 6,7 are considered as a crime. Secondly, it is not required to prove the existence of the result of the violation in order to determine someone has convicted Cartel conduct. However, it is required to prove that there are profits earned or damages caused by the crime. Specifically, the profits earned by violation must be from US $22,500 to $135,000 or the damages caused by violation must be from $45,000 to $225,000. (As of the day I wrote, 1USD=22,222VND).
As mentioned above, all conduct from section 1 to 5 Article 8 is considered illegal if executed by entities with a combined market share of 30% or above. The 30% market share is calculated as the total market share of all competitors in the Cartel. For example, if there are 10 firms agreeing to fix prices of their products in the market and each firm has 5% market share, the total market share of the cartel is 50%. If the prosecutor proves that the total profits earned from the violation is higher than [approximately] US $22,500 or the total damages of other firms who are not in the Cartel is higher than $45,000, then there are enough evidences to convict all competitors in the Cartel. The 30%-combined-market share is applied for all the market with no exception.
Bid rigging has special treatment under Vietnam law. It is a prohibited agreement in article 8.8 of the Competition Law but it is also treated criminally under Article 222 of the new penal code.
In the new Criminal Code, Article 222 regulates about Bid rigging:
Article 222. Offences against regulations of law on bidding that lead to serious consequences
A person who commits any of the following acts and causes damage of from VND 100,000,000($45,000) to under VND 300,000,000($135,000), or causes damage of under VND 100,000,000($45,000) but was disciplined for the same offence, shall face a penalty of up to 03 years’ community sentence or 01 – 05 years’ imprisonment:
b) Colluding with other bidders in bidding;
According to the law, damage is required in order to convict someone for offense this crime. This is different from the Antitrust Law that Bid Rigging is per se illegal.
This blog post is an abbreviated version of a more complete paper I wrote on Competition Law in Vietnam. I would be happy to provide you with a copy if you like.
Tân Bùi Thọ Minh email@example.com
Thank you for reading.