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A competition case in
Vietnam
Quang Binh, 12/01/2006
General Information
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
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
Claimant – LV Co.

Information on possession
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Operation
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LV Co. is a liability limited company
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.
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Climax – premium product
Superlite – premium product
Defendant – TT Co.
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Information on possesion
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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
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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
Defendant – TT Co. (cont’)
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Products:
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LiteMax – premium product
Sinder - premium product
BeatGain - premium product
Market share of TT Co.
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From Quang Binh southward
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Three products of LiteMax, Sinder và BeatGain
manufactured by TT Co. account for 90% of
premium products
Nationwide
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Three products of LiteMax, Sinder and BeatGain
manufactured by TT Co. account for 85% of
premium products
Market power of TT Co.
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Capital
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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
Product – characteristics
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Price:
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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
Geographical market
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
Conclusion on relevant market

Relevant product market


Belongs to premium type with energy and
nutritional features
Relevant geographical market
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Viet Nam territory from Quang Binh province
southward
Conduct of the defendant (TT Co.)
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TT Co. signed distribution contracts with
distributors in which it is agreed that :
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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
Conduct of TT Co. (cont’d)

TT Co. signed distribution contracts in which it is
agreed that:
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
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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.
Regulations of Viet Nam’s Commercial
Law 2005 on purchase and sale agency
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
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)
Damages vis-à-vis the claimant (as
per the LV Co.’s allegation)
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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.
Issues to be considered
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
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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.