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A competition case in Vietnam

A competition case in Vietnam. Quang Binh, 12/01/2006. General Information.

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A competition case in Vietnam

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  1. A competition case in Vietnam Quang Binh, 12/01/2006

  2. General Information • In early 2005, Long Viet Co. Ltd (LV Co.) claimed Truong Thinh joint venture company (TT Co.) for abusing its dominant position to prevent new entry from other companies including Long Viet, violating Clause 6, Article 13 of Vietnam competition law. • Relevant product is premium type of a product that improves energy for human body

  3. Claimant – LV Co. • Information on possession • LV Co. is a liability limited company • Operation • LV Co. has a factory located in Binh Duong province, proximate to Ho Chi Minh City • Started introducing its products in 12/2003 • Products of LV Co. • Climax – premium product • Superlite – premium product

  4. Defendant – TT Co. • Information on possesion • TT Co. is a joint venture, in which Kinglite (a foreign company) holds 60% of capital and South Saigon Trading and Service Company holds 40% • In addition, Kinglite established and holds 100% of capital of North Hanoi Trading and Service Company (BHN Co.) • Operation • TT Co. has a factory in Ho Chi Minh City and mainly operates business in the South of Vietnam • BHN Co. has a factory in Ha Tay province (proximate to Hanoi) and operate business in the North of Vietnam

  5. Defendant – TT Co. (cont’) • Products: • LiteMax – premium product • Sinder - premium product • BeatGain - premium product

  6. Market share of TT Co. • From Quang Binh southward • Three products of LiteMax, Sinder và BeatGain manufactured by TT Co. account for 90% of premium products • Nationwide • Three products of LiteMax, Sinder and BeatGain manufactured by TT Co. account for 85% of premium products

  7. Market power of TT Co. • Capital • Start-up capital: US$ 50 million • In 2000: US$ 100 million • In 2004: US$ 150 million • Kinglite has a capital of US$ 800 million, total assets of US$ 1.2 billion and market capitalization in 2004 is US$ 2 million • Technology and intellectual property rights capability: LiteMax, Sinder và BeatGain are 3 leading trade marks both in Asia and in the world • Distribution network: Distribution network developed nationwide in Vietnam, further developed since the operation of BHN Co. in the North of Vietnam

  8. Product – characteristics • Price: • Premium: 3x VND • Medium: 2x VND • Mainstream: x VND • Usage purpose: Products manufactured by the two companies are used to improve energy for human body • Degree of effect: decreasing from premium to medium and mainstream

  9. Geographical market

  10. Geographical market (cont’) • Factories manufacturing subject products locate in Hanoi, Ho Chi Minh City and their surroundings. Therefore, transportation costs within one part and to the other are different. • In marketing and promotion strategy of TT Co., Vietnam market was divided into two parts: Ha Tinh province northward and Quang Binh province southward

  11. Conclusion on relevant market • Relevant product market • Belongs to premium type with energy and nutritional features • Relevant geographical market • Viet Nam territory from Quang Binh province southward

  12. Conduct of the defendant (TT Co.) • TT Co. signed distribution contracts with distributors in which it is agreed that : • TT Co. will sponsor the distributors with a fixed amount on annual basis depending on business scale of each respective distributor. • The above distributors should facilitate TT Co.’s activities of advertising, promoting and marketing its products • They also commit not to sell, advertise, promote or market any other products of the same type

  13. Conduct of TT Co. (cont’d) • TT Co. signed distribution contracts in which it is agreed that: • Term of such contracts is one year • Distributors should commit to keep absolute confidentiality of all information regarding the content and value of the contract concluded with TT Co. • According to LV Co.’s survey in the relevant geographical market (as per LV Co.’s determination), 65% of distributors (of a sample size of 1.600 distributors) have signed such contracts with the defendant TT Co.

  14. Regulations of Viet Nam’s Commercial Law 2005 on purchase and sale agency • Agency is a commercial act whereby the principal and the agent agree for the agent, on behalf of itself to conduct sale, purchase of goods for the principal or provide services of the principal to customers in return of remuneration (Art. 166) • Exclusive agency is a form of agency whereby a sole agent is authorized by a principal to sell, purchase one or more items of goods or provide one or more types of services within a certain territory. (Art 169, Sect. 2)

  15. Damages vis-à-vis the claimant (as per the LV Co.’s allegation) • In 2004, total volume of products sold by LV Co. was only about 0,6% of premium product type • LV Co. had to spend huge cost to establish retail outlet network but the business efficiency of such distribution channel is quite low.

  16. Issues to be considered • Are accurate the ways in which the claimant (LV Co.) defined the relevant market (including relevant product market and relevant geographical market) ? • Is the conduct of the defendant (TT Co.) in breach of regulations of Viet Nam’s Competition Law ? • In case of violation, you are required to make recommendation or measures for such infringement.

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