VIETNAM - Legal Alert - COMPETITION LAW VIOLATIONS CAN BE A CRIME - TWO-YEAR OPERATION-SUSPENSION FOR COMPANY’S COMPETITION CRIME

1. VIETNAM - Legal Alert - COMPETITION LAW VIOLATIONS CAN BE A CRIME - TWO-YEAR
OPERATION-SUSPENSION FOR COMPANY’S COMPETITION CRIME
Under Vietnamese jurisdiction, competition sector is generally governed by Law on Competition No.
27/2004/QH11 issued by National Assembly dated 3 December 2004 (“Competition Law”).
Nevertheless, Penal Code No. 100/2015/QH13 dated 27 November 2015, as amended and supplemented in
2017 (“Penal Code”) which has just come into effect on 1 July 2017 is also to cover competition-related
crimes by creating potentially severe penalties for both individuals and institutions including monetary fines
and imprisonment.
At the time of this alert, it is not purely clear when to apply administrative sanction under Competition Law
and when the violation is serious enough to be deemed as a crime under Penal Code. Another query would
be how to determine if a crime is conducted by an individual or by a company, given that such individual
is working for the company in question. In other words, whether the penalty will impose on the individual
offender or on the company for which he/she is working is still arguable.
While awaiting further guidance on how these new offences will be interpreted as well as their full
implications in light of the competition scheme in Vietnam, we have outlined the basic information in this
legal alert, mainly focusing on the penalties applicable to a violating company.
On the one hand, agreements in restraint of competition are addressed under Article 8 of the Competition
Law as below:
(i) Agreements either directly or indirectly fixing the price of goods and services;
(ii) Agreements to share consumer markets or sources of supply of goods and services;
(iii) Agreements to restrain or control the quantity or volume of goods and services produced
purchased or sold;
(iv) Agreements to restrain technical or technological developments or to restrain investment;
(v) Agreements to impose on other enterprise conditions for signing contracts for the purchase and
sale of goods and services or to force other enterprise to accept obligations which are not directly related to
the subject matter of the contract;
(vi) Agreements which prevent, impede or do not allow other enterprises to participate in the market
or to develop business;
(vii) Agreements which exclude from the market other enterprises which are not parties to the
agreement; or

2. (viii) Conclusion in order for one or more parties to win a tender for supply of good and services (bid-
rigging).
Following to this, Article 9 of Competition Law prohibits all agreements that fall under foresaid items (vi),
(vii) and (viii); whereas agreements falling under items from (i) to (v) are only prohibited where the
combined market shares of the parties to the agreement is at least thirty per cent (30%), subject to certain
potential exemptions under Article 10 of Competition Law.
More specifically, Article 118 of the Competition Law provides a fine of up to ten per cent (10%) of the
previous year’s turnover of the offender in case of breaches under Article 9.
On the other hand, the new Penal Code now drastically alter the regime for regulations on anti-competitive
agreements, especially for a legal entity being a company.
Pursuant to Article 217 of the Penal Code, a monetary fine of up to VND 3 billion (equivalent to US$
132,000) will apply for the company that directly participate in or carry out certain acts in violation of the
regulations on competition where (a) such conduct results in illegal profits of up to VND 3 billion
(equivalent to US$ 132,000) or (b) losses to others of up to VND 5 billion (equivalent to US$ 220,000).
The prohibited subject matters for these agreements would comprise:
 Preventing participation or development of other businesses in a market;
 Removing a non-party from a market; and
 Where the parties to the agreement have a combined market share of at least 30%:
 Price fixing, directly or indirectly;
 Allocating markets or supplies;
 Limiting or controlling volumes;
 Limiting technology development or investment; and
Imposing obligations not directly related to the subject matter of the contract.
Putting that aside, we note that the sanction for a company may increase to VND 5 billion (equivalent to
US$ 220,000) or the operation suspension of up to 2 years once any of the statutory aggravating
circumstances appears. Further, penalized companies, in addition to potential fines, may be prohibited to
carry out certain business activities as well as to raise capital for the up-to 3-year duration.

3. As addressed at the very beginning, it is being expected form the law-making team that there would be
clarifications on (i) whether conduct will be subject to administrative penalties under the Competition
Law or to criminal prosecution under the Penal Code and (ii) the proposed scope of activity that may
bring on liability for individuals conducting the prohibited agreement.
Bottom line, a company should consider thoroughly reviewing its business practices to ensure not to fall
under the scope of sanctions from both Competition Law and Penal Code perspectives.
Also important, there exists a legal risk where the conduct of company's employees is somehow attributed
to the company. With a view to minimizing such risk, it is strongly recommended that the company, in its
internal policies, including without limitation to the Internal Labor Regulations (“ILR”), should
expressly addressed its employee’s independent and separate obligations, i.e. not in connection with those
of the company in light of competition violations, assuming that such employee’s breaches are not
employment-related assignments. On this basis, Company would very unlikely to bear the penal liability
for what its employee does outside the contractual job description.
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If you have any question on the above, please do not hesitate to contact Dr. Oliver Massmann under
omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam
LLC.
Thank you very much!