Review M&A transactions under economic concentration aspect

1. 3
ABSTRACT
M&A UNDER MERGER CONTROL REGIME ACCORDING TO VIETNAM
COMPETITION LAW, REFERRING TO SOME OTHER COUNTRIES’
LEGISLATION AND PROPOSING SOLUTIONS FOR VIETNAM IN FUTURE
PHAM Thi Bich Ngan
This dissertation concerns the criteria and method to assess M&A transactions
under competition law. Through analyzing current provisions of economic
concentration in Vietnam Competition law and referring to that in competition
law of some other countries, the author wants to propose some solutions for the
problems and limitations meets by the current Vietnam Competition law on the
basis of improving the confronting drawbacks and converging with regulations of
other developed countries. It is hard for the dissertation, within its scope, to
solve all the problems once for all; but it does provide the answers to the
following important issues:
 How does an M&A transaction affect competition environment? And,

2. 4
 How to make the economic concentration (merger) analysis and assessment
in Vietnam better predict the effects of an M&A transaction and harmony
with the countries‟ competition law?
Under the background of global business integration, establishing and reforming
economic concentration control requires not only effectiveness in the enforcement
of such provisions but also the convergence with other countries‟ respective
legislations, especially legislations of whose have close commercial and
investment relationships, or those in the same region or be the parties of FTAs
with Vietnam.
1. The Purpose and Tasks of Researching the Topic
The purpose of this topic is to clarify the nature of M&A under the competitive
aspect and the content of economic concentration controlling legislations, thereby
provide direction and solutions to improve the current economic concentration law
and enhance the effectiveness of economic concentration enforcement. In order to
reach the goal, the dissertation sets out the research tasks as follows:
- Analyzing and evaluating the basic theoretical issues of M&A under the
economic concentration viewpoint.
- Analyzing and evaluating provisions in Vietnam Competition law regulates
M&A activities and assessing the current practices in the implement and

3. 5
enforcement of M&A control in Vietnam in comparative with the economic
concentration control (merger control) of some other countries.
- Proposing direction and solutions for the competition law amendment in
future, to ensure the systematic and synchronic with other current laws and
harmonious with international law.
2. The Scope of the Dissertation
According to Vietnam legislation, the sole M&A activities are provided for and
regulated by many different laws. Primarily, under the Investment law1
, M&A is a
form of foreign direct investment; under the Enterprise law, M&A are activities of
controlling and restructuring company2
; and under the competition law, M&A is a
form of economic concentration.3
Besides those laws, some other (specialized)
laws also have regulations governs M&A activities, such as the Civil law, the
Security Law, etc.
The main goal of economic concentration control is to identify and prevent or
apply remedies for M&A transactions which may potentially result in significant
restriction to competition environment. To successfully achieve this goal,
analyzing and assessing the effects of M&A transactions on the competitive
1
Article 24 of the Investment Law
2
Article 53 and Article 195 of VEL
3
Section 3 of VCL

4. 6
environment and the economy is the most important task. Derive from that point,
within the scope of the dissertation, the author, inter alias, focuses on the analyzing
and evaluating the criteria and method to assess effects of M&A transactions under
the Vietnam Competition law.
3. The Structure of This Dissertation
The dissertation consists of six chapters, including an introduction and conclusion.
It analyzes and criticizes the approach of assessing an M&A transaction under the
Vietnam Competition Law 2004, refers to some other competition laws of other
countries, mainly EU competition law, and proposes some solutions for limitations
and problems existing in discussed law.
Chapter 1 introduces the background in Vietnam that concerns the M&A activities
together with concepts relating to M&A transactions, classifies M&A transactions
and the driving forces of M&A whereby delineate general views of M&A – the
core activities discussed in this dissertation.
Chapter 2 analyzes the effects of M&A on the competition which helps to answer
the question why is it necessary to control M&A. And it links to the subsequent
part of functions of the competition law in relation to M&A control.
Chapter 3 analyzes and assesses the regulations of Vietnam competition law on
M&A in detail. This chapter is divided into two separate parts: Part A is analyzing

5. 7
the current provisions of Vietnam Competition law governing M&A – considered
as forms of economic concentration. Then part B is going to assess the provisions
of VCL governing M&A – economic concentration based on the prior analyses
and enforcement of M&A control (merger control) in reality.
Chapter 4 refers to merger control regime in competition laws of some other
countries, mainly focusing on EU competition law.
As the result of the chapter 3 and chapter 4, chapter 5 proposes some solutions for
matters identified in chapter 3 and compared in chapter 4.
Last but not least, chapter 6 – conclusion helps to sum up the main contents
coherently and briefly.
For making the dissertation easier to understand wholly, it is noted within the
scope of this dissertation that:
- The term “M&A” or “M&A transaction (s)” is used equivalent and
equivalent to term “merger” and vice versa;
- The term “merger” covers all types of merger, acquisition and consolidation
transactions that may give rise to two or more enterprises ceasing to be
distinct, or changing the cooperation control and governance.
- The term “M&A control” is used equivalent to “merger control” and/or
“economic concentration control”.

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TABLE OF CONTENTS
ACKNOWLEDGEMENT ................................................................................................ 1
ABSTRACT ..................................................................................................................................3
1. The Purpose and Tasks of Researching the Topic................................................ 4
2. The Scope of the Dissertation .............................................................................. 5
3. The Structure of This Dissertation ....................................................................... 6
ABBREVIATION ........................................................................................................... 13
CHAPTER I: INTRODUCTION................................................................................. 15
I. BACKGROUND................................................................................................ 15
II. LEGAL CONCEPTS ......................................................................................... 17
1.1. M&A ..................................................................................................................... 17
1.2. Cross-border M&A................................................................................................ 24
1.3. Participating Parties............................................................................................... 25
1.3.1. Buyer ..................................................................................................................... 25
a. Who they are?........................................................................................................ 25
b. What do they pay attention to?.............................................................................. 26
1.3.2. Seller...................................................................................................................... 27
a. Who they are ......................................................................................................... 27
b. What do they do or are expected to do?................................................................ 28
1.4. Categories of M&A............................................................................................ 29
1.4.1. Horizontal M&A ................................................................................................... 29
1.4.2. Vertical M&A........................................................................................................ 30
1.4.3. Conglomerate M&A.............................................................................................. 31
1.5. The driving forces of M&A ............................................................................... 32
1.5.1. External driving forces .......................................................................................... 32

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1.5.2. Internal motivations............................................................................................... 37
CHAPTER II: THE EFFECTS OF M&A ON THE COMPETITION AND THE
FUNTIONS OF COMPETITION LAW OF M&A.................................................... 41
I. THE EFFECTS OF ECONOMIC CONCENTRATION ON THE ECONOMY
41
1.1. M&A as A Form of Concentration........................................................................ 42
1.2. The Effects of M&A on the Participating Companies........................................... 43
1.3. The Effects of M&A on the Competition.............................................................. 45
II. THE ROLES OF MERGER CONTROL REGIMES IN REGULATING M&A
48
CHAPTER III: M&A UNDER MERGER CONTROL IN VIETNAM
COMPETITION LAW ................................................................................................. 51
A. REGULATIONS OF VCL REGARDING M&A AS ECONOMIC
CONCENTRATION ACTIVITIES................................................................................. 51
I. M&A TRANSACTIONS THAT ARE SUBJECT TO MERGER REVIEWS . 54
1.1. M&A as economic concentration.......................................................................... 54
1.2. Concept of control................................................................................................. 55
1.3. Are out of Vietnam territory M&A transactions under the scope of VCL? .......... 58
1.4. M&A transactions are assumed not to be economic concentration....................... 64
II. MERGER CONTROL....................................................................................... 65
2.1. The Thresholds of Economic Concentration...................................................... 65
2.1.1. The non-restriction economic concentration ......................................................... 65
2.1.2. Notification-required economic concentration...................................................... 65
2.1.3. Prohibited economic concentration ....................................................................... 67
2.2. The elements of accessing merger control ......................................................... 69
2.2.1. Combined market share......................................................................................... 69
2.2.2. Relevant market..................................................................................................... 70

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2.2.3. The company size: small and medium-sized companies....................................... 70
2.3. Procedures in merger control ............................................................................. 71
2.3.1. Pre-merger notification.......................................................................................... 71
a. Transactions are subject to the notification procedure .......................................... 71
b. The procedure for notification:.............................................................................. 71
2.3.2. Sanctions ............................................................................................................... 74
III. EXEMPTION .......................................................................................................... 75
3.1. The Criteria For Exemption................................................................................... 75
3.2. Competent Authorities .......................................................................................... 76
IV. VCA AND OTHER RELEVANT AGENCIES................................................. 78
4.1. Vietnam Competitive Authority............................................................................ 78
4.2. Vietnam Competition Council............................................................................... 80
B. ASSESS THE CURRENT PROVISONS OF VCL ON CONTROLLING
ECONOMIC CONCENTRION AND REALITY IN APPLYING THESE PROVISONS
IN VIETNAM.................................................................................................................. 82
I. M&A TRANSACTIONS SUBJECT TO MERGER CONTROL ..................... 82
1.1. Vertical Mergers.................................................................................................... 83
a. Non-coordinated effects or unilateral effects:........................................................ 84
b. Coordinated effects:............................................................................................... 86
1.2. Conglomerate Mergers:......................................................................................... 87
a. Non-coordinated effects ........................................................................................ 87
b. Coordinated effects................................................................................................ 88
II. EVALUATING M&A TRANSACTIONS........................................................ 89
2.1. Notification Threshold........................................................................................... 89
2.2. Drawbacks And Challenges Rising From The Current Provisions On Merger
Control in Current VCL ................................................................................................... 90
2.2.1. Causing difficulties to participating enterprises..................................................... 91

9. 11
2.2.2. Miss control of non-horizontal M&A transactions................................................ 92
2.2.3. Shortcomings in assessing M&A transactions ...................................................... 93
2.2.4. Limitation in the role of competition authorities in assessing M&A cases. .......... 95
III. EXEMPTIONS........................................................................................................ 95
3.1. Criteria of Exemption......................................................................................... 95
3.2. Analyzing Exemption Cases in Vietnam............................................................ 96
3.3. Comments .......................................................................................................... 99
IV. THE MODEL OF THE COMPETITION AUTHORITY................................ 100
CHAPTER IV: REFER TO RESPECTIVE REGULATIONS............................... 103
I. M&A SUBJECT TO THE MERGER CONTROL.......................................... 103
1.1. M&A Transaction Carried Out Outside Of Vietnam Territory .......................... 103
1.2.To Expand The Form Of M&A Transaction Subject To Control Under VCL... 105
II. NOTIFICATION CRITERIA .......................................................................... 108
III. SUBSTANTIVE EVALUATION OF M&A TRANSACTIONS.................... 111
3.1.1. Factors are under consideration in assessment process....................................... 114
3.1.2. Referring to some other countries legislations .................................................... 114
IV. REMEDIES...................................................................................................... 123
V. COMPETITIVE AGENCIES.............................................................................. 130
CHAPTER V: PROPOSING SOLUTIONS.............................................................. 132
I. EXPAND THE RANGE AND FORMS OF ECONOMIC CONCENTRATION
UNDER CONTROL.................................................................................................. 132
1.1. To Control M&A Transactions Which Are Proceeded Outside Vietnam But
Have Considerable Effects On Competition Restriction In Vietnam Market................. 133
1.2. Expand The Range And Forms of Transactions Under Control ........................ 134
II. NOTIFICATION THRESHOLD..................................................................... 134
III. EXEMPTION ........................................................................................................ 135
IV. EVALUATING IMPACT ON MARKET OF AN M&A TRANSACTION .. 136

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V. REMEDIES...................................................................................................... 140
VI. COMPETITION AUTHORITY....................................................................... 143
5.1. Independence and Transparence.......................................................................... 143
5.2. The Powers and Functions................................................................................... 145
CHAPTER VI: CONCLUSION................................................................................. 147
BIBLIOGRAPHY.......................................................................................................... 152
A. Legal Documents.............................................................................................. 152
B. Books ............................................................................................................... 154
C. Journals and reports.......................................................................................... 156
D. Thesis and Law research .................................................................................. 161
E. Cases ................................................................................................................ 163
D. Websites........................................................................................................... 163
APPENDIX I................................................................................................................. 164

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ABBREVIATION
EC European Commission
FTA Free Trade Agreement
FDI Foreign Direct Investment
M&A Merger & Acquisition
MRFTA Monopoly Regulation and Fair Trade Act
OECD Organization for Economic Cooperation and Development
SOE State-owned Enterprise
SMEs Small and Medium-Sized Enterprises
UNCTAD United Nation Conference on Trade and Development
VCL Vietnam Competition Law
VEL Vietnam Enterprise Law
VCA Vietnam Competition Authority
WIR World Investment Report

12. 14
WTO World Trade Organization

13. 15
CHAPTER I: INTRODUCTION
I. BACKGROUND
M&A is a normal phenomenon in economic life, the behavior of enterprises as a
constitutive right.4
Vietnam, in the period of economic transition, the
overwhelming majority of Vietnam enterprises on the market are small and
medium-sized which the economic power is limited, small scale, weak
competitiveness, slowly developed technology, lack management skills and the
low ability to innovate and restructure the business. On the other hand, in the
context of globalization and international economic integration, the appearance
and increasing activities of multinational corporations with strong economic
potential have and will conduct M&A deals to establish monopoly or dominant
position that may lead to the exclusion, disappearance of some Vietnam
enterprises from the market, causing adverse impacts on the young market
economy of Vietnam. Due to the economy-sources-concentrating nature and the
method of implement M&A deals (merger, acquisition or consolidation), it causes
to reduce the number of the independent competitors in the market thereby directly
forms and changes market structure and operation of the market. By this process,
the participating company shall gain considerable market power by which may
4
Article 33 of the Constitution of the Vietnam Socialist Republic of Vietnam.

14. 16
lead them to profitably practice the behaviors of restriction competition that
impacts the competition environment on the market and the economy.
Recognizing the importance of the M&A and its potential effect, many countries
in the world issued law to control M&A transactions.5
As a developing country with the frequency of M&A activities more and more
increases6
, Vietnam should learn the experience from developed market economies
in controlling M&A transaction – a form of economic concentration, and amend
and timely and sufficiently promulgate detail provisions in this issue. However, in
Vietnam, the regulation on economic concentration is still at the first stage and the
research works on this topic are not many.
M&A transactions are forms of economic concentration. By acquiring,
consolidating or merging companies together, these kinds of activities can create
alliance, tacit collusion or dominant position in the market by which then be able
to abuse their relationship or by themselves market power may distort fair
5
According to the book: ICLG (2016), International cooperative legal guide to Merger control
2017 - 13th edition, https://iclg.com/practice-areas/merger-control/merger-control-2017, at
Introduction it says that “Today, there are more than 130 merger control regimes around the
world.”
6
The frequency and the volume of M&A transaction in Vietnam recent years have a significant
increase. M&A transactions have been carrying out in various business sectors, such as banking,
construction, consumer goods, port service, real estate, etc. See more detail at The Report on
Economic Concentration 2014, Section II Common background of economic concentration in
recent time. Available at: http://en.rcv.gov.vn/Report-on-Economic-Concentration-in-Vietnam-
2014.htm

15. 17
competition and profitably increase the price of products or service, causing harm
to customers and other competitors in the market. Merger control refers to the
procedures of reviewing M&A under competition law or antitrust. It is adopted to
prevent anti-competitive consequences of concentrations (and mergers and
acquisitions are known as forms of concentrations). The dissertation mainly
focuses on the M&A control under the economic concentration control regime in
the competitive law through substantive test. Due to the analysis of current
Vietnam Competition law (VCL) and its limitations in controlling M&A, together
with comparing, referring to other competition laws and mainly EU competition
law, this dissertation will propose solutions to some of these limitations. Within
the scope of the dissertation cannot solve all the problems once for all, it does
provide solutions for the following important issue: How to make the analysis and
assessment of M&A transactions in Vietnam better and more thorough predict of
the effects of the transactions on effective competition and economy? Thereby
knowledge again from this dissertation will contribute to the better enforcement of
merger control in M&A sector.
II. LEGAL CONCEPTS
1.1. M&A

16. 18
M&A is a term popularly used in financial, corporation and investment fields,
stands for merge and acquisition. It is activity conducted by a company to acquire
the control wholly or partially other companies in a same, a complementary or
totally different industry either through purchase of a majority or all of the
company shares that formed the capital of the acquired company (acquisition), or
through annexation or merging another company into the merging company
(merge).
In a merger, all the assets and liabilities of one or some companies (merged
company) transferred to another company and the merged companies cease to
exist. Mergers are more common when the participating parties are of similar size
and influence.
In an acquisition, part of or all the assets or shares of a company are purchased by
another company. In case an acquisition is a whole and the acquired company
ceases to exist, it is considered as a merger activity. From this point, an acquiring
action may lead to an acquisition or a merger deal. For that reason, M&A term in
practice is generally used to indicate either a merger or an acquisition transaction.
An acquisition may be friendly with the mutual willingness of the entities or
hostile when the buyer is opposed by the management of the acquisition target. A

17. 19
transaction or series of transactions to purchase of more than a half of a company‟s
share may also be termed a take-over.7
According to UK legislation, a merge is a legal process where one or more public
companies, including the company in respect of which the compromises or
arrangement are proposed, transfers their undertakings property and liabilities to
another existing public company (a merger by absorption).8
Otherwise, two or
more public companies, including the company in respect of which the
compromise or arrangement is proposed, transfer their property, undertakings and
liabilities to a new company, whether it is a public company or not (a “merger by
the formation of a new company”).9
Alternatively, a merger is a legal process
where one company proposes to acquire all the assets and liabilities of another in
exchange for the issuance of shares or other securities of one to the shareholders of
the other, with or without any cash payment to shareholders. 10
For the acquisition,
the Takeover Code addition to part 28 of the UK Companies Act 2006 governs
most important acquisition (takeover) activities. According to this code, a takeover
bidder is someone who has already acquired 90% of a company‟s share and
7
Weinberg and Blank Take-overs and Mergers, Sweet & Maxwell, 2003, supra note 6, a take-over
is defined as a transaction or series of transactions in which “a person (individual, group of
individual or company) acquires control over the management of the company”. See para.1-1002.
8
Section 904/1/a of the UK Companies Act 2006
9
Section 904/1/b of the UK Companies Act 2006
10
Section 902 of the UK Companies Act 2006

18. 20
accordingly has the right to compulsorily buy-out the remaining shareholders.11
Conversely, section 983 allows minority shareholders to insist their stakes are
bought out. Furthermore, according to the Takeover Code, as a basic principle, all
shareholders are to be treated equally within the same class of shares. In order to
help ensuring such equality, bidders involved in a takeover and mandatory offer
are prohibited from paying lesser amounts to other parties for target shares within
a certain period.12
While merger ostensibly appears to involve the consensual union of two or more
different firms, acquisitions may not necessarily be harmonious. Acquisitions
involve one firm acquiring all or the majority of the shares in another firm and so
taking over that firm‟s business assets. The firm conducting the acquisition will
make an offer to the target firm‟s shareholders to buy their shares at a given price.
In term of takeovers or acquisitions of public firms, whose shares are traded on
regulated collective markets, the buyer or the acquirer will typically build up its
shareholding in the target firm slowly until it holds a majority of its shares
sufficient to take control of the acquired company.13
In addition, to acquire a
company, the acquiring firm normally makes an offer to the target firm‟s
shareholders to buy their shares at a stated price and with a fixed time that the
11
Article 979 of the UK Companies Act 2006, Part 27
12
Article 983 of the UK Companies Act, Part 27
13
Section 110/3/b of the UK Insolvency Act 1986.

19. 21
offer is accepted providing that a quorum percentage of the shareholders accept the
offer, or else the offer is void. In such cases, the offer is usually at a higher price
than the present market value of the shares as quoted on the stock exchange and it
may be in cash or in kind.14
From the merger and acquisition concepts mentioned, besides giving attention to
regulate mergers by providing provision showing the general concepts of merger
and acquisition, UK legislations also solve the problems of a minority shareholders
or partners who are not willing to merger or/and acquisition by providing that they
can exit the transferor company and recover the value of their share or insist their
stakes are bought out.
In Vietnam, M&A is practically understood as a term using in sale and purchase
companies (through sale and buy shares or assets) between two or more
companies, in which the control of acquired company will be transferred to the
acquirer, or in other words, the acquires take the control of all the operational
activities of the acquiring company. Under Vietnam legislation, M&A definitions
are stipulated in some different Vietnam laws such as Enterprise law, Investment
law, and Competition law, with each different aspect. For example, Article 17 of
Law on Competition of Vietnam provides that:
14
Ibid.

20. 22
1. Merger of enterprises means the transfer by one or more enterprise(s) of all
of its assets, rights, obligations and interest to another enterprise and at the
same time the termination of the existence of the merging enterprise(s).
2. Consolidation of enterprises means the transfer by two or more enterprises
of all of their lawful assets, rights, obligations and interests to form one new
enterprise and at the same time the termination of the existence of the
consolidating enterprises.
3. Acquisition of an enterprise means the purchase by one enterprise of all or
part of the asset of another enterprise sufficient to control or govern the
activities of one or all of the trades of the acquired enterprise.15
In connection with the above provisions, a merger of enterprises is similar to the
merger by absorption and the consolidation of enterprises is similar to the merger
by forming a new company in the UK Companies Act 2006 aforementioned. For
the acquisition, like UK law or other jurisdictions, “acquisition” in Vietnam
legislation is used when one company buys and takes control of another, whether
by buying the majority of the company‟s shares or all of its property and it does
not assume the liabilities of the target company. For the detail regulatory shades of
control under Vietnam law, it will be made clear in the subsequent section.
15
Article 17 of VCL.

21. 23
Article 195, Clause 1 of the Law on Enterprise, as the main law governing the
structures and operation of a company, provides that:
1. One or some company (hereinafter referred to as merged company) may
merge into another company (hereinafter referred to as merge acquirer) by
transferring all assets, legitimate rights, obligations and interests to the
acquirer. After that, the merged company shall cease to exist.
For acquisition, except the definition as said in Law on Competition, there is no
Vietnam law provides any definition of acquisition. There are only some concepts
of acquisition shares, distribution capital, assets spread out in different laws.
An acquisition may arise from either assets acquisition or shares acquisition. In the
assets acquisition, the acquiring company purchases wholly or partially all, of the
assets of the target company, becoming the parent company of the latter, or other
words leaving the latter a mere corporate shell to dissolve. In the shares
acquisition, referred to as takeover in the United Kingdom (UK) or many
European countries, the purchase of wholly or partially all of the outstanding
stocks of a company by another company would take place. The target company
generally becomes a subsidiary of or is merged into, the acquiring company. A
shares acquisition can be effected through:
(1) by buying shares in the target company with the agreement of all its
members (if the shares of a target company are closed held, i.e. held by

22. 24
only a few persons) or of only its controllers;
(2) by the purchase on the Stock Exchange;
(3) by means of a takeover bid; or
(4) by a purchase of new shares.
1.2. Cross-border M&A
Cross-border M&A transactions are defined as M&A transactions that involve an
acquirer firm and a target firm whose headquarters are located in different home
countries.16
In a cross-border merger, the assets and operations of participating
firms belonging to different countries are combined to establish a new firm. In
cross-border acquisition, the control of assets and operations is transferred from
local to a foreign company, the former becoming an affiliate of the later.17
According to the UK Cross-border Merger Act 2007, cross-border merger occurs
between at least one company formed and registered in the UK and at least one
company formed and registered in an EEA state other than the UK.18
Under the reports of UNCTAD and other international reports, articles, etc., cross-
16
“Cross-border M&A: Challenges and opportunities in global business environment”, Brussels,
Belgium, November 12-13, 2009.
http://www.eiasm.org/frontoffice/event_announcement.asp?event_id=664
17
UNCTAD WIR 2000, pp.99 It should be noted that the transnational nature of these
transactions is determined by the locations of the companies involved and the relevant laws
applying to these companies.
18
In Part I of the UK Cross-border Merger Act 2007, it states at the part Meaning of “cross-border
merger” as follows: ―at least one of those companies is an EEA company‖, or ―either the
transferor or company or transferee company is an EEA company‖

23. 25
border M&A is often used in scenes of FDI, it is a form of FID.19
Vietnam legislations in general and Vietnam competition law, in particular, have
no separate provisions on cross-border M&A. Thus, cross-border M&A will be
governed by relevant laws as domestic M&A depending on different legal aspects.
Under the merger control aspect, it is the same legislation governing for both
domestic and cross-border M&A, competition law.20
1.3. Participating Parties
1.3.1.Buyer21
a. Who are they?
Buyer is the person (i.e. individual or company) who signs a purchase agreement,
pays the purchase price and directly or indirectly own and controls the target
company and its assets. The motivations and conditions of the buyer decide a
19
UNCTAD WIR 2000, pp.99
20
Regarding the M&A transactions that the buyers are foreign investors usually, starts by the
screening mechanism for the right to establish a foreign-invested company in Vietnam based on the
domestic laws (the Investment Law) applied for all firms and industries and Vietnam‟s WTO
Commitments on Goods and Vietnam‟s WTO commitments on Services. After this screening
mechanism, competitive matters will be regulated by the same legal sources regardless of the
nationality of the company.
21
It is also referred to as the purchaser, the acquirer, the acquiring or emerging company based on
the different form of M&A transactions.

24. 26
number of key issues concerning the transaction, such as the type of the target, as
well as the pattern following which the transaction will precede.22
Being the buyer party in an M&A transaction and a foreign investor23
, besides the
business laws of the home country, the buyer faces the relevant legislations and
legal issues of the host country where they invest into.24
b. What do they pay attention to?
In M&A, the buyers usually put the issue of controlling risk and profitability on
top. In particulars, they may pay attentions to:
 Target company: Depending on their motives, the buyer search for targets
with different features such as business lines, the size of market share,
complementary resources. In addition, the process of formation of the
company, ownership, legal and financial history and its obligations to the
third parties are important factors since it tightly related to the consummation
of the transactions and the viability of future business.
22
Erik Lopez (2015). Who are the key M&A participants, and what do they do
https://www.themalawyer.com/who-are-the-key-ma-deal-participants-and-what-do-they-do/
23
In a cross-border M&A transaction, the seller party of the transaction at the same time is being a
foreign investor at the host country – at which the M&A transactions carried on.
24
Concerning the M&A transactions where the operating companies merge with or acquire control
of the whole or a part of the business of other company with parties of different national origins or
home countries will be called “cross-border M&A”. The country of the acquirer or purchaser is the
“home country” and the country of the target or acquired form is the “host country”. UNCTAD
WIR 2000, pp.99.

25. 27
 The legal matters related to the legal status of M&A transaction: This is the
matter of thorough evaluation of assets valuation, tax matters, operations,
ownership title to the real estate property, project documents, constructions
documents, etc., of target companies in order to recognize actual and
potential risks and eliminate them.
 The legitimacy of the M&A and investment: In order to invest in Vietnam
without applying greenfield investment process, is it possible and legitimate
for them to use M&A method by contributing capital, purchase shares, take
over a company?
1.3.2.Seller25
a. Who are they?
The seller, in general, can be understood as the target company whose assets,
ownership and control shall be acquired in M&A transactions by the buyers.
However, in each M&A deal performed in different ways the direct seller could be
individual shareholder/owner of a proportion of charter capital contribution or the
Board of director acts on behalf of the target company. For instance:
The target company could be the subject of a private M&A deal or a public deal
according to its form. For the public M&A, the Board and management of target
companies serve as representatives of the interest of the stockholders and the
25
It can be referred to as the target company, the acquired company, the merged company or the
offeree in case of tender offer being made.

26. 28
public company target is typically a party to the principal transaction agreements.
In that case, the target company plays the role of the seller.26
For the private M&A,
individuals who control the target company will generally act as seller themselves
and will be responsible for post-closing indemnification obligations owed to the
buyer in case there is any loss as a result of violations the purchasing agreements if
any.
b. What do they do or are expected to do?
The seller, as a party in an M&A agreement, is expected to, in a cooperative
manner, provide buyer appropriate information, documents requested and
certificates to identify legal and financial issues, transactions documents with third
parties unless they are bound by confidentiality clauses against third parties.
However, for transactions undertaken against the willingness of the target
company are considered a hostile deal, and in these cases, the buyer has little
chance to receive fully corporation in providing information from the seller.27
In concern to shareholders, the legislation of most countries recognizes that the
shareholders ‟ consent is required in transactions that substantially change the
26
Erik Lopez (2015). Who are the key M&A participants, and what do they do
https://www.themalawyer.com/who-are-the-key-ma-deal-participants-and-what-do-they-do/
27
OECD supra note 5, pp.23

27. 29
organizational structure and economic situation of the company.28
As mentioned
above, M&A transactions are related to the sale and purchase stocks, the
proportion of capital contribution that changes the controlling right of the target
company; such change is considered as substantially change of the organizational
structures. Besides, a merger or a sale of substantial assets of the target company
must be approved by shareholders in the target company.
1.4. Categories of M&A
Based on different purposes M&A could be classified in different ways. Under
investment aspect and in accordance with the relationship between the parties,
M&A can be classified as horizontal, vertical and conglomerate M&As. The
following of this section is a survey of some classifications of M&A, with their
own policy implications.
1.4.1.Horizontal M&A
28
For instance, according to some of the US States Corporation laws, a merger agreement resulting
to 100 percent shares of the target company being converted to the shares the shares of the
acquiring company must be approved by the majority vote at the Shareholders‟ meeting. See Horn,
N. (2001). Cross-Border Mergers and Acquisitions and the Law: A General Introduction. Kluwer
Law International, pp.13.

28. 30
Horizontal M&A takes place between competing firms in the same industry and
the same stage of the production chain.29
Its main objectives are to achieve
synergy and specialization in order to ensure a significant market share and
achieve economies of scale. From nature, horizontal M&A transactions may create
a monopoly or oligopoly in a market by eliminating or reducing competition
within the industry that can be detrimental to customers.30
Therefore, they are
subject to the supervision of merge regulatory authorities.
1.4.2.Vertical M&A
Vertical M&A takes place between firms of the same industry, but at the different
parts of the value chain (for example between buyer and supplier).31
The type of
M&A may take the form of upstream integration policy in the industry
(distributors by suppliers) and also downstream through the acquisition of
distribution network (suppliers buy distributors). The oil industrial reflects this
form of integration since refiners control their own gar distribution network.32
The
advantages of this type of merger vary according to context: streamlining
activities, improving coordination between business, controlling of supply and
29
Meghouar, H. (2016). Corporate Takeover Targets: Acquisition Probability. John Wiley & Sons,
pp. 12.
30
Ibid. 20
31
Ibid., pp. 12-13
32
Ibid.

29. 31
quality, ownership of margins previously reached by the acquired company,
achieve economies of scale and reduce transaction costs. This strategy controls
entire the economic chain, right from the raw materials to the finished products.33
1.4.3.Conglomerate M&A
Conglomerate M&A takes place between companies from different sectors with
unrelated business activities.34
There are two types of conglomerate mergers: pure
and mixed. Pure conglomerate mergers involve firms with nothing in common,
while mixed conglomerate mergers involve firms that are looking for product
extensions or market extensions.35
For example the case of General Election, it
made a lot of M&A deals to merge with company totally uninvolved different
businesses. It is in media, it is in financial services, energy provider made it
becomes a very big conglomerate.
These merge operations are subject to review by competent authorities to ensure
that exchange parties are not prejudicial to any party. Thus, the mergers that lead
to creation or reinforcement of a dominant position are prohibited in order to
prevent possible excesses. A company is dominant when it can act in the market
without taking into account competitors‟, suppliers‟, or customers‟ reaction. All
33
Ibid., pp 13
34
Ibid., pp.13.
35
Five types of company mergers: http://www.mbda.gov/blogger/mergers-and-acquisitions/5-
types-company-mergers

30. 32
market operators and especially consumers dread the emergence of these dominant
structures which may result in a higher price, reduce product supply, or scarcity of
innovation. Thus, controlling mergers is necessary in order to prevent a
deregulation of the market.36
1.5. The driving forces of M&A
1.5.1.External driving forces
Globalization and the trend of international economic integration together with the
rapid changes caused by it lead to new markets and demand dynamism among
organizations. A wide range of factors relating to the economy, technology, high
competition and policy and regulatory environment have affected the M&A
decision of companies.
a. Economic factors
At the macroeconomic level, the factors such as the business environment, the
development condition of the financial market and the sectorial changes in some
industry areas are factors strongly and directly affect M&A decisions.37
36
Id. 14.
37
The testimony in the hearings before the International Competition Policy Advisory Commission,
formed by the US Department of Justice to report and advise on the status of international
competition and competition law, Nov. 3, 1998. See the transcript of this hearing is available at
http://www.usdoj.gov/atr/icpac/2232-b.htm.

31. 33
At the industry aspect, the sectors which are intensified competition, overcapacity,
and the deregulation and rapid technological change forces companies make an
alliance to exploit synergies, reduce costly overlaps, take advantage of new
technologies, so making M&A is preferable.38
On the contrary, slow economic growth is also the factor to force M&A. In recent
years, in many Asian countries includes Vietnam, when the financial crisis has
resulted in a serious economic recession, owing to the falling asset prices, the
changes in business practices create a more favorable environment for foreign
investment capital flows and inward M&As have been increasing.39
Together with globalization, intensified global competition in many manufacturing
and service sectors and the consequent need to restructure at the global level also
drove the growth in M&As. In front of the intensive competition, companies enter
into M&A to seek the economies of scale and cut cost by streamlining operation,
while concentrating on their core activities.
Moreover, the changes in the world capital market such as the liberalization of
capital movement, new information technology providing instant information
across global, the emergence of a new financial instrument and the more active
market intermediaries have facilitated M&A. The rise of stock markets and ample
38
ZHE, H. (2005). Cross-Border mergers & acquisitions and the legal response of host
countries (Doctoral dissertation), pp. 149-150.
39
OECD new patterns of industrial globalization, pp.40.

32. 34
liquidity in capital market result in the possibility to raise large amounts of money
has profound impacts to boost to M&A activities worldwide.40
On the other hand,
the weakness of host countries‟ capital market in the operation and the amounts
which leads to a slowdown of liquidation, undervaluation of company assets could
encourage the entry of foreign investors through M&A.
b. Technological factors
Technological development is driving M&A due to the growing ease of
communication, the high cost of research and the need for an international
standard. First of all, falling communication and transportation cost has facilitated
the international expansion of companies seeking to exploit and consolidate their
competition advantage. Secondly, the soaring cost of R&D, coupled with the
uncertainties of technological change and the rapidly changing competitive
conditions have forced companies to cooperate with others in global markets in
various ways to share resource and risks for developing new products.41
The
growing complexity of technology also requires companies to cooperate with
others in different sectors (OECD, 2000c).42
Thirdly, the fast changes in
technology have brought intensified pressures on companies that wish to maintain
40
UNCTA WIR 2000, pp. 152 – 153.
41
OECD supra, pp. 41 - 42
42
Id 6

33. 35
and enhancing their competitive advantages in this era of technology boom
because the technology- related assets such as technical competence and market
know-how, flexibility and ability to innovate are increasingly becoming strategic,
so the companies are forced to look for the fastest way to obtain and absorb such
intellectual intangible assets.43
Likewise, the technology change creates new
business and markets such as the communication and information- related
industries. It also tends to shorten the product life cycles and promote new entrants
with new innovation technology.44
In many developing countries which the technological development is in fairly low
level, the market potential for high-technology products are huge and this is the
market that many multinational companies are willing to invest in. Besides the
advantage of M&A in comparison with Greenfield investment, in considering
others factor like administrative speedy, industrial policy, relevant legislations,
investment environment, in practice, the form of cross-border M&A are often
chosen.
With all of the above mentioned influences of the technological factors, it
encourages M&A to cooperation to reduce costs, to enhance the competition
advantages, to facilitate better management, to capture new markets and establish
the dominant position as fast as possible.
43
Hu Zhe, 2005, Cross-Border merger and acquisitions and legal response of host countries, pp. 16
44
OECD supra, pp. 42

34. 36
c. Policies and regulatory environment factors
The policies and regulatory environment impact on M&A include the
liberalization of FDI and trade regimes, regional economic integration,
privatization and the deregulation of various industries and new investment
incentives. The overall trend towards the more liberalized regulatory environment
with more favorable for FDI in general and M&A in particular.45
For example,
privatization makes the availability of domestic firms for sale as an M&A target
increased and opening up economies to increased competition; the integration of
regional market by signing multi or bilateral or regional conventions encourages
companies to expand their operations geographically; the liberalization of
international investments and capital movements, as well as new investment
incentives, all have boosted the inward M&A.46
Cross-border M&A, as a form of FDI, is also promoted by the changes in national
regimes that favor the development of FDI.47
Such as the removal of various
restrictions, the provision of high standard of treatment, guarantees, and more
incentives, along with the opening up of the previously closed industries and
business lines (WTO commitment of each member nation) and the removal of
45
UNCTAD WIR 2000 pp.146-148.
46
UNCTAD WIR 2000 pp.149-152.
47
Lebedev, S., Peng, M. W., Xie, E., & Stevens, C. E. (2015). Mergers and acquisitions in and out
of emerging economies. Journal of World Business, 50(4), 651-662, pp. 652.

35. 37
compulsory joint venture requirements, restrictions on majority ownership and
reduce administrative procedures.
1.5.2.Internal motivations
For the growth up and development, a company can choose either external growth
or organic growth. The World Investment Report shows that the number of M&A
transaction recently is more and more increased; especially in the region have
many developing countries like Asia region.48
To explain why companies may
prefer to grow via M&A rather than through organic growth, this subsection will
provide with the benefit of M&A and the internal motivations of companies.
Accompany with globalization and international economic integration, besides
opportunities it also brings the pressures on companies for the more and more
intensive competition. Therefore, companies have the needs and desire to maintain
and strengthen their competitive advantage on the market. A competitive
advantage could arise from synergies via M&A due to extending the economic
scale, expanding into new markets or new distribution channels, saving costs and
increasing revenue, better access to a customer base, to knowledge and
technology, to reach a greater firm size to acquire economies of scale.

36. 38
M&A has two main advantages in comparison with Greenfield or organic growth,
that brings the competitiveness for companies as mentioned:
Firstly, speed. M&A often presents the fastest means of reaching the desirable goal
when expanding domestically or internationally. For instance, as a new investor in
a new market, acquiring an existing company in that market with established
distribution system is far more preferable to establishing and developing a new
local distribution.
Secondly, access to the proprietary assets. M&A can quest for strategic assets,
such as R&D or technical know-how, patents, brand names, the possession of local
permits and licenses, the supplier or distribution networks. For a company, to be
ready-made access to propriety assets can be important since they are not available
elsewhere in the marker and they take the time to develop.49
Besides seeking for searching new market, M&A can also be motivated by the
pursuing market power and market dominance or monopoly. Especially in the case
of horizontal M&A, the motivation may be searching for oligopolistic positions.50
Vietnam nowadays is an attractive investment place, according to the “Report on
The Economic Concentration in Vietnam” made by Vietnam Competition
Authorities, 2009, the inward FDI, and especially under the form of M&A is more
49
UNCTAD WIR 2000 pp.140.
50
UNCTAD supra, pp. 143.

37. 39
and more increase both in the amount of capital and a number of transactions.
Furthermore, in the period of economic transition, the overwhelming majority of
Vietnam enterprises on the market are small and medium-sized which the
economic power are limited, small scale, weak competitiveness, slowly developed
technology, lack management skills and the low ability to innovate and restructure
the business.51
On the other hand, in the context of globalization and international
economic integration, the appearance and increasing activities of multinational
corporations with strong economic potential and competitive capacity have and
will continue M&A in order to acquire the dominant position. This causes the need
for Vietnamese companies to merge together to take the exploitation of synergies
and enhance market power, competitiveness to survive and compete with foreign
companies. However, as above mentioned, at present 90% of companies in
Vietnam is the small and medium-sized companies which not only weak in the
capital but also weak in management and technical skills, so they are cannot
compete with foreign investors those willing to M&A in Vietnam. That leads to
the exclusion of some Vietnamese smaller companies, causes negative impacts on
the young economy in Vietnam.
51
See more details at Cuong, T. T., Sang, L. X., & Anh, N. K. (2007). Vietnam‟s small and
medium-sized enterprises development: Characteristics, constraints and policy
recommendations. SME in Asia and Globalization, ERIA Research Project Report, 5, 323-364.

38. 40

39. 41
CHAPTER II: THE EFFECTS OF M&A ON THE COMPETITION AND
THE FUNTIONS OF COMPETITION LAW TO CONTROLLING M&A
Under Competition law, M&A transactions are considered as some of economic
concentration forms. Therefore, through whole VCL, the term “economic
concentration” is used to replace M&A transactions in general.52
For that reason,
in this section and the sections below, in order to reach the consistence and
uniformity with the regulations in Vietnam legal system, the author used the
terminology of “economic concentration” to replace the terminology of “M&A
transactions”.
I. THE EFFECTS OF ECONOMIC CONCENTRATION
The economic concentration is an economic phenomenon appearing in the free
competition environment. The forming of it has certain effects on the structure of
the economy in general and the competition in particular. Effective competition
brings benefits to consumers, such as low prices, the wide selection of goods and
services, high-quality products, and innovation. Through its control of mergers, the
competitive agencies prevent mergers that would be likely to deprive consumers of
these benefits by significantly increasing the market power of merging firms,
52
Section 3 of VCL

40. 42
thereby increase their ability to profitably increase prices, reduce output, choice or
quality of goods and services, diminish innovation, or otherwise negative
influence parameters of competition.
1.1. M&A as A Form of Concentration
As pointed out above that a company can choose either external growth or organic
growth. For organic growth, it is the growth through capital accumulation process
or surplus value accumulation, but this process demand for a long time. However,
for external growth via M&A participants will take advantage of synergy effects
by uniting each participant‟s own business resources such as capital, production
facilities, technology, management capacity which into a unified bigger
combination. The participants are usually independent companies.
VCL provides no definition of economic concentration but specifies forms of
economic concentration, which includes merger, acquisition, consolidation and
joint ventures.53
Economic concentration and business combination have the same
meaning under the VCL.
According to EU Merger Regulation54
, the concept of “concentration” includes:
53
Article 16 of VCL
54
EU merger control is governed by Regulation (EC) 139/2004 on the control of concentrations
between undertakings (Merger Regulation). Under the Merger Regulation, the European
Commission (Commission) has, subject to limited exceptions, exclusive jurisdiction within the EU
over "concentrations" (see below, Jurisdictional matters: Concentration) that have a "Community
dimension"

41. 43
 The merger of two or more previously independent undertakings;
 The acquisition of direct or indirect control (whether by purchase of
securities or assets, by contract or otherwise) of the whole or parts of one or
more other undertakings; or
 The establishment of the joint venture where this involves the acquisition of
joint control of a full-function joint venture undertaking.55
Under the aspect of competition management, the economic concentration may
have negative effects on social welfare, consumers „interest, fair competition if a
company formed thereby has the ability to control or to influence the market.
1.2. The Effects of M&A on the Participating Companies
Under the aspect of the benefit of participating companies, economic
concentration has significant impacts to the benefit and business strategy of the
participating companies. In details:
First, economic concentration is the shortest way to address the need of
centralizing the resources of the market in order to improve business and
competitiveness. By join together of their separate resources held by each
company into one or under the control of one corporation, the merging companies
brings the bigger capacity of investment to address many matters arising from a
55
Article 1, 3 and 5 of the Merger Regulation.

42. 44
market that one single enterprise is hard to do. Therefore, the methods of a merger,
acquisition, consolidation are presumed to lessen spending time in achieve
synergies and create greater market power or event dominant position in the
market. It could be:
- Gathering capital to enhance the investment capacity, expand new market;
- Concentrating intellectual property to research and develop new technology,
enhance management, etc.
Second, an economic concentration creates thorough corporation possibilities in
the business. Through merger, acquisition, joint venture the participating
enterprises form business alliance or a group of enterprises having ownership or
management relationship but still be the separate entity, the existence of which
forms closely business corporation, assisting in management, conduct market
expanding and developing strategies, sharing risks in case of significant market
changes in order to overcome the crisis.
Third, economic concentration between enterprises at the same business line and at
the same stage of business process (same relevant market) (horizontal merger and
acquisition) result in no competition between them.
Fourth, the economic concentration is an effective solution to restructure
enterprise. The business process of companies on the market is always influenced
by the fluctuations on the market, the changes in demand, the formation of barriers

43. 45
in the market, etc. Such fluctuations bring advantages and risks to the business and
require companies carry out restructuring strategies to suit changes from the
market.
From the aspect of international investment, especially in cases of foreign
takeovers, as an acquired company there are some positive impacts, especially
with regard to their productivities, shareholder gains, investor protection, as well
as wages of the employees.56
1.3. The Effects of M&A on the competition environment
From its features, M&A might be considered as a form of FDI57
, a method of the
corporation restructures or a mode of economic concentration.58
M&A as a form of economic concentration, in general, may raise competition
concerns by changing the structure of the given market in which such transaction
are taking place. Why? Through M&A, the acquired companies and acquiring
56
A detail some literature can be found in WIR 2000, Chapter V, Section A: Corporate
performance of M&A, pp. 137-140. For the further analysis see ZHE, H. (2005). Cross-Border
mergers & acquisitions and the legal response of host countries (Doctoral dissertation), pp. 52-53.
57
In annual World Investment Report of UNCTAD, M&A is usually mentioned as a mode of FDI,
which increases more and more in quantity and amount of capital in developing countries and
regions in recent years.
58
In relation to “a method of the corporation restructures‖, M&A is one of the most significant
ways of corporate restructuring and it is crucial for companies to achieve cooperate strategies.
Besides, it is the legitimate right of firms to restructure their companies, right of freedom of
establishes and exercise their business autonomously. See more at Aydin, B. B. Cross-Border
Mergers in the EU: Exercising the Freedom of Establishment. At the Article 7 of Vietnam
Enterprise Law 2014 also states this right.

44. 46
companies establish the ownership connection, they can merge or consolidate to
become a unified one company or become subsidies company, affiliations that lead
the number of incumbent competitors in the market reduced then makes the level
of competition on the market also reduce. Therefore, it is said that M&A tightly
connects with forming and changing market structure and impacts (decrease) the
competition in the given market.
Besides reducing number of competitors and degree of competition in the given
market, together with synergy effects come from M&A the resultant may provide
acquiring firms competitive advantages and sufficient market power to acquire a
dominant market position, enable them to engage in anti-competitive practices or
restrictive competitive practices that are detrimental to the effective competition
within the given market and consumers‟ interest such as raising prices, reducing
output, lower market entry, etc..59
M&A, in order to concentrate economic resources, is a phenomenon arises in the
free competition environment, the appearance of which has certain impacts on
economy and competition in both negative and positive sides. At the positive side,
economic concentration creates the bigger business scale, this is especially helpful
for small and medium-sized companies owing to consequence of synergies; it
59
Although M&A are not always correlated with anti-competitive activities, it is undeniable that
the consummation of these transactions may provide considerable avenues open for the restrictive
competition practices by the market-power combined firms.

45. 47
boosts the improve and innovation of technology as mentioned at “the external
driving forces”, shortening time and cut down cost for a company to extend its
operations and market share, etc.. Besides the positive effects, economic
concentration also has negative effects:
 Free competition creates a concentration in manufacturing, operation, and
this concentration develops and expands to a point become a monopoly. In
short, economic concentration creates big companies with considerable
market power, which have the potential to impact on the competitors and
consumers through price strategy.60
 As a form of economic concentration, M&A directly causes reduce the
number of incumbent competitors in the market, facilitated the other existing
companies in the market to make the alliance to practice anti-competition
behavior to counterpoise the market power of companies formed after M&A.
For such negative impacts, it needs to control the M&A transactions in order to
enhance the benefits bring by M&A and restraints its negative effects on the
market. Directly governing M&A as a form of economic concentration is the
60
The Horizontal Merger Guideline (2004), Section IV, par. 22.

46. 48
merger control regimes in the competition law of host countries.61
Most host
countries have economic concentration control regimes to prevent potential
negative impacts raised from economic concentration.
II. THE ROLES OF MERGER CONTROL REGIMES IN REGULATING
M&A
In general, the purpose of competition laws is to “improve the competition policy
and reduce the monopoly so as to create a fair competition environment. Besides,
it is necessary to prevent business transactions that result in barriers to competition
and development”.62
In other words, it is to prevent and restrain anti-competition
and restrain competition conducts, protecting fair competition environment, then
lead to enhancing economic efficiency, safeguarding the interests of consumers
and the social interests as the whole.
With regard to the merger control, the core purpose is to assure economic
concentration not contain implicit risks of causing negative impacts on
competition on the market.
61
The merger control regime is usually a separate set of provisions under competition laws, which
specially deals with the competition effects of M&A transactions, while the anticompetitive
practices are often regulated by another separate set of rules under competition laws.
62
Decision 160/2008/QĐ-TTg approving a strategy to protect the domestic manufacturing
industries in accordance with the international commitment of Vietnam and the rules of the WTO,
2008, section V.

47. 49
As one of the practices in restraint of competition in VCL, including agreements
about competition restraint, abuse of market-dominant position or monopoly
position and economic concentration, economic control provisions have the pre-
examining impact in order to prevent practices or transactions which are likely to
the detriment of competition, while provisions governing agreements about
competition restraint, abuse of market-dominant position/ monopoly position are
to post-examine, deal with behaviors harming to competition.
Why is merger control regimes need?
In practice, the investment activities in the form of M&A is easy to form business
concentration which at a definite size may create anti-competition or restrain
competition problems and thus creating the negative influence on fair competition
in the given market.
The emergences of merger control regime to prevent transactions which are likely
to harm for the fair competition are based on the rationales that:63
Firstly, economic concentration immediately eliminates competitive pressure
between participating parties and reduce incumbent competitors in the market. If
the competition-eliminating effect derived from mergers is high, a market will
gradually lose its economic efficiency. At the same time, in many cases, the
63
Annual Report of the Vietnam Competition Authority 2010, accessed November 4, 2014, pp. 90.

48. 50
merged company is able to, without commits anti-competitive acts, eliminate
incumbent competitors and get benefit from its own power position.
Secondly, the efficiency of enforcement of competition law/merger control is not
all of the times get 100 percent. It means not all commitment of merger control is
detected and handled with. Thus, applying pre-test measure, merger control really
helps to reduce pressure on law enforcement agencies. Furthermore, even if the
post-merger remedies can be applied for law breaching concentration, it is costly
remedies.
Briefly, economic concentration control is to prevent changes in market structure
by which could cause detriment to competition on the market thereby diminish
economic efficiency and harm customers‟ benefits.

49. 51
CHAPTER III: M&A UNDER MERGER CONTROL IN VIETNAM
COMPETITION LAW
A. REGULATIONS OF VCL REGARDING M&A AS ECONOMIC
CONCENTRATION ACTIVITIES
Since the issuance of the VCL in 2005 and its guiding decrees later on, there
are two legal documents on enhancing the effectiveness of the law
enforcement, namely decree No.119/2011/ND-CP dated December 16th,
2011 amending and supplementing a number of administrative procedures
provided in Decree No. 116/2005/ND-CP dated September 15th, 2005
regulating details of implementing a number of articles in the VCL, and the
Decree No. 71/2014/ND-CP dated July 21st, 2014 replacing Decree No.
120/2005/ND-CP dated September 30th, 2005 providing regulations on
administrative sanctions in the competition field.
Generally, the competition legislation of Vietnam includes two parts, the
first part is about anti- unfair competitive practices and the other one is
about controlling of practices in restraint of competition. The practices in
restraint of competition include agreements that restrain competition,
abusing dominant market position and monopoly position and economic
concentration. The Vietnam Competition law does not have a definition of
economic concentration but gives a list of practices assumed as economic
concentration which includes (1) Corporate merger; (2) Corporate

50. 52
consolidation; (3) Corporate acquisition; (4) Joint venture between
company; (5) Other forms of economic concentration as stipulated by law.
Therefore, M&A as prior pointed out is one of the modes creates economic
concentration and is in the scope governed by the Law on competition.
Economic concentrations in general and corporate M&A in particular tightly
connect with forming and changing market structure in which such
transactions are taking place. M&A could make the number of incumbent
competitors in the market reduced then make the level of competition on the
market also reduced and increase the market share concentration. Together
with synergy comes from M&A, the resultant may provide acquiring firms
advantages and sufficient market power to acquire a dominant market
position, enable them to engage in anticompetitive practices that are
detrimental to the effective competition within the given market and
consumers‟ interest such as raising prices, reducing output, lower market
entry, etc. Under investment aspect, M&A may affect host country‟s market
structure and competition and local consumers, so host countries usually
have economic concentration control regimes to prevent potential
anticompetitive practices and protect the competitiveness of their domestic
market and consumers‟ interest. The rationale for such pre-entry M&A
control in a competition law is simple: it is far better to impede the
acquisition of market power than it is to attempt to control or to break up the

51. 53
market power once it exists. For this reason, most competition laws have
some provisions that allow for pre-merger scrutiny.64
In order to assess the effects of an M&A on the market structure
immediately after a transaction and long-term performance of market and
companies within host countries, most regulations of economic
concentration control acquire participating parties to notify competition
authorities of proposed transaction that meet certain criteria and to wait for
the competition authorities‟ review before consummating that transaction.65
The details on M&A transactions subjected to the regulation of Vietnam
competition law, types of transaction subjected to required notifying
procedures and the requirement procedures will be specified in the
following sections.
Within the scope of this thesis and for the purpose of coherently phrasing
the content of the subsequent chapters and sections, the term “economic
concentration” used later expresses the meaning of M&A transaction.
64
CUTS Center for International Trade, Economics & Environment, No.2/2001,
Contours of A National Competition Policy: A Development Perspective, Briefing
Paper, pp.6, available at http://www.cuts-
ccier.org/pdf/Contours_of_a_National_Competition_Policy-
A_Development_Perspective.pdf
65
ZHE, H. (2005). Cross-Border mergers & acquisitions and the legal response of host
countries (Doctoral dissertation),pp. 84

52. 54
I. M&A TRANSACTIONS THAT ARE SUBJECT TO MERGER
REVIEWS
1.1. M&A as economic concentration
In Vietnamese legislation system, M&A activity itself has various meanings
in each of different aspects. For example, under the Vietnam Enterprise law,
it is one of the restructuring activities; according to investment law, it is one
of the investment direction methods.
Under Vietnam Competition Law, M&A is recognized as one of economic
concentrating activities including the particular methods of merger and
acquisition business, corporate consolidation, or a joint venture between
companies.66
According to that recognition, given restrictive rules of M&A
are based on the combined market shares of the parties to the transaction.67
At the Article 17 stipulates the basic concepts of economic concentration, in
connection with M&A, they are:
―Article 17: Merger, consolidation, acquisition and joint venture
between enterprises
1. Merger of enterprises means the transfer by one or more
enterprise (s) of all of its lawful assets, rights, obligations and
interests to another enterprise and at the same time the
termination of the existence of the merged enterprises (s).
66
Article 16 of Law on Competition
67
The combined market share is the total share of participating parties in the relevant
market. Refer to Clause 6, Article 3 of VCL.

53. 55
2. Consolidation of enterprises means transfer by two or more
enterprise (s) of all of its lawful assets, rights, obligations and
interests to another enterprise and at the same time the
termination of the existence of the consolidating enterprises.
3. Acquisition of an enterprise means the purchase by one enterprise
of all or part of the assets of another enterprise sufficient to
control or govern wholly or partly some business of the acquired
enterprise.
4. …‖
However, not all M&A cases are considered to be economic concentration.
Under VCL, M&A is concentration through establishing the relationship
between the acquirers and targets which eliminates competition between
participants. Thus, in case that acquiring other companies without leading to
the right of control and governance wholly (merger, consolidation or 100%
ownership68
) or partly (acquisition) is not economic concentration.
1.2. Concept of control
The notion of control carries a concrete application under merger and
acquisition regulation as the means by which one company (the acquirer)
68
100% ownership: There exist cases that a company purchase 100% share of a company
but not a merger case because the acquired company is not dissolution but still exist and
become a subsidiary company of the merging company. A merged company would be
continuing to exist or not depends on the discretion of acquirers based on their own
business strategy. See further explanation at Brown, M. M. (Ed.). (1999). International
mergers and acquisitions: an introduction. Kluwer Law International, pp.45-46.

54. 56
acquires another company (the target). Acquiring the “control” in the target
can be premised either on the quantitative approach which is a bright-line
test based on a specific shareholding threshold such as 50% voting rights; or
on the qualitative approach by which subjective determination of control
based on the shareholding pattern on target, specific rights available to the
acquirer under a shareholders‟ agreement or constitutional documents of the
target. Vietnam has opted for a combination of the two quantitative and
qualitative approaches.
Among the forms of corporate restructure in Vietnam Enterprise Law, there
is no form of corporate acquisition but share acquisition. The clause 3 of
article 18 of Vietnam Enterprise Law about share purchase and corporate
management states that every organization and individual is entitled to buy
shares/stakes in joint-stock companies, limited liability companies, and
partnerships. According to VCL, acquisition is a form of economic
concentration: the clause 3 of article 18 of VCL states: “Acquisition of an
enterprise means the purchase by one enterprise of all or part of the asset of
another enterprise sufficient to control or govern the activities of one or all
of the trades of the acquired enterprise‖. Acquisition in Vietnam Enterprise
Law has the purpose of holding a specific proportion of the share of a
company. In case, a number of shares purchased account for a level that the
acquirer is able to perform the control and governance that company, such

55. 57
share acquisition transaction becomes corporate acquisition as provided by
in VCL.
Regarding the right to control or govern company, the Vietnam Enterprise
Law bases on the proportion of ownership or “the right to make decisions on
the member of the board of managers and operation of the company‖.69
The Competition Law bases on the right to vote to verify such right. In
particular:
According to Article 34 of Decree 116/2005/ND-CP detailing the
implementation of a number of articles of the VCL, to be assumed as having
the right of control or government, the acquiring company has to:
(1) ― Acquiring to hold over 50% of the voting right in the General
Meeting of Shareholders, the Board of Managers of target company,
or
(2) Acquiring sufficient to dominate the financial policies and operations
of the target company.‖
With this regulation, transactions purchase minority of shares are not the
economic concentration.
69
Clause 1 of Article 189 of Vietnam Enterprise Law about Parents company and subsidies
states:
1. ―A company is considered parent company of another company if the former
company:
a) Owns more than 50% of charter capital or total ordinary shares of the other
company;
b) Is entitle directly or indirectly decide the designation of a majority of or all of
Members of the Board of Directors/ the Director/General Director of the other
company;
c) Is entitled to decide amendments to the other company’s charter.‖

56. 58
In the first case, it is the quantitative approach that based on the number of
shares or the proportion of voting right, provided by in VCL, at the top
management organ of a company. For the second case, it needs to refer to
the respective regulations of deciding financial policies and operation
policies of a company. It is different from the possessed proportion of
share/capital which provides control right over the target depending on form
of target. The laws on corporation governance (The Vietnam Enterprise
Law) and its relevant guiding instruments help to make these issues clear.
1.3. Are out of Vietnamese territory M&A transactions under the scope of
VCL?
Article 2 of the Competition Law 2004 provides that, “This Law shall apply
to business organizations and individuals (hereinafter referred collectively
to as enterprises), including also enterprises producing, supplying products,
providing public-utility services, enterprises operating in the State-
monopolized sectors and domains, and foreign enterprises operating in Viet
Nam.”70
However, the law does not specify the word “operating” while the
Standing Committee has not made any interpretation on this word.
Given the unclear regulation causes different understanding among
practitioners and law enforcers on the “foreign enterprises operating in
70
Article 1 and Article 2 of VCL

57. 59
Vietnam”. The first opinion asserts that VCL can only govern acts
conducted by foreign enterprises when:
(1) The alleged act is taken place in Vietnamese territory;
(2) The foreign enterprise must register its business in Vietnam in the
form of foreign – invested company, branch or representative office.
This opinion asserts that it is impossible for the Vietnamese authority to
conduct the investigation as well as enforce the final decision in a foreign
territory.71
The second opinion on the extraterritorial jurisdiction of VCL asserts that
the law can cover acts conducted abroad by foreign enterprises as long as
such acts have effects to Vietnam. The argument for this opinion is that the
term “operating” is broad with activities including commercial purposes.
According to the Article 3, clause 1 of Commercial Law of Vietnam,
“commercial operation” means “activity for profit making purposes, which
includes purchase and sale of goods, provision of services, investment,
commercial promotion and other activities for the profit purpose.”72
Therefore, any profit-making activity of domestic firms or foreign firm
doing is covered by VCL regardless of its registration territory. In addition,
at the Article 3, paragraph 3 of VCL defines acts that are restrict
competition as “acts performed by enterprises to reduce, distort and prevent
71
http://www.eria.org/ERIA-DP-2015-86.pdf.
72
Commercial Law of Vietnam 2005, Article 3 para. 1.

58. 60
competition in the market, including… economic concentration”.73
Through
analyzing the articles above, it means that the law does not exclude any act
that restricts competition in Vietnam‟s market even though it is carried out
outside the territory of Vietnam.74
In practice, the second opinion is prevailing since the VCA has dealt with
some cases in the application of the second opinion. For instance, the case
of The M&A between Suntory company and PepsiCo company: Both
companies are foreign companies, PepsiCo has a subsidy in Vietnam but
Suntory has no; the acquisition transaction made out of Vietnam territory
but the VCA stated that: Though Suntory company have no commercial
representatives in Vietnam but its products are consumed in Vietnam market
(through importing and distributing into Vietnam). The M&A transaction
was conducted out of the Vietnamese territory but both participants have the
operation in Vietnam, through a commercial representative, or have their
products or services consumed at or supplied to Vietnam are under the
scope of VCL. 75
Therefore, this transaction is under the scope of VCL.
For instance, the case of The M&A between Suntory Company and PepsiCo
Company Suntory Beverage (SBF) and Food Asia Pte.Ltd (SBFA) are two
enterprises operating overseas (in the Netherlands and Singapore). Those
two acquired 51% shares of the PepsiCo Global Investment II B.V (PGI II)
73
Ibid., para. 3.
74
http://www.eria.org/ERIA-DP-2015-86.pdf.
75
Thanh, P. C. (2015). Competition Law Enforcement of Viet Nam and the Necessity of a
Transparent Regional Competition Policy (No. DP-2015-86, pp. 24.

59. 61
– a subsidiary of Linkbay, an affiliate of PepsiCo. Suntory Holdings Limited
owned two subsidiaries including SBF and SBFA and it conducted the
transaction with PepsiCo abroad to acquired 51% shares of PGI II. This is a
transaction taking place outside the territory of Vietnam (refer to the below
description chart). However, PGI II holds 100% capital contributed by
PepsiCo Vietnam (PIVC) and it operates commercial activities on food and
beverages of PepsiCo on Vietnam. Clearly, PepsiCo has its subsidiary and
commercial activities in Vietnam. After the M&A was finished, PIVC
would not trade food but just work in the field of beverages. Though
Suntory Company has no commercial representatives in Vietnam but its
products are consumed on Vietnam market (through importing and
distributing into Vietnam). The M&A transaction was conducted out of the
Vietnam‟s territory but both participants have the operation in Vietnam,
through commercial representative, or have their products or services
consumed at or supplied to Vietnam are under the scope of VCL. Therefore,
this transaction is under the scope of VCL.76
76
Annual Report of the Vietnam Competition Authority 2010, 29, accessed November 4,
2014, http://www.vca.gov.vn/NewsDetail.aspx?ID=1425&CateID=244.

60. 62
Source: Figure11:TransactionbetweenPepsiCoandSuntory-AnnualReportofthe
Vietnam Competition Authority 2010.
Quaker European
Investments B.V.
PGI
PIV
Vietnam
Beverage

61. 63
The second sample case providing the extraterritorial jurisdiction was the
insurance. In April 2010 the VCA received an application for consultation
made by Prudential Plc. (Prudential) based in England and the American
International Group Inc. (AIG) based in United States concerning the
acquisition of Prudential to AIA Group Limited (AIA) – a subsidy of AIG in
Vietnam. At the time of applying for consultation, both Prudential and AIA
had subsidies in Vietnam with which the respective market share are
39,97% and 6,67% on the basis of turnover 2009, the combined market
share in the life insurance market in Vietnam was 46.64% so it was the case
to make the notification of economic concentration to the VCA (above 30%
and below 50%). In this case, the participants were not Vietnamese
companies and the transaction would not be carried out inside the Vietnam‟s
territory. Nevertheless, such merger would substantially affect the life
insurance market in Vietnam through their affiliations of which the
combined market share was relatively high, reaching the threshold of
notification. This case then was closed in June 2010 as the participants
stopped the acquisition.77
Besides aforementioned cases, there have been offshore merger cases where
the participants went ahead to consult with the VCA before concluding the
transactions. With such practices of merger control, the VCA shows that the
77
Annual Report of the Vietnam Competition Authority 2010, page 137, accessed
November 4,2014, http://www.vca.gov.vn/NewsDetail.aspx?ID=1425&CateID=244.

62. 64
second opinion on the extraterritorial jurisdiction of the VCL becomes an
official approach in Vietnam. Thus, the M&A transactions taken place
outside of Vietnam‟s territory but affecting the Vietnamese market are
under the scope of regulation of VCL.
1.4. M&A transactions are assumed not to be economic concentration
The Article 35 of Decree 116/2005/ND-CP detailing implementation of a
number of articles of the Competition Law states: Acquisition which is not
regarded as economic concentration consists of insurance companies or
credit institutions acquires another company for the purpose of resale within
a maximum period of one year, and the acquirer does not exercise the right
to control or govern acquired company or only exercise this right in a
compulsory manner in order to achieve the resale purpose.
Rising from the need to control economic concentration activities in order to
avoid the formation of large enterprises having the power to control the
market, VCL has many provisions to create a legal framework allowing the
state administrative bodies to conduct controlling economic concentration
activities, that is practically called as the term merger control.
However, The VCL, on the basis of assessing the size of the market share of
the enterprise formed after the economic concentration operation, by the
other words, on basis of the presumed potential negative effect of economic
concentration on the competition of the market does not control all cases but

63. 65
those satisfy criteria of combined market share thresholds and size of the
resultant enterprises. The following sectors will provide the particulars of
such criteria.
II. ECONOMIC CONCENTRATION CONTROL
2.1. The Thresholds of Economic Concentration
In the Vietnam Law on Competition, the combined market share is used as a
criterion to verify the threshold of notification of economic concentration.
The economic concentration cases are divided into three groups with
different merger control manners. In details:
2.1.1.The non-restriction economic concentration
If the combined market share of participants of economic concentration in a
relevant market is below 30%, then it can be conducted with no restrictions.
Non-restriction also applies if the resulting economic concentration
accounts to above 30% in relevant market but is a small or medium-sized
company.78
2.1.2.Notification-required economic concentration
a. Threshold of economic concentration requests notification procedure
78
Article 20 of VCL, Section 1, para. 2.

64. 66
If the combined market share of participants of an economic concentration
in a relevant market falls between 30%-50%, the legal representatives of
participants have to notify the competent authorities of that transaction prior
to proceeding with such transaction.79
The parties may carry out the
transaction of economic concentration only after having received a written
reply (approval) from the competent authority that such transaction is not
within the prohibited category.80
b. Notify the competitive authority of economic concentration
Notification of economic concentration is mandatory for any transaction
fallen into the notification thresholds before implementing transactions.81
Failure to obtain approval prior to closing can expose parties to significant
penalties, including fines, potential divestiture orders to unwind a
transaction.82
To determine the filings of notification, two fundamental should be fulfilled:
Does the proposed transaction qualify as a concentration; and if so, are the
thresholds met in current case? (The concentration and the thresholds are
analyzed in the above subsection). The parties of M&A transactions must
determine whether the relevant filing thresholds have been met.
79
Article 20 of VCL, section 1, paragraph 1
80
Article 24 of VCL
81
Many countries have the regulation that Notification of economic concentration is
mandatory. See the table 2 hereinafter.
82
See Section 8 of VCL, Article 117 forms of penalties.

65. 67
According to the competition legislation, the participants to the M&A
transaction have a duty to notify the competent authority of such deal which
falls into notification requested deals. Thus, in order to ensure total
compliance with the regulation of competition law and avoid potential risks
of offending Vietnam‟s merger control regime, before entering into an
economic concentration it is crucial for investors to calculate the result
combined market share, which allows participants to determine whether the
notification of transaction required.
2.1.3.Prohibited economic concentration
If the combined market share of participating companies in the relevant
market is more than 50%, the economic concentration will be prohibited
unless falls into exemption cases or still falls within the category of small
and medium-sized company.83
The exemption will be analyzed in the
“Exemption” section.
After determining the threshold of their proposed transaction based on the
combined market share and relevant market share, if the result is more than
50%, it falls into the threshold of prohibited cases.84
According to the VCL, an economic concentration is illegal if the aggregate
market share of participating firms exceeds 50% of the relevant market. A
83
See Article 18 of VCL. For the regulation of small and medium-sized company, see table
1 hereinafter. For further regulation on small and medium-sized company, see 56/2009/ND-
CP on assistance to development of small and medium –sized enterprises.
84
Article 18 of VCL

66. 68
merger that results in a small or medium-sized enterprise is legal per se
regardless of its anticompetitive status. However, the law deems that an
economic concentration that has a combined market share exceeding 50
percent is illegal per se.
The Article 18 raises the prohibited cases of economic concentration that
have the combined market share in the relevant market of more than 50%.85
The rationale is that in these cases, merger or acquisition may make the
acquirers take the considerable market power and bring them the control of
that market share. That makes the correlation of market share and change
the given market structure, then it may reduce and distorts the competition
in the market.
Briefly, the Law on Competition uses combined market share as the basis to
classify the level of economic concentration and to assess the impact of
economic concentration on the competition. Thus, economic concentration
cases that the combined market share of participating companies accounts
for more than 50% relevant market share are always assumed competition
restraint as nature. In case the combined market share of participating
companies accounts for less than 30% relevant market share, such economic
concentration is assumed impossible to create a dominant position for a
resultant company. In addition, the prohibited economic concentration cases
85
Ibid.

67. 69
(the relevant market share accounts for more than 50%) are likely to be
immune if meet the aforementioned required conditions.
But what are the combined market share and the relevant market share?
How to calculate it and who have to calculate it? Which elements need to be
considered while evaluating an M&A transaction? The following section
will detail these elements.
2.2. The elements of accessing economic concentration transactions
2.2.1.Combined market share
About the market share, Article 5, section 5 of LOC states that: “Market
share of a company with respect to a certain type of goods or services
means the percentage of turnover from sales of such company over the total
turnover of all companies conducting business in such type of goods or
services in the relevant market or the percentage of turnover of inward
purchases of such company over the total turnover of inward purchases of
all companies conducting business in such type of goods or services in the
relevant market for a month, quarter or year‖.86
According to Article 5, section 6 of VCL combined market share means the
total market share in the relevant market of the companies participating in
an economic concentration, or in other words in an M&A transaction.
86
Article 5, section 6 of VCL

68. 70
2.2.2.Relevant market
The relevant market consists of the relevant product market and the relevant
geographical market, in which:
 Relevant product market means a market comprising goods or
services that may be substituted for each other in terms of
characteristics, use purpose and price.
 Relevant geographical market means a specific geographical area in
which goods or services may be substituted for each other with similar
competitive conditions and is significantly different from a neighbor
area.87
2.2.3.The company size: small and medium-sized companies
In regard to small and medium-sized companies (“SME”), an SME is
defined pursuant to Decree No. 56/2009/ND-CP (30/6/09) based on the size
of total capital or the average annual number of employees.88
The criteria to
establish each type of SME (e.g. very small, small, and medium) may vary
based on the type of business being considered. (For the details of the
conditions to be considered as a small or medium-sized enterprise, see the
table 1 hereinafter).
87
Section 1: Definition of relevant markets, Chapter II of the Decree No. 116/2005/ND-CP
detailing the implementation of a number of articles of the competition law.
88
The Article 3 of the Decree No. 56/2009/ND-CP on assistance to the development of
small and medium-sized enterprises.

69. 71
However, size does not accurately reflect a company‟s market power.
Sometimes, especially when the geographical market is small, an SME may
possess market power and distort competition. According to the
classification of the Decree 56/2009/ND-CP about SMEs, the charter capital
of a medium-sized enterprise may reach US$5 million. Hence, a small or
medium-sized firm can possess market power especially when it receives
financial support from industrial policy.
2.3. Procedures in merger control
2.3.1.Pre-merger notification89
a. Transactions are subject to the notification procedure
Pre-merger notification is required in cases:
 The combined market share of a company formed after merger
accounts for between 30% and 50% in the relevant market.90
And,
 The company formed after merger does not fall into small or medium
size as prescribed by law.
b. The procedure for notification:
If the proposed economic concentration falls into the threshold of
notification, the lawful representative of each company must file a
89
Merger in this section has a general meaning in which include acquisition and
consolidationtransactions.
90
Article 20 paragraph 1, VCL

70. 72
notification as the case may be. According to the Article 21 of VCL, the
notification dossiers shall provide the required information, among which
includes: (1) a list of the kinds of goods and/or services dealt in (including
by any dependent units); and (2) reports on its market shares in the relevant
market for the latest two consecutive years.91
Regarding the time-limit for a reply to the notification of economic
concentration, according to the Article 23 of VCL, the VCA has seven
working days from the day of receipt of the complete file of notification to
indicate whether the notification is complete. Once the application is
confirmed as complete, the VCA has 45 days to provide a written response
to the notifying company indicating whether or not the economic
concentration is prohibited under Article 18 of VCL and the basic of such
prohibition. This period may be extended twice for up to 30 days each
time.92
Pre-merger notification is mandatory before preceding the economic
concentration. Economic concentration transaction would be conducted by
participants only after having received a written reply from the competent
authority that such transaction is not within the prohibited category.93
In the notification procedure, the VCA calculates the combined market
share of companies participating in an M&A transaction to verify whether
91
Article 21 of VCL
92
Ibid. Article 22 and Article 23
93
Ibid. Article 24