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Remarkable cases of economic concentration in 2014

22 January 2016
News Vietnam

In the last 5 years, the economic concentration activities in Vietnam grew by 30% on average. This situation reflects an open economy with the participation of many economic sectors and an increase in the economic concentration activities consequently increase as an objective fact. However, that also have potential constituents establishing a dominant business which can affect to the competitive environment. Therefore, in recent years, VCA has been actively performing the task of monitoring and controlling activities to prevent timely and minimize the negative impact of some transactions to the market . In the period 2012 - 2014, VCA has processed 19 notified cases about economic concentration and a lot of consultation before and during implementating economic concentration.

Here are two cases related to merger and acquisition, in which the first case is the acquisition taken place abroad but enterprises have a commercial presence in Vietnam (Acquired PEPSICO); and the second is the case of foreign enterprises (non-business activities in Vietnam) acquiring another foreign enterprise which has a commercial presence and activities in Vietnam (Abbott acquired CFR).

  1. The acquisition of the PEPSICO company

Suntory Beverage & Food (SBF) and Suntory Beverage & Food Asia(SBFA) operating in foreign countries (the Netherlands and Singapore) has acquired 51% stake in the PepsiCo Global Investment II BV (PGI II) - a subsidiary of Linkbay, an affiliated company of Pepsi Co. Group. Suntory Holdings Limited owns two subsidiaries: SBF and SBFA. This group carried out transactions abroad with PepsiCo to buy 51% stake of PGI II. This is the transaction between 2 groups taken outside of Vietnam (see diagram described in the attachment).

However, PGI II operating the food and beverage of PepsiCo in Vietnam holds 100% equity of PepsiCo Vietnam (PIVC). That means PepsiCo has subsidiaries in Vietnam, operating business in Vietnam (reference, the Commercial Law and the Law on Enterprises). After the acquisitions are completed, PIVC will separate food business for a food company to operate, PIVC only operate the field of beverage.

Although Suntory has no commercial presence in Vietnam but the Suntory’s drinks are still available and sold in Vietnam (imported and distributed in Vietnam). The acquisition is performed abroad, but both enterprises are now operating in Vietnam, so they are still be subject to the application of the competition law.

The acquisition above is under the competition law (Article 16, the Competition Law and Article 34 of Decree 116 / ND-CP). The relevant market is the beverage market with a national scale. Based on the market share reports by the enterprise, the market share of PIVC in 2010 and 2011 is 45.6% and 47.1% respectively (data of two years before transaction is conducted), Suntory's share respectively is 0.2% and 0.3%. Thus, the combined market share of the two businesses is 45.8% and 47.4%, which is in the  threshold of control economic concentration (from 30% to 50%). Therefore, the enterprises have obligations to make the notification about the economic concentration. This acquisition is not prohibited so the business should implement the economic concentration procedure in authorized state agencies under the law.

  1. Acquisition of Abbott and CFR

June 5, 2014, the VCA received the notification dossier of Abbott Investments Luxembourg Sarl Company, CFR Pharmaceuticals SA Company and Positron Limited Ltd about Abbott Investments Luxembourg Sarl planning to buy CFR Pharmaceuticals SA. Parties involved are: Seller: Positron Limited Ltd, no activities in Vietnam; Target company: CFR PHARMACEUTICALS SA, operating in Vietnam through representative offices in Ho Chi Minh City and Hanoi, and its subsidiary (Domesco Medical Import-Export JSC.); Buyer: Abbott Investments Luxembourg S.A.R.L. operating in Vietnam through representative offices in Ho Chi Minh City and Hanoi, and its subsidiary (Vietnam 3A Nutrition Ltd.).

Pursuant to Paragraph 3 of Article 17 of the Competition Law, the case of economic concentration is under an acquisition a business, Abbott Investments Luxembourg Sarl buy CFR Pharmaceuticals SA from Positron Ltd Limited.

For this case, the relevant market is defined as the pharmaceutical market classified by active substances (each active substance is a relevant market) throughout the territory of Vietnam. According to the market share report provided by the parties, the combined market share of the active ingredients Duphaston and Betaserc is in the threshold of 30-50%.

The acquisition is taken oversea, which does not alter the structure of the pharmaceutical market of Vietnam.

The combined market shares of the parties on the related product market in Vietnam is less than 50%. Therefore, pursuant to Article 18 of the Competition Law, the acquisition mentioned above shall not be prohibited in cases stipulated by the Competition Law.