Vertical and conglomerate integration in viet nam theory, practice and tendenc

With the aim of conducting in-depth research in which the assessment of the advantages, disadvantages and applicability of the economic integration control model under vertical and mixed

QUACH THI NGOC THIEN

VERTICAL AND CONGLOMERATE INTEGRATION IN VIET NAM:

THEORY, PRACTICE AND TENDENCY

MASTER THESIS IN LAW

Ho Chi Minh City – Year 2020

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY

QUACH THI NGOC THIEN

VERTICAL AND CONGLOMERATE INTEGRATION IN VIET NAM:

THEORY, PRACTICE AND TENDENCY

Major: Economic Law

MASTER THESIS IN LAW

SUPERVISOR

DR TRAN VAN LONG

Ho Chi Minh City – Year 2020

CONTENTS CONTENTS

LIST OF TABLES

1 Rationale of research 1

2 Literature review 2

3 The research questions 3

4 Object and scope of the thesis 4

5 Coverage of the thesis 5

6 Structure 5

CHAPTER 1: THEORETICAL FRAMWORK OF ECONOMIC INTEGRATION 7

1.1 THEORETICAL BASIS OF ECONOMIC INTEGRATION: ECONOMIC INTEGRATION FORMS 7

1.1.1 Theoretical basis of economic integration 7

1.1.2 Several economic integration forms 9

1.2 ISSUES SHOULD BE ADDRESSED FOR WHEN BRINGING EFFICIENCY INTO BUILDING THE ECONOMIC CONCENTRATION CONTROL SYSTEM 13

1.2.1 Protective target of economic concentration control policy 13

1.2.1.1 Protection of small companies 13

1.2.1.2 Protecting consumer welfare or total social welfare 15

1.2.1.3 Protect the nation's competitive strategy 17

1.2.1.4 Other targets Social target: 19

1.2.2 Economic analysis on the effectiveness of economic integration 20

1.2.2.1 Issues in information collection 20

1.2.2.2 Issues in analysis and assumptions 21

1.2.3 Process control and enforcement mechanisms issues 22

1.2.3.1 General approach and case-by-case approach 22

1.2.3.2 Mechanism through litigation method and through agreement method 23 1.2.3.3 Legalize the guidelines on economic integration 24

Conclusion of chapter I 25

CHAPTER 2: LEGAL FRAMWORK ON ECONOMIC INTERGRATION: A COMPARATIVE ANALYSIS 26

2.1 COMPETITION LAW GOVERNING ECONOMIC INTERGRATION IN VIETNAM 26

2.1.1 Approach of Competition Law 2018 26

2.1.2 Evaluation criteria 29

2.1.3 National Committee of Competition 34

2.2 THE CONTROL OF VERTICAL AND MIXED ECONOMIC INTERGRATION IN THE UNITED STATES 35

2.2.1 Evaluation process 35

2.2.1.1 Determine the market 35

2.2.1.2 Determine the market share and market concentration 37

2.2.1.3 Determine the powerful purchasers 39

2.2.1.4 Ability to enter the market 40

2.2.1.5 Special conditions 41

2.2.2 Economic efficiency analysis 41

2.2.3 Remedies for the anti-competition effect 44

Conclusion of chapter II 49

CHAPTER 3: PRACTICE OF ECONOMIC INTERGRATION: ISSUES AND LEGAL RECOMMENDATIONS 51

3.1 PRACTICE OF VERTICAL AND MIXED ECONOMIC INTERGRATION IN VIETNAM 51

3.1.1 Tendency of economic intergration in Vietnam 51

3.1.2 Inadequacies of the legal provisions on economic integration 58

3.2 RECOMMENDATIONS AND PROPOSALS FOR THE VIETNAMESE LAW ON ECONOMIC INTERGRATION 62

3.2.1 New concept of economic integration: 62

3.2.2 Objectives of Competition Law 63

3.2.3 Applying economic efficiency analysis in Case-by-case aproach 64

3.2.4 Establish post-check mechanism and corrective measures 65

3.2.5 Technical regulations control criteria for economic concentration 66

3.2.6 Other recommendations 67

Conclusion of Chapter 3 69

CONCLUSION 70 REFERENCES

UNDERTAKINGS

 o 

I, the undersigned, with full name Quach Thi Ngoc Thien – Code: 7701281019A,

be attending Master Class with major in Laws of Economics, Faculty of Law, University

of Economics Ho Chi Minh City, being the writer of the Master Thesis “Vertical and

conglomerate integration in viet nam: theory, practice and tendency” (hereinafter

referred to as “Thesis”)

Hereby undertake that all content presented in the Thesis is result from my independent research with instructions of my advisor, Dr Tran Van Long The Thesis has employed and extracted a number of comments, scientific opinions of other scholars and writers All information is properly affiliated with sufficient and accurate evidence Figures and data therein are used with objectiveness and honesty

By Quach Thi Ngoc Thien

LIST OF ACRONYMS

APC/PPC Actual/Perceived Potential Competition

Co-operation and Development

R&D Research and Development

SSNIP Small but Significant Increase in Price

LIST OF TABLES

Figure 2.1: Explaination of Concentration levels Figure 2.2: Herfindahl-Hirschman index formula

ABSTRACT

As a natural tendency, expanding production and technology by vertically increasing the power of companies has become inevitable Vietnam's integration intothe global economy has entered a new stage These multi-tiered links with new rules create more opportunities and, undoubtedly, impose challenges on Vietnamese businesses This urges us to gradually improve the legal corridor to adapt to economic integration into the global economy In general, the economic integration

in the world is a field that is concerned by many scholars and researchers However, the in-depth studies into economic integration on vertical and conglomerate forms have never been properly taken into consideration in Vietnam

In terms of theory and practice, the author will identify groups of issues that need to be concerned for the achievement of effectiveness of an economic integration management policy With the aim of conducting in-depth research in which the assessment of the advantages, disadvantages and applicability of the economic integration control model under vertical and mixed forms according to

US law is performed, the author will make reference to the advances in US law for some constructive proposals to the competition law in Vietnam

The methodology used in this research is: (1) Economics analyst of law: to analyze the models, predict the possibilities and calculate the costs - benefits when analyzing the manifestations of the economic integration cases in Vietnam (2) Comparative method: Used to compare the legal system and practice of Vietnam with US’s to find out the advantages and limitations in the law of each country From there, the author will discuss the efficiency of various solutions (3) Logical method: used to explain to draw conclusions from the analyzed and synthesized theoretical and practical bases Thereby, the author will boldly gives personal opinions

This thesis gives a thorough and comprehensive study of the provisions of the competition law on economic integration control activities On that basis, the

thesis will contribute to limit the negative impacts of this activity Moreover, the thesis also gives the provisions of the US competition law in order to draw out progressive legal experience, thereby serving as the basis for acquiring competition law in Vietnam so that it is consistent with the socio-economic conditions

After the epidemic of covid 19, economic integration is an option that businesses often think of in order to concentrate capital, new technology to help improve their competitiveness in the market The author expect to provide preliminary ideas for a guideline of vertical and conglomerate economic concentration control, contributing to the innovation of Vietnam's socio-economy

Key words: Competitive Law, Vertical and Conglomerate Integration.

INTRODUCTION

1 Rationale of research

Economic integration governed by the current Competition Law remains debatable Issues such as the objectives of competition law, determination of relevant market, combined market share, as well as functions and powers of the competition authority remain ambiguous According to Article 29 of the 2018 Competition Law, economic integration is the behavior of an enterprise, including:

1 Merging an enterprise; 2 Enterprise consolidation; 3 Acquisition of enterprises;

4 Joint venture between enterprises; 5 Other acts of economic integration as provided for by law Competition Law does not define economic integration but uses method to list 4 acts of economic integration and plan for other behaviors of economic integration, but these so-called economic integration have not been given specific definition yet Besides, the number of experts in competition law is very few The training on the law performance for the investors and the consequent retraining only partially meets the real demand; and the outcome is still limited

Moreover, although each country has a model with its own specific policies and distinctive audiences, it is widely accepted that economic integration activities must bring out a common positive impact to ensure economic efficiency, competitive environment and consumer welfare Serving the purpose of optimizing the efficiency of economic integration, the obvious challenge should revolve around economic efficiency offered by economic integration and the effectiveness of State intervention

From the above reasons, it can be seen that a systematic study of legal provisions on economic integration is extremely necessary Therefore, the research topics: “Vertical and conglomerate integration in Viet Nam: theory, practice and tendency” is developed as my master thesis The thesis is expected to propose some suggestions to Vietnamese law on vertical and conglomerate integration

Cao Thi Hoang Oanh (2012) Controlling economic integration according to Vietnam and US competition law (Doctoral dissertation, Ho Chi Minh City University of Law) first graduate thesis comparing economic integration between Vietnam and the United States, provides an overview of economic integration activities in the United States On the contrary, the thesis did not propose US-laws-based suggestions to Vietnamese laws

The study "Laws governing mergers and acquisitions in Vietnam" edited by

Dr Pham Tri Hung in 2011 provides a comprehensive view of the horizontal control of economic integration in Vietnam and a number of countries in the world The thesis provides the comparison between Vietnamese law and its American counterpart on economic integration However, the thesis only focuses on the horizontal integration without mentioning the vertical and conglomerate integration

Ha Ngoc Anh (2018), The law controling economic concentration in Vietnam, PhD thesis, Law University Ho Chi Minh City The thesis presents general theoretical issues about economic integration; control economic integration according to Competition Law 2004; analyzing the current status of economic integration and controlling economic integration in Vietnam; thereby giving the principle of improving the law on controlling economic integration and a number of specific solutions, in which emphasizing on enhancing the capacity of the competition authority; coordination mechanism between relevant state agencies, promoting communication about competition law The thesis introduced and

analyzed the initial situation of economic integration in Vietnam until 2014 However, the thesis lacks a breakthrough in the approach to the concept of economic integration Therfore, the proposals and solutions have not followed the new approach under the competition law 2018

The above research has provided the first-hand analysis of vertical - mixed economic integration activities and the control model of this issue in US law However, the study of experience extracted from research of advances in the legal systems of the world (especially the United States) and its application into Vietnam have not been carefully and comprehensively considered

An effective mechanism for vertical and mixed economic integration adjustment has not been systematically mentioned in any previous research in Vietnam My research focuses on issues that have not been mentioned in studies in Vietnam, including: (i) standards for the effectiveness of a state-proposed policy economic integration theory, (ii) advanced and flexible economic integration control regime, (iii) application of indicators in testing in the United States, (iv) the legal economic approach in competition policy and (v) analysis of efficiency and economic models in the vertical and mixed economic integration control that have been applied in other countries

3 The research questions

First research question : What is theoretical basis of economic integration?

Forms of economic integration and their impact on the economy?

Second reseach question: What is the practice of vertical and conglomerate

economic integration in Vietnam? What is the Issues that need to be focused on when building the economic integration control system?

Third research question: What is the control of vertical and conglomerate

economic integration in the United States? What are the recommendations and proposals for the Vietnam law on economic integration?

4 The research method

Chapter I:

Economics analyst of law: to analyze the models, predict the possibilities and calculate the costs - benefits when analyzing the manifestations of the economic integration cases in Vietnam

Chapter II:

Comparative method: Used to compare the legal system and practice of Vietnam with US’s to find out the advantages and limitations in the law of each country From there, the author will discuss the efficiency of various solutions

Chapter III:

Logical method: used to explain to draw conclusions from the analyzed and synthesized theoretical and practical bases Thereby, the author will boldly gives personal opinions

4 Object and scope of the thesis

- Object: The object of the topic is legal provisions on vertical and conglomerate integration in Vietnam

- Scope: The thesis focuses on research in Vietnam, in addition to comparison with some laws of other countries in the world, especially US law with the timeline spanning the years from 2008 to 2020

5 Aim of the thesis

In terms of theory and practice, the author will identify groups of issues that need to be concerned for the achievement of effectiveness of an economic integration management policy

With the aim of conducting in-depth research in which the assessment of the advantages, disadvantages and applicability of the economic integration control model under vertical and mixed forms according to US law is performed, the author will make reference to the advances in US law for some constructive proposals to the competition law in Vietnam

6 Coverage of the thesis

The object of the research is advanced vertical and mixed economic integration control models in the world, especially in the United States Within the topic, I will analyze the steps that the US authorities use to comprehensively control the operation of economic integration under these two forms Moreover, the author also makes reference to Vietnamese Competition laws to highlight the contrasts and

provide the most central contents

7 Structure

Chapter 1: Theoretical framwork of economic integration

In this chapter, the author will provide the most basic theoretical issues about economic integration Additionally, I will also provide advanced and effective models of the economic integration control system around the world Chapter 1 includes 02 sections:

1.1 Theoretical basis of economic integration Several economic integration forms

1.2 Several economic integration forms

Chapter 2: Legal framwork on economic integration: a comparative analysis

In this chapter, the author will present the current legal status of Vietnam and briefly introduce the control of economic integration in the United States Besides, the author will analysis three steps that US law uses to evaluate an economic integration case: (i) Economic integration assessment process (ii) analysis economic efficiency in economic integration and (iii) anti-competitive remedies due to economic integration Chapter 2 includes 02 sections:

2.1 Competition Law governing economic intergration in Vietnam

2.2 The control of vertical and mixed economic intergration in the United States

Chapter 3: Practice of economic integration: Issues and legal recommendations

In this chapter, the author will present the practice of Vietnam on economic integration activities to points out the issues and provides recommendations Chapter 3 includes 03 sections

3.1 Practice of vertical and mixed economic intergration in Vietnam 3.2 Recommendations and proposals for the Vietnamese law on economic integration

3.3 Conclusion

9 Scientific meanings and value of the topic

This thesis gives a thorough and comprehensive study of the provisions of the competition law on economic integration control activities On that basis, the thesis will contribute to limit the negative impacts of this activity Moreover, the thesis also gives the provisions of the US competition law in order to draw out progressive legal experience, thereby serving as the basis for acquiring competition law in Vietnam so that it is consistent with the socio-economic conditions

CHAPTER 1: THEORETICAL FRAMWORK OF

ECONOMIC INTEGRATION

1.1 THEORETICAL BASIS OF ECONOMIC INTEGRATION: ECONOMIC INTEGRATION FORMS

1.1.1 Theoretical basis of economic integration

In economics and legal science in the world, there are many different approaches and definitions of economic integration behavior The first approach (i) describes and provides an overview of the concentration of an industry, by measuring the competitiveness and integration ratio of firms in the industry In the first approach, economic concentration is considered as the level of capital concentration which includes revenue, assets or employment in the industry of enterprises, containing industry concentration or market concentration in which it is divided into two categories: the sellers’ economic concentration and the buyers’ economic concentration (in order) to harness the price fixing of the former

The second (ii) approach from the perspective of microeconomics can be used to explain and consider the restructure of the cost and operation of a company, and innovate the production process through economic integration However, within the scope of the topic, the author will go deeply into analysis of the third approach (iii), especially the definition of economic integration as a legal tool to regulate the economy with an emphasize on competition law Although they are all approaches

to competition management, there should be different definitions of economic integration among legal systems

First and foremost, perceived as the illegal act of enterprises, economic integration is understood as a group of acts insisting on the control of two or more companies which is decided by the same entity, including merger, acquisition, or interlocking directorates that could affect the competition, or tend to generate a monopoly

Secondly, the economic integration is basically considered as a change of ownership when the right of making decision is concentrated on one side by mergers, acquisitions, joint ventures or the control is transferred directly or indirectly to the hold of one department of the business or of the business as a whole

Thirdly, in the perspective of Competition Law, lawmakers do not stipulate the characteristics of economic concentration and merely list behaviors considered

as economic concentration instead However, according to the author, this regulation only shows the formation of economic integration, not the substance of problem Scholars namely Le Danh Vinh, Hoang Xuan Bac and Nguyen Ngoc Son have similar comments:

“In comparison with the laws of many countries around the world,

Vietnam's competition law has not mentioned the form of economic

concentration under the form of concurrently holding a position (one

or several people working as managers in many enterprises or

representatives of many businesses jointly manage a third business) or

cross-border acquisitions (the conduct of mergers and acquisitions of

multinational corporations) In fact, both of the above phenomena can

create a structual and administrative link to create a

jointly-orchestrated action among businesses and can affect the competition

structure of the market 1 ”

Finally, as a process closely associated with the formation and change of market structure, economic integration is understood as a process in which the number of independent enterprises competing in the market is reduced, accompanied by mergers (in a broad sense) or endogenous growth of the business

on the basis of expanding production capacity.2

1 Le Danh Vinh, Hoang Xuan Bac and Nguyen Ngoc Son (2011), Competition Law Curriculum, National

University, p.160

2 Le Viet Thai (2005), Subject of economic concentration behavior, research topic on competitive institutions

in market development conditions in Vietnam, Trade Research Institute - Ministry of Trade, 2005, http: //bacvietluat.vn/kiem-soat-tap-trung-kinh-te-theo-phap-luat-canh-tranh-va-van-de-cua-viet-nam.html, last updated on 01/1/2021

According to the author's conclusion in this master, academically, a complete concept of economic concentration covers all forms of behavior of merger and acquisition activities that create anti-competitive effects without affecting the control of competition authority of mergers and acquisitions that may distort the nature of economic integration The nature of the economic integration understood here must be “the right of making decision can be subsumed under the control of one side after an ownership transaction, and that decision-making will inevitably, or possibly, result in anti-competitive effects to the market” In this respect, the European Commission's definition of economic integration in the second definition mentioned above is the most complete The author will use this definition in the topic

1.1.2 Several economic integration forms

First is Horizontal integration: among companies that competitively manufacture and sell products on the same market Because the focus of the topic is vertical and mixed economic concentration, the author will focus on analyzing these types based on the legal systems in the world along with their effectiveness also

Second is Vertical integration: There is a buyer-seller relationship among enterprises and this category of integration is often in the supply chain of goods and services Conducting economic integration will result in a business that performs both activities in the supply chain There are three vertical forms of economic concentration: backward economic integration, forward integration and balanced (combing both)

A firm performs backward economic integration when it has reverse control over companies supplying input products for themselves For example, a car company may own a tire company, a glass company and a metal company, and the ownership of such three subsidiaries is aimed at stabilizing the input of raw materials, and ensure the desired quality For examples, during the mid-1920s, American car manufacturers minimized their operating costs by applying economic integration with spare parts makers

In contrast, a company tends to move to integration when it controls the distribution and retailing channels during which its own products are offered to the market The competition for distributors among the petroleum companies of members in OPEC and non-OPEC countries is the most typical example of the economic integration cases along the forward flow3 It not only serves the economic goals but also fulfil the political motives

Finally, a company can both buy input producers (backward), and retail distributors (forward), in order to control costs, production quality, and distribution process It is called a balanced economic integration - or complete (both forward and backward)

Most healthcare systems, for example, are all trying to be designed in a complete vertical chain4: (i) Research and development department, (ii) The hospital directly takes care of the patient and (iii) Pharmaceutical retail companies

to most properly serve the patients

In essence, vertical economic concentration cases are the behavior of enterprises who have the act of making decisions at their disposal based on their own economic goals From the perspective of competition law, only when such behavior creates anti-competition will the authorities intervene.5

Finally, Conglomerate and mixed integration: Among companies that do not operate in the same market and have no buyer-seller relationship Specifically, the stratification into three groups based on the goods relationship of the merged companies which includes: (i) Complementary goods (ii) neighboring goods (iii) Non-relational goods

In the case of (i), the motivation of companies who perform the act of acquisition can be traced back to their perspective on consumers’ behavior: the

3 Majed A Al-Moneef (1998), Vertical Integration strategies of National oil companies, The Developing

Economies, 36 (2), p.208-212

4 O Gröne & M Garcia-Barbero (2002), Trends in Integrated Care – Reflections on Conceptual Issues,

World Health Organization, Copenhagen, EUR/02/5037864

5 For example, in the United States, anti-competitive vertical economic integration cases have been prevented

such as: United States v Columbia Steel Co (1948), 334 U.S 495; United States v E.I Du Pont De

Nemours & Co (1956), 351 U.S 377; Brown Shoe Co., Inc v United States (1962), 370 U.S 294

consumer will buy complementary goods separately and then have the goods indiscriminately consumed For example, a fresh milk company (Vinamilk) acquires a powdered milk company (Dielac), which is a case of a mixed economic integration of two complementary goods Mixed economic integration where goods

of two economic concentration enterprises are able to complement each other may bear some resemblance to vertical economic integration Because goods in the same supply chain will normally also be complementary (eg, baking ingredients and finished cakes, milk powder and milk) In terms of influence, the effect on the economy of both vertical and mixed integration is virtually identical There is one slight difference which can be perceived as: for vertical integration, enterprises acquire their own output suppliers while they acquire output suppliers (not their own) in another market in the mixed integration.6

In case (ii), neighboring goods are defined as goods that are bought together For example, dish-washing liquid, soap, detergent and toothpaste A family has a (relatively) tendency to buy all 4 items together even if they are not in the same market The two main common points of the above behavior are: goods that are independent but share the same distribution channel (or the same distributor), and if

a company has the advantage of providing consumers with one kind of product line, they will have more prestige in another kind if they own both

Finally, case (iii) is also known as pure mixed economic concentration The three characteristics mentioned in this form are (i) these products are not interchangeable, that is, there is no horizontal relationship; (ii) enterprises have a relationship of buying and selling products with each other but these products do not show a vertical relationship among them and (iii) the products are not in the complementary goods or neighboring goods market In addition to expanding

6 Ha Anh (23/7/2013), Vinamilk giai the cong ty sua Dielac, giai-the-cong-ty-sua-dielac-2013072310463971.htm , last updated on 01/1/2021

https://vneconomy.vn/chung-khoan/vinamilk-markets and range of customers, businesses implementing economic integration in this form can diversify investments, allocate risks and limit capital deficits.7

In addition, there are some other ways of dividing, namely total (or partial) economic integration along with economic integration in combination (tight) or not tight8 In fact, when applying policies on controlling economic integration, there is a way to classify other economic concentration cases, such as pure horizontal or horizontal integration affected by vertical or mixed forms9 Then the classification becomes unclear because the effects of the economic integration on a competitive market is diversified and there are many different economic effects

Mentioning vertical and mixed economic concentration, once the former is completed, other firms may be closed because they lose opportunities to trade with the group of businesses For example, the manufacturer of a finished product has a large market share and purchases raw materials from multiple suppliers If that producer merges with a supplier, it is likely that they will only use input product from the supplier associated with them Therefore, other suppliers will lose the opportunity to do business with the manufacturer Similarly, if a large producer establishes commercial ties with a large supplier of raw materials, it will make it difficult for other manufacturers to enter the market as the group of firms may form their separate distribution network Even when the group of firms continued to do business with their competitors after the economic integration, the competitors were

in a more disadvantageous position than in the past As a result, the competition between them is not as effective as before Mixed economic concentration can also pose a threat of closure or withdrawal from the market as it increases the overall capabilities of the group of companies The most obvious example highlights the ability of purchasing raw materials, techniques, advertising, brand Factors assessing the ability of economic integration which can lead to vertical anti-

7Richard B Blackwell (1972), Section 7 of the Clayton Act: Its application to the conglomerate

merger, William and Mary Law review, 13, p 631

8 Le Danh Vinh, Hoang Xuan Bac and Nguyen Ngoc Son, 2010, Competition Law Curriculum, University of

Economics and Law - Ho Chi Minh City National University

9 Tomaso Duso, Burcin B Yurtoglu, Klaus Gugler (2011), How effective is European merger control?,

European Economic Review, 55(7), p 990.

competitive effects through unilateral behavior are similar to those of horizontal economic intergrration

According to the author, the classification will be useful in studying the manifestations of this behavior However, in order to build models to analyze the effectiveness of economic concentration and its impact on competitiveness, the identification and naming seems incomplete which requires the next step of working out the argument behind the need to control economic integration and its concomitant control system which should prove effective to some extent In other words, the next content that the author wants to mention is how to build a control system in which the economic integration does not cause anti-competitive damages and still simultaneously brings positive effects for to economy

1.2 ISSUES SHOULD BE ADDRESSED FOR WHEN BRINGING EFFICIENCY INTO BUILDING THE ECONOMIC CONCENTRATION CONTROL SYSTEM

1.2.1 Protective target of economic concentration control policy

Quite frequently, the debates about economic concentration policy often

revolve around defending the following aspects:

1.2.1.1 Protection of small companies

The most primitive point of view about the benefits of protecting competition in the marketplace is the ability to protect small companies In the mid-19th century, when the United States built economic policy on the foundation of

"competitive protection" of the Harvard school aiming at protecting peasants and

small companies from large corporations Industrial Organization10 is understood as the number of companies in the industry and their respective magnitude This organization11 will help determine the effectiveness of firms in the industry Harvard professors have argued that when markets become centralized, companies

10 Thomas A Piraino, Jr (2007), Reconciling the Harvard and Chicago Schools: A New Antitrust Approach

for the 21st Century, Indiana Law Journal, 82(2), p 348-350

11 Harvard economists were greatly influenced by the classical theory of the market structure of the French economist Augustin Cournot For analysis of the effects of the Cournot model, see also: Eric Maskin and

Jean Tirole (1987), A Theory of Dynamic Oligopoly, III Cournot Competition, European Economic Review,

31, p.947-968

will then engage in more anti-competitive activities12 Therefore, the Harvard school completely opposed the forms of economic integration against the fact that they were not as popular at that time compared to vertical and mixed economic integration13 which promises to reduce transaction costs, hence leading to lower costs and resultantly improve consumers’ benefit14 Harvard school drives judges and policymakers to the assumption that any economic integration behaviors performed by companies displaying dominant market power should be considered illegal and this school also emphasizes the act of protecting small businesses from business expansion rather than consumer protection15

In addition, the main argument in support of this policy is that Small and Mid-size Enterprises (SMEs) will be more dynamic, creative and able to create job opportunities in comparison with large firms16 Therefore, they should be granted with some extent of priority to be mature However, the actual data proved that it is very difficult for the small businesses to create and contribute to economic development compared to their counterparts of larger scale17 On the other hand, giving preference to small enterprises leads to inefficiencies in terms of allocating resources and imposing large costs on the economy For example, in the retail market, large supermarkets buy in bulk so they are supposed to be eligible for discounts from suppliers Taking advantage of this, supermarkets will have their items offered cheaper prices compared to small-scale shops which, in the long run, will have to file bankruptcy because of the lack of competition capabilities However, based on economic analysis, the reduction in the cost of their purchases is due to economic advantages of scale, not because they accept losses to enforce destructive pricing or unfair competition As such, large companies decide on low

12 Hovenkamp (2003), The Rationalization of Antitrust, Harvard Law Review, 116(3), p 917-944

13 Kąkol M.K (2014), The evolution of US Merger Control Policy Part 1: 1890 – 1973, Ekonomia i Prawo

Economics and Law, 13(3), p.413

14 Donald F Turner (1962), The Definition of Agreement under the Sherman Act: Conscious Parallelism and

Refusals to Deal, Havard Law Review, 75(4), p 663-673

15 W.G Sheperd (1985), The Economics of Industrial Organization, (2nd ed.), Prentice-Hall, p 53

16 Massimo Motta (2003), Competition Policy: Theory and Practise, Cambridge University Press, p 21

17 For the sake of short-term survival, usually small businesses will focus on profits over investment in product development

selling prices because they operate more efficiently than small companies In the long run, the more efficient their operations are, the more consumers can benefit from the low retail price This is completely in line with the economic theory of efficient resource allocation stating that only the most efficient firms should survive

in the market and bring benefits to society18

1.2.1.2 Protecting consumer welfare or total social welfare

The disagreement, as intense as it has been described, pits experts who aim the economic concentration policy to protect consumer welfare against the ones who stand for the protection of total social welfare In his 1966 article, Robert Bork (an observer of Chicago school19) argued that competition law should simply aim to increase efficiency in the economy 20, increase welfare 21 (Chicago school is prone

to draw an analogy between welfare and consumer welfare, reducing production costs, increasing quality and quantity of the output22) This has created a strong wave in view of controlling economic concentration (the General Dynamics case in

197423, as the most typical illustration) The Chicago school believes that the market (i.e companies in the industry) will know how to adjust any competition imbalance on their own without profound legal intervention24 They argue that in order to form an "efficient" economy, economic integration is sometimes necessary,

as long as the welfare of consumers is protected. 25

18 Massimo Motta (2003), footnote 16, p 13

19 The Chicago school of economics was initiated by scholars: R Posner và R H Bork See also: Richard A

Posner (2001), footnote 6; Robert H Bork (1978), The Antitrust Paradox, New York Free Press

20 Robert H Bork (1966), Legislative Intent and the Policy of the Sherman Act, Journal of Law and

Economics, 9, p.51

21 In most cases, an increase in the selling price of a product results in a decrease in total social welfare as well as a decrease in total consumer welfare However, an exception exists, even though consumer surplus decreases, total surplus still increase: in the case of economic concentration cases that reduce the costs of the business after the economic concentration decrease, bringing outstanding profits to the producer enough to offset the lost surplus on the part of consumers Most of the views of economic researchers are in favor of formulating competition policies towards protecting total surpluses, but lawmakers have very different goals

22 Frank H Easterbrook (1986), Workable Antirust Policy, Michigan Law Review, 84, p.1696- 1703

23 U.S v General Dynamics Co (1974), 415 U.S 486

24 The Chicago School believes that the market will deliver the best products and performance when it is

followed by the "laws of natural efficiency" - Eleanor Fox (1987), The Battle for the Soul of Antitrust,

California Law Review, 75, p 917 – 923

25 Robert H Bork (1993), the Antitrust Paradox: A Policy at War with Itself, Simon & Schuster Inc., p 90

However, this argument of the Chicago school still has a limitation That is, allowing the market to self-adjust can undermine the attractiveness and incentive for innovation of the industry, even if it initially does not affect the well-being of consumers26, thereby leading to the ineffectiveness of economic resources, reducing total social and consumer welfare alike

To make up for this shortcoming, a modern school emerged in the early 1990s27: The Late Chicago school, starting with the California Dental Ass’n case28, aims to protect total social welfare Gross welfare (or gross surplus) is the first standard used in economics to measure the operational health of an industry29 – is calculated by having the consumer surplus30 added to manufacturer surplus31 Based

on that premise, when all other parameters remain the same, an increase in the selling price of the product reduces the consumer surplus and increases the manufacturer surplus (the surplus will be passed from the consumer to the manufacturer and total social surplus remain unchanged) However, it is the situation that only happens under ideal conditions In reality, the reduction in consumer surplus and the increase in manufacturer surplus are not always simultaneous and reciprocal As a result, the total social surplus is still reduced, creating load losses The focus of this model is on economic resources which are allocated efficiently, regardless of whether the surplus is distributed fairly or not32

26 Robert D Atkinson và David B Audretsch (2011), Economic Doctrines and Approaches to Antitrust, The

Information Technology & Innovation Foundation of Washington, p 18-19

27 L Sullivan (1995), Post-Chicago Economics: Economists, Lawyers, Judges, and Enforcement Officials in

a Less Determinate World, Antitrust Law Journal, 63(2), p 669

28 California Dental Ass’n v FTC (1999), 526 U.S 756

29 Massimo Motta (2003), Competition Policy: Theory and Practise, Cambridge University Press, p 24

30 Consumer surplus measures the consumer's interest to enter the market as the difference between the price consumers are willing to pay and the prices that consumers actually pay – Gregory Mankiw (2014),

Principles of Economics, (7th ed.), Cengage Learning, p.138

31 Manufacturer's surplus is profit from the sale of products or, in some cases, also includes government

revenues, taxes and other revenues that do not create social loss: Gregory Mankiw (2014), Principles of

Economics, (7th ed.), Cengage Learning, p.141

32 It doesn't matter more or less whether the benefits of the consumer, the manufacturer or the government are This theory is based on the fact that in most situations the producer (or shareholder of the manufacturing company) of this product is the "consumer of another product" Therefore, the consumer still does not suffer

damage, only the total social surplus is enough: Jean Tirole (1988), The Theory of Industrial Organization,

MIT Press, tr 7 – 12

Both the pre- and post-Chicago schools revolve around the definition of

"welfare" and "economic efficiency" (efficiency) However, unlike the pre- Chicago school, which focused on protecting the welfare of consumers, the post-Chicago school tackles more with the intrinsic value and the efficiency that economic integration acts bring to the economy Efficiency here includes not only efficiency when it comes to economic resource allocation or production costs, but also progressive efficiency - improvement of production techniques or market entry of potential firms Therefore, when assessing whether an economic integration case should be allowed or not, the progressive efficiency criterion will override the one

of affecting the consumer welfare By taking advantage of both the principles and tools of Harvard and Chicago, the post-Chicago school has initially realized the potential competitiveness- restricting effect in some vertical economic integration cases

In fact, some countries of Canada, Australia or New Zealand 33 apply the above theories to support the development of a competition policy aimed at protecting total social surplus (efficiency), while others rely on a foundation of protecting consumers - typically America34, Finland, UK, Ireland and Europe (although these systems sometimes express both views on different issues35)

1.2.1.3 Protect the nation's competitive strategy

Legal studies in several countries have shown that lawmakers tend to introduce tolerant competition policies in order to support domestic firms36 This is sometimes interpreted as an act of favor from the government who expects domestic firms to grow into larger scale so they can comparably compete with

33 In Vietnam, the objectives of competition policy are not clearly specified in legal documents, but

mentioned and encouraged by researchers Bui Xuan Hai (2004), Objectives and Scope of Competition La”, Journal of State and Law, 2, pp.43 - 51; VCA (2012), Report on the Review of Competition Law Regulations

in Vietnam, p 49

34 Citing US economic concentration guidance: Regulators must pay attention to… cause harm to consumers

in relevant markets, for example from maintaining an increase in product prices DOJ and FTC (2010),

Horizontal Merger Guidelines, Department of Justice, p.1 – 34

35 Massimo Motta (2003), footnote 16, p.13

36 A prime example is its support to create the "National Champions" against foreign corporations - See also

Thomas W Ross (2007), Recent Canadian Policy toward Industry: Competition Policy, Industrial Policy

and National Champions, Second Lisbon Conference on Competition Law and Economics, pp.1-59

foreign firms, properly gain foothold in the domestic market37 or even get themselves established in overseas markets38 Usually, this policy is followed by two models: (i) in the market where the majority of domestic firms export or sell products to foreign consumers, economic integration, though creating a non-competitive effect on foreign consumers, is seen as increasing domestic national welfare and (ii) in contrast, in a market where domestic firms have to compete with

a range of foreign competitors The protection of the domestic market and business will be aimed at preventing the predatory dumping by foreign companies who enter the market and outperform domestic firms In this case, the Canadian competition law stipulates that: the coordinated effects on price is only granted on enterprises who deal with exported goods39

Another approach to this model is the coordination among countries to promote the economic integration towards globalization and regionalization40 This model is purely strategic and quite unnecessary for social welfare In relation

to transnational economic concentration cases, Joe Brodley41 gives opinion that, the loss of companies with domestic competitiveness will gradually weaken a nation's competitive advantage based on Michael's economic theory of "National Competitiveness" Porter42. Accordingly, the wave of international economic integration needs to be expanded, countries (or regions) who choose their own competitive advantage and enter the global market need to lower the barriers that protect the domestic market As a result, the earlier globalization or regionalization will increase the efficiency of capital allocation, take advantage of competitive

37 This explains why European member states, although considered as a common economic community, still strongly oppose France and Germany in their entry into the domestic market See also: Dan Tabery (2011),

Competition law in the EU, focus on cartels and their reveal, Mendel Brno University Bachelor Thesis, p 26

38 Marek Martyniszyn, (2012), Export Cartels: Is it Legal to Target Your Neighbour? Analysis in Light of

Recent Case Law, Journal of International Economic Law, 15(1), p 181

39 Mark Katz & Erika Douglas, 2011, Minn-Chem Incorporated et al v Agrium Incorporated et al.: A

Canadian Perspective on the Extraterritorial Application of U.S Antitrust Law, Antitrust Chronicle,

Competition Policy International, vol 11

40 The promotion of economic concentration to take advantage of comparative advantages in the region (or globally) is one of the key goals in the economic concentration policy of the economic alliances (Typically the European Union)

41 Joseph F Brodley (1990), Antitrust and Competitive Advantage in World Markets, Antitrust, 38 (5), p.9

42 Micheal Porter (1998), The Competitive Advantage of Nations, Havard Business Review, p.74 – 91

advantages and minimize opportunity costs43 However, in terms of the total loss of social welfare, the presence of a business with a dominant position can inflict the comparable social losses to the international economy that happened to domestic economic integration cases44

1.2.1.4 Other targets Social target:

In certain times, the competition policy is loosened to relieve social tension However, the laxity on the implementation of policies to may create another more serious problem in the future Any sudden loosening or intervention of policies to the market can negatively affect the allocative efficiency of the economy

Political target:

In some cases, the formation of large industrial conglomerates will lead to political collusion Usually, the restrained democracy and free competition of the market as a result of the monopoly of wealth and resources possessed by some aristocrats or their organizations that are influential enough to distort the economic policies for their own interests

Production technology improvement target:

This goal has been analyzed in the New Economy school that is specifically applied to assess the competitiveness of advanced technology industries after a vertical merger45 includes “inventions, intellectual property, and technical advances”46 Accordingly, it is necessary to accept social load losses (including consumer welfare and producer losses) in the short term for the bigger aim of the concentration of economic resources to generate developments of science and

43 Harvey J Goldschmid, H Michael Mann and J Fred Weston (1974), Industrial Concentration: The New

Learning, Little Brown & Co

44 Jörn Kleinert and Henning Klodt (2002), Cause and consequences of merger waves, Kiel Institute of World

Economic, p 27

45 Bruce M Owen (2011), Antitrust and Vertical integration in New Economy Industry with a Broadband

Acess, Stanford Law and Economics Olin, p 376

46 United States Antitrust Modernization Commission (2007), Report and Recommendations, p.19

technology in the future if it can be proved that the arrival of new inventions will bring about long-term economic growth47

Ensure social equity target:

One of the most freedom-inclined competitive control systems comes from Germany where there are vertical price arrangements between manufacturers and retailers to ensure the latter will not sell products at unaffordable prices which can defame the former This coercive agreement will directly affect the fairness, especifically the retailer's right to do business

1.2.2 Economic analysis on the effectiveness of economic integration

How to include the aforementioned "efficiency" in the analysis of economic integration activities, and simultaneously minimize the risks and errors in such analytical activities

1.2.2.1 Issues in information collection

The nature of an analysis and calculation of the effectiveness of economic integration activities is a quantitative analysis of economic hypotheses Therefore, the analyst's first job is to collect data and information relating to the business

First, responsibility to collect evidence: Some legal systems recognize that

competition authority should be the one who is obliged to prove, inspect, analyze and make decisions, while others think that enterprises themselves must play the role of arbitrary people who are liable to providing the evidence Arguments in favor of the latter assumption is based on the suggestion that the firms themselves are the most well-informed about their competitors Allowing competition authority

to collect data will not be objective enough, not to mention creating a cost burden However, even if the authority specify what documents businesses need to submit and what information they are supposed to provide, the lack of information still

occurs This is the reason why the United States courts consistently refuse to accept such cases48

Second, criteria of evidence: When decisions are based on evidence, one of the first questions is the criteria for the evidence

1.2.2.2 Issues in analysis and assumptions

Although considered as the most advanced and accurate tool in legal economic analysis, model analysis still faces certain barriers when it comes to considering economic integration cases Therefore, before dismissing an economic integration case, law-enforcement agencies and antitrust courts must ensure that the anti-competitive effect theories are rendered absolutely applicable.49

There are many ways for businesses to engage in anticompetitive behavior (through imposing exorbitant prices on consumers, or through agreements or practices that create social damage) The weakness of model analysis is:

First, the analytical models must be based on accurate data on the description and behavioral habits of businesses, their competitors and the market While some effects might be visible in some cases, others will not and there are always variables beyond assumptions

Second, most of the analytical models of business behavior are based on the assumption that the enterprises are managed in a sophisticated manner and for the sake of profit optimizing for the business itself However, sometimes this is not true

in reality For example, the model is built on the assumption that after a merger, the company will perform more efficiently by means of supposedly reduced operating prices due to the advantage of its scale of production However, due to holding an important position and different products in the market, enterprises not only have the price decreased but also inflicts insurmountable damage on consumers due to exorbitant buying prices

48 Kinne and Konstanze (1998), The Efficiency Defence in the US American Merger Policy, HWWA –

Institut fur Wirtchaftsforchung – Hamburg, p 67

49 Ralph A Winter (2005), Vertical Restraints and Antitrust Policy: A Reaction to Cooper, Froeb, O’Brien,

and Vita, Competition Policy International, 1(2), p 74 – 89.

Third, the behaviors proposed in theory do not directly lead to competitive reaction effects in reality but lead to a different one For example, the vertical increase in mobilizing costs in the economic integration leads to an increase in the cost of the offered products - a competitive effect, but on the other hand, the result increases the cost burden that prevents firms from being able to afford the risk of losses as their items are sold at low prices This indirectly enables its competitors to gain benefit and avoid a price war - a beneficial effect for total social welfare

1.2.3 Process control and enforcement mechanisms issues

In this section, the author will briefly discuss issues related to the enforcement mechanisms and control procedures that the surveyed countries are applying

1.2.3.1 General approach and case-by-case approach

General approach: only economic integration cases that significantly limit

competition are prohibited For cases partially restraining competition (based on indices such as Herfindahl Hirschman Index - HHI uneven market share), cost savings are considered more important than anti-competitive effects General approach used by Bundeskartellant50in Germany and some other bodies, the EU as

an example, alike

Case-by-case approach: Efficiency can be ordered against competitive

reaction effects by case Case-by-case method is used in USA, Canada, USA, UK and Sweden

The general approach is often preferred because case-by-case analysis is too costly and needs constant feed of new data However, the general approach incurs the disadvantage of using only one measurement standard (often using a market share index like the HHI) and often indirectly measuring The use of an index sometimes is not reasonably measurable in all cases

Two-step approach: Usually, for optimum economic efficiency, a

case-by-case approach is combined with some general criteria in legal systems and is called

50 Competition authority of the Federal Republic of Germany

a Sequential method For economic integration cases which are only partially competitive, the case-by-case approach will be the second step in the context that the cases have passed the first check

1.2.3.2 Mechanism through litigation method and through agreement method

Assessing the effects of an economic concentration is only part of the whole control process After the assessment, the authority should make a conclusion of whether to approve it without any condition or have it deployed under some commitments This has been stated in the Vietnamese Competition Law 2018, which is clearly different from the 2004 edition51

For the first option, competition authority is usually the plaintiff itself in a lawsuit, with the parties participating in the economic integration being the defendant After evaluating and determining that an economic integration case will cause anti-competitive effects, the authority can, through the Court, seek a verdict

to completely prevent this case The result of the normal litigation path result in only two solutions: the case passed without the obligation to meet any restrictions,

or will be strictly prohibited This option has been popular for a long time in many countries However, due to its rigidity and extremity, the modern competition law is more inclined to the second option

The second option provides both economic concentration participants and the authority with a much more flexible solution Identifying and calculating the advantages and disadvantages of the economic integration will become meaningless when the latter pursues a litigation path After taking the appraisal steps which determine that the case is believed to bring economic benefits rather than anti-competitive effects, the authority may apply a post-review mechanism as it will have some discussions with the relating parties on some of the methods to eliminate the highly expected anti-competitive effects, along with making a decision based on the agreement This agreement is a commitment of the parties to the authority in

51 Act 36, 37 Competition Law 2018

exchange for the benefits of the economic integration, which is also the origin of the

so called "semi-contracts" decision appears

Although considered to be more difficult to be implemented and more expensive (incurring additional fees for post-check), the second option is an inevitable trend As discussed above, the path of litigation often yields only extreme results; In order to ensure that anti-competitive effects are not overlooked and economic efficiency remains possible, more detailed study and implementation of corrective measures are needed

1.2.3.3 Legalize the guidelines on economic integration

Most economic concentration control agencies (including the ones in Canada and the US) have publicly chosen how they will use an analysis of an economic concentration case, including the ways in which effectiveness is mentioned In Europe, the EU Commission issued a bulletin board related to the analytical aspects and gave examples of how to measure the efficiency If companies bear the burden

of proving the existence of efficiency, the Economic Integration Guide can help firms, competition regulators and Courts, focus on the issues involved despite their lack of inofrmation, hence saving their time and money

Conclusion of chapter 1

In economics and legal science, there are many different approaches and definitions of economic integration behavior In this chapter, the author has the following conclusions:

First, economic integration is a phenomenon of centralized decision-making right after a transaction of ownership (shares and assets) of an enterprise, and that decision-making power will result in, or more likely to, anti-competition effect on the market In which, vertical economic concentration is the case of economic integration between companies having the relationship of buyer - seller in the same supply chain of goods and services; Mixed economic integration is a case of economic concentration between companies that are not in the same market and also have no buyer-seller relationship

Second, most countries in the world still agree that: economic integration activities must bring about positive impacts, in order to ensure economic efficiency, competitive environment and increase consumer welfare However, the challenge is

to determine what the economic efficiency that economic integration brings to stakeholders, and when government intervention will bring positive effects Accordingly, an advanced economic integration control model should satisfy the following criteria:

- Correctly determining the nature and influence ability of economic concentration and its variations;

- The evaluation process must consist of two steps (sequential): Step one provides a general assessment framework to save costs If the cases fall into the control of step two, apply case-by-case analysis

- Apply the behavior-analysis model, the benefit-cost model in the analysis

of economic integration cases;

- Build an agreement mechanism and apply a review - approve or review - forbid mechanism;

- Legalize the guidelines on economic integration, or the method of evaluating economic efficiency of economic integration cases

CHAPTER 2: LEGAL FRAMWORK ON ECONOMIC INTERGRATION: A COMPARATIVE ANALYSIS

2.1 COMPETITION LAW GOVERNING ECONOMIC INTERGRATION

IN VIETNAM

2.1.1 Approach of Competition Law 2018

Compared with the Competition Law 2004, the Competition Law 2018 somewhat has a change in approach, especially the incorporate of legal thinking and economic thinking According to Article 33 of Competition Law 2018, the notification threshold of economic integration includes the total revenue, total assets

of one of the parties participating in the economic integration on the Vietnamese market and the value of economic concentration transactions Specifically, enterprises participating in economic integration must notify the National Committee of Competition before conducting economic integration if it falls under the notification threshold of economic integration The threshold is based on one of the criteria such as the total assets on the market of one of the enterprises participating in the economic integration, the total turnover in the market and the value of economic integration transactions

In addition, with the change of the approach to controlling economic integration, from banning based on market share thresholds of parties participating

in economic integration, The Competition Law 2018 amends the prohibition on economic integration if there is impact or ability to cause significant anti-competitive effects on the market The decision to handle the economic integration case must be made on the basis of the assessment of the economic integration of the competition authority based on the filtering steps on the level of market accumulation and assessment of competition effects of economic integration

There are 8 basic, but undoubtedly essential, new amendments and supplements to the Competition Law 2018, including the expansion of the scope of

regulation and the subject of application; Amend, supplement prohibited acts; Control anti-competitive agreements as well as leniency policies; Implement criteria for determining market strength, provisions on controlling economic concentration; Control unfair competition practices; Reorganize the competition authority and improve the regulations on the order and procedures in competition legal proceedings Regarding the scope of regulation, the 2004 Competition Law only constrained acts performed within the territory of Vietnam In fact, according to the Government's Report No 377 / TTr-CP to the National Assembly on September 6,

2017 on the Competition Law Project, there are many competition cases being carried out outside the territory of Vietnam has certain influence on the Vietnamese market For example, in the case of Thailand's Central Group acquiring the BigC Supermarket system in Vietnam, there is no clear legal basis to regulate the behavior that takes place outside the territory of Vietnam but has negative effects on extremely competitive environment in Vietnam Ms Tran Phuong Lan, Head of Inspection Department Economic Integration control – Department of Competition and Consumer Protection (Ministry of Industry and Trade) pointed out.52

“Although at that time, the retailers in the market as well as the supply businesses were very concerned that this deal had potential

competition problems which prove detrimental to domestic retailers

However, the competition authority could not handle this or take

measures to limit competition in the retail sector since this case is not

under the scope of the law”

According to Ms Lan, the Competition Law 2018 has met and solved the issues that are the world's competition trend as well as the handling of competition authorities in the world Specifically, with any competition restriction or economic integration transaction occurring anywhere in the world, outside Vietnam, if there is

a significant anti-competitive effect on the Vietnamese market included in the Competition Law 2018 However, mentioning the expansion of the scope of the

52 VCCI (14/9/2018), trung-kinh-te , last updated on 01/1/2021

https://www.vcci.com.vn/luat-canh-tranh-2018-khong-cam-mot-cach-may-moc-ve-tap-Competition Law 2018, there is an opinion that https://www.vcci.com.vn/luat-canh-tranh-2018-khong-cam-mot-cach-may-moc-ve-tap-Competition Law 2018 tried to expand the scope of adjusting the implementation behavior outside of Vietnam, the relevant terms cannot be applied in specific cases such as Grab's acquisition of Uber

in Southeast Asia, including Vietnam

On the other hand, the approach of the 2004 Competition Law mainly reorganized the strength of an enterprise in the market from the perspective of

"market share" without coming into its nature Specifically, the enterprise must announce the economic integration if the combined market share reaches the threshold of 30%, in the case in which the combined market share reaches over 50%, it is likely to fall into the case of prohibition of economic concentration It can

be seen as a rigid and impractical approach because the assessment and prohibition

of economic integration based only on the criteria of market share do not fully and accurately reflect the market reality and the impact of the case on the competitive environment, leading to the omission of cases that are likely to have a negative

impact on competition or vice versa, the provision that prohibits cases in practice

does not cause a significant restraining effect

Mr Phung Van Thanh, Deputy Head of Competition Restriction Investigation Department - Department of Competition and Consumer Protection (Ministry of Industry and Trade), said that Competition Law 2018 recognized economic concentration as a natural right of enterprises, contributing to improving efficiency in business operations Accordingly, the Law does provide a ban on economic integration mechanically based on the combined market share of enterprises participating in economic integration which accounts for over 50% of the relevant market (as prescribed in the Competition Law 2004) In contrast, the Law only stipulates that enterprises are prohibited from conducting economic integration when the act of economic integration displays the likelihood of causing

a significant anti-competitive effect in the market Mr Thanh said:

“The 11 provisions in Article 11 of the Competition Law ensure

to cover all possible situations in reality in the current market With

regard to the competition agreements prohibited in Article 12, there is a

significant difference from the 2004 Competition Law That is, the Law

absolutely prohibits the competition restriction agreements between

enterprises in the same market, in relation to price, market and output

produced and traded when firms in the same market are competing with a

combined market share of 30% or less”53

The Competition Law 2018 has changed the approach to controlling economic concentration in the direction of empowering the competition authority to assess the competitive impact of economic concentration and increasing the enterprise's initiative in implementing notification procedures to competition authorities and expanding the evaluation factors of an economic concentration case

It can be seen that the expansion of the scope of regulation in the Competition Law

2018 will create a legal corridor to investigate and comprehensively handle all competition acts, contributing to ensuring healthy competition for the domestic market and the implementation of the commitments on competition in bilateral and multilateral trade agreements

in the relevant market; The possibility that an enterprise after economic integration can significantly increase its price or increase the profit-to-revenue ratio; The possibility that an enterprise after economic integration could eliminate or prevent another enterprise from entering or expanding the market; Specific factors in the industry or field in which enterprises participate in economic integration In

53 VCCI (14/9/2018), trung-kinh-te , last updated on 01/1/2021

https://www.vcci.com.vn/luat-canh-tranh-2018-khong-cam-mot-cach-may-moc-ve-tap-addition, the National Committee of Competition assesses the positive impact of economic integration based on the following factors: Positive impacts on the development of the industry, field, science and technology according to the State's strategy and planning; Positive impact on small and medium enterprise development; Strengthening the competitiveness of Vietnamese businesses in international markets

To assess the anti-competitive effect of economic integration, quantitative and qualitative criteria are needed Along with the economic integration, the market structure will also change in the direction of the number of enterprises decreasing and the correlation of the size and strength of enterprises in the market is also different In most countries, the integration of an industry is used by the competition authority as an indicator of the relative size of firms in relation to all sectors in the same industry These metrics can also help define the market format of the industry The most commonly used concentration indicators are the 3 or 5 firm Concentration Ratios (CR3 and CR5), and the HHI (Hirschman - Herfindahl Index) The CR3 index is the total market share of the 3 largest enterprises in the market Meanwhile, the HHI is the sum of the squares of the market shares of firms operating in the relevant market The firm's market share may be the firm's percentage of goods sold divided by the total output of goods sold on the relevant market However, in cases where the output of the goods is difficult to determine, the market share can also be calculated based on sales

Concentration ratios range from 0%–100% Concentration levels are explained in figure 2.1