LUND UNIVERSITY HO CHI MINH CITY FACULTY OF LAW UNIVERSITY OF LAW TRAN HOANG NGA REGULATIONS AGAINST ABUSIVE PRICING -A COMPARISON OF EU, US AND VIETNAMESE LAW AND AN APPLICATION OF ITS RESULTS TO VIETNAM Field of Study: International and Comparative Law Code: 62.38.60.01 A SUMMARY OF THE DOCTORAL DISSERTATION OF LAW HCMC-2011 2 This research was done at: LUND UNIVERSITY, FACULTY OF LAW HO CHI MINH CITY UNIVERSITY OF LAW SUPERVISORS: PROF. HANS HENRIK LIDGARD ASST.PROF. LÊ THỊ BÍCH THỌ Discussant 1: Discussant 2: …………………………………………… Discussant 3: This dissertation will be defended at the Ho Chi Minh City University of Law Date and time: This dissertation may be found at following libraries: - Vietnam National Library - Library of Ho Chi Minh City University of Law - Library of Lund University Faculty of Law 3 Chapter 1 INTRODUCTION 1.1. Background Competition and monopoly are integral issues to deal with in a market economy. While many other countries have long experience in dealing with these issues, Vietnam only commenced the process of transitioning from a planned to a market economy a little more than two decades ago. Thus, Vietnam currently faces many theoretical and practical challenges involved in protection of effective competition. Due to its own unique circumstances, abuses of dominance are one of the most serious problems for the Vietnamese market. Research in this field, therefore, has a significant potential for improving the Vietnamese economy. In a market economy, prices are one of the most important signs of the state of competition. Prices are established and exercised by economic rules. In a market economy prices are the result of competition. Most basic economic concepts are relevant to prices. The question of whether sellers are price-takers or price-makers is applied to identify whether the market is competitive, monopolistic, or oligarchic. In a competitive market, prices are decided by objective economic rules, especially by the interrelation between supply and demand. So sellers must obey the rules and charge the most appropriate prices in the framework of the rules which serve their competition target. Otherwise, they cannot to exist in the long run and will be driven from the market. Prices are also important tools used by competitors in their struggle for existence and for a position in the market. Pricing is an extremely important job in every enterprise in a market economy. It is the basis for the realization of business targets. In competition, 4 pricing is utilized at the first instance. Strategies applied to other elements of production such as quality, functions, or guarantees, after-sales care, etc., are, after all, of indirect relevance to prices. Pricing can be used for pro-competitive or anti-competitive purposes. In a monopoly market, the power to govern prices is in the hands of the seller. There is a great tendency to exploit that power to extract benefits and maintain the monopolist‟s position. Therefore, it is necessary that the power of regulation be in the proper “hands” in order to curb this danger to a competitive market. The point in time which is largely regarded as the birth of monopoly control laws is the year 1890 with the passage of the Sherman Act in the US. After the Sherman Act, the US enacted in turn the Clayton Act (1914), the Federal Trade Commission Act (1914), the Webb-Pomerene Act (1918), the Robinson Patman Act (1936), the Wheeler-Lea Act (1938), the Celler Kefauver Antimerger Amendment (1950), the Hart-Scott-Rodino Antitrust Improvements Act (1976), which all constituted the anti-monopoly laws (in the US called “Anti-Trust Laws”). In those Acts, Section 2 of the Sherman Act, Sections 2 and 3 of the Clayton Act, and the Robinson – Patman Act regulate abuses of a dominant position (in the US usually called a “monopoly power”). In the European Union, monopoly control laws came to life at the same time, and as part of, the establishment of the Community. Provisions on competition principles appeared in Articles 3 (f), 85 and 86 of the Treaty of Rome of 25 March 1957 which established the European Economic Community. To an extent, both Articles 85 and 86 of Treaty of Rome are monopoly control laws since Article 85 prohibits cartels and Article 86 prohibits abuses of a dominant position. The Treaty of Rome was amended by the Single European Act, and, the Treaty of Maastrichtestablishing the European Union in 1992. This Treaty entered into force from 1 5 November 1993 and became the EC Treaty. Articles 85 and 86 became Articles 81 and 82 of the EC Treaty and used to be called as Article 81EC, Article 82EC. The Treaty was further amended by the Treaty of Amsterdam and the Treaty of Nice. Then, on 13 December 2007, the EU member states signed the Treaty of Lisbon, which entered into force on 1 December 2009. The Lisbon Treaty amends all of the prior Treaties. In this process, the original Treaty establishing the European Economic Community from 1957 became the Treaty on the Functioning of the European Union (TFEU). Articles 81 and 82EC now become Article 101 and 102 of TFEU (Article 101TFEU and Article 102TFEU). Nowadays, EU competition law and US antitrust law have become popular models of competition law in the world. Based on theory, and Vietnam‟s specific situation, the issue of legislation against abuse of a dominant position is a burning question of the day and strategic task of Vietnam‟s monopoly control laws. These regulations must be used to force all entities possessing monopoly power to respect legal rights and economic expectations of consumers and put an end to competition restraints. However, after 6 years from the date Vietnam Law on Competition (VLC)came into force, it has not had much practical effect. In fact, so far only three cases relating to abuse of a dominant or monopoly position have been dealt with by the authorities under the VLC. The first case is Tan Hiep Phat Ltd. v. Vietnam Brewery Ltd.(THP v. VBL), commenced in the later part of 2003, and ultimately brought in the form of an official complaint to the Vietnam Competition Authority (VCA) in the beginning of 2007, after its establishment and issuance of governmental decrees providing detailed guidance on the implementation of the VLC. The VCA made its decision to investigate the case in October 2007, then 6 concluded the investigation and referred the case to Vietnam Competition Council (VCC) for final decision. Based on proposals of the VCA, the VCC decided to terminate handling the case because the alleged enterprise did not possess a dominant position in the relevant market. The second case, which has reached a final result – a decision made by the Competition Case Handling Council (CCHC) – is the Vinapco case. The third case is the Megastar case, in which six companies in the movie industry submitted a complaint on Megastar‟s abuses of its dominant position to the VCA in May 2010, and the VCA has made an official investigation. In the meantime there are many other practices which have attracted arguments from enterprises, state agencies, researchers, and lawyers about whether they are abusive conduct such as increasing the prices of pharmaceutical products, milk products, and steel, “price wars” among mobile telecommunications providers, a price dispute between VNPT and EVN over electric grids and pole rental, complaints about the price increase relating to exclusive broadcasting rights of K+ to Sunday matches of the English Premier League in Vietnam. This real-world situation demonstrates two problems. The first is that although the VLC has been established and a range of laws and guiding legal documents have been promulgated, Vietnamese society and especially its developing business community has not developed a unified concept of this issue. The second is that abuses of a dominant position still exist under various forms yet are not effectively dealt with. This phenomenon raises questions regarding the practical value of the Competition Law and with respect to what the Vietnamese State should do next if it is to construct comprehensive, clear, and consistent competition policies. Relevant materials regarding the laws of developed countries such as the US and the EU are plentiful. a comparative law approach 7 would aid in understanding current regulations of abuses of a dominant position, while referring to Vietnamese laws and Vietnam‟s factual situation to derive practical solutions to existing problems would be useful and help fill gaps in theoretical and practical solutions. Meanwhile, many abusive activities, which had been identified and condemned by authorities, related to the pricing policies of dominant enterprises. I therefore decided to perform doctoral research with the object of producing a thesis titled: “Regulations against abusive pricing – A comparison of EU, US, and Vietnamese laws and an application of its results to Vietnam”. The results of my research should provide useful ideas with respect to regulations which will be important to the development of the Vietnamese economy. Referring to the experience of other countries‟ laws from a comparative perspective may also permit me to make suggestions for improving Vietnamese competition law. Furthermore, I hope that the results of my research will be helpful in my teaching and be a further reference for others interested in this topic. 1.2. Purposes This research has two purposes. The first purpose is to investigate both theoretical and practical aspects of competition laws in combating abusive pricing by dominant enterprises in the EU, US and Vietnam. It aims at finding universally accepted relevant concepts, as well as commonalities in measures applied to prevent and deal with infringements. It also aims at identifying differences among the laws of different countries and determining the conditions and consequences of these differences. 8 The second purpose is to draw lessons for Vietnam. This cannot be achieved without first attaining a clear and comprehensive awareness of Vietnam‟s actual situation in this field. My aim is to determine the contents and practical effects of current regulations on abusive pricing. More importantly, I want to discover what if any deficiencies exist under Vietnamese competition law in this area and to propose solutions. 1.3. Definition and Delimitation There is no interchangeable official definition of the term “abusive pricing”, or “pricing abuses” in the laws of any country that I have studied. However, the term is popularly used in legal documents and academic legal works. It appears to me that it is generally recognized as having one meaning: it refers to abuses of dominant or monopoly positions in respect of pricing. Therefore, in the framework of this dissertation, I will use the term “abusive pricing” with following definition: Abusive pricing is the abuse of a dominant or monopoly position (in accordance with EU and Vietnamese competition law), or monopolise or attempt to monopolise (in accordance with US antitrust law), relating directly to pricing of goods or services of the infringing entity. This dissertation focuses on only laws against abusive pricing. In other words, this dissertation‟s contents are absolutely within the framework of unilateral pricing for restraint of competition. It does not discuss collusion, i.e., joint conduct for restraining competition such as agreements and concerted practices, even when they relate to pricing. It also does not discuss other abuses not directly related to pricing effects.even if they relate to pricing. It also does not discuss other abuses not directly relating to pricing. As the title of this dissertation states, I have selected for examination only the laws of three legal systems: The EU, the US 9 and Vietnam. The EU and the US are the most important and characteristic legal systems, which deal with the issues concerned in this thesis. These two legal systems have had a great deal of experience in addressing abusive pricing, in addition to of other forms of competition abuses. The relevant authorities in both systems have issued guidelines on abusive pricing. Studying these two legal systems‟ experiences in the field of fighting against abusive pricing is a good approach to applying their experiences and answers to relevant issues in Vietnam. All basic rules, provisions and regulations on forms and remedies of the Vietnamese legal system on abusive pricing will be analysed. This dissertation will concentrate on clarifying weaknesses in the current provisions of Vietnamese law in order to develop and propose meaningful solutions. This dissertation utilises facts and legal theory obtained from many different sources, such as statutes, regulations and official guidance, decisional law from courts, administrative authorities, sources of academic thought found in books, empirical studies, legal journals, forum or conference reports, official reports, statistics from state bodies, and reports found in mass media. This dissertation uses case law from the EU and US to illustrate issues under discussion. With such a long development and history, the extent of sources in EU and US law is enormous. This provides huge diversified views on and practical experience for this dissertation‟s research issues. However, on the other hand, this presents difficulties in performing comparisons at the macro level in order to discover typical similarities and differences between the two systems. Thus, in some instances when presenting the historical development of EU and US case law or theoretical arguments under discussion, this dissertation relies primarily on official reports and 10 guidelines of EU and US competition authorities and includes references made therein even if I have not studied everything myself. 1.4. Methods In order to fulfil the above-mentioned purposes, I use a combination of study methods for legal research. To wit: the traditional legal (dogmatic) method and a comparative legal method. I will also apply a historical and law and economics perspective in my research. Traditional legal method (or Legal Dogmatics): This method is used to interpret and evaluate the content and systematize specific valid provisions of concerned legal systems. Sources such as laws, case law, preparatory work and doctrine are assigned value and analysed in such a way as to shed light on the given problem and find the answers to the question posed. The ultimate aim of using this method is to investigate current applicable law against abusive pricing in selected legal systems. It not only describes the applicable law and answers the question why the law is as it is, but also targets reaching certain rules and legal/technical significance in legislation of the concerned law. This method will be presented in my dissertation in two parts: descriptive and analytical. The first part presents the area of law to which the current problem belongs. The second part scrutinizes the legal problem in terms of its components and finally it is brought together and analysed as a whole. This method is used in Chapters 2, 3, and 4 of this dissertation. Comparative legal method: I use this method for discovering and dealing with similarities and differences between the US, the EU, and Vietnamese legal systems regarding abusive pricing. The interdependence and disparities of the systems are analysed. At a macro level, I compare the spirit, style, and method of these systems. At a micro level, this method is used for studying the similarities and [...]... Chapter 4, together with final conclusions of this dissertation Chapter 2 REGULATIONS AGAINST ABUSIVE PRICING UNDER EU AND US LAW 2.1 Basic rules and concepts on abusive pricing in EU and US 2.1.1 Basic rules EU and US laws relating to abusive pricing have two similar basic rules First is direction against all abusive conduct, which includes but is not limited to abusive pricing Second is a mandate to. .. introduction to the same issues as addressed by the Vietnamese legal system, and makes a comparison through the same logical process to identify similarities and differences among relevant Vietnamese, EU and US relevant laws 12 Part III focuses on proposals for application to Vietnamese competition law drawn from the experiences obtained from the comparative research into EU and US laws This part is presented... essential step is to define the relevant market Relevant market includes relevant product market and relevant geographic market Analyses and methods used by the EU and the US in identifying relevant market are basically similar to each other 2.2 Specific forms of abusive pricing in EU and US laws 2.2.1 Excessive pricing Excessive pricing is not itself an offense under US law Legitimate monopolists are... circulating the product That becomes a major obstacle to understanding and applying the regulations 3.3 Remedies to abusive pricing Vietnamese competition law has a system of remedies to abuses that is quite multiform and similar to EU system The remedies include conduct and structural remedies, fines and compensation Due to the difficult and somewhat ambiguous statutory language in the relevant articles... Vietnamese legal system as it endeavours to control monopoly in the first years of integration into the world market economy Practical value: This dissertation may also help to satisfy the demands of both enterprises and consumers who wish to understand the concepts and forms of a large group of abuses of dominant position, i.e abusive pricing, and discover ways of avoiding to do and/ or defending against. .. with abusive pricing The main content of Part I is contained in Chapter 2 The chapter presents an examination of measures for dealing with abusive pricing, after setting out theoretical issues such as the basic rules of laws, concepts and forms of abusive pricing For every issue, I correlate and analyse information regarding the relevant EU and US laws Part II, located in Chapter 3, focuses on an introduction... Chapter 3 ABUSIVE PRICING IN VIETNAM COMPARED WITH EU AND US 3.1 Background, basis rules and concepts 18 3.1.1 Gradual inforcement capacity development of legislation and This part of dissertation presents two contents: - Development of Vietnamese laws before and after the VLC enactment; and - Competent Authorities for regulating abuses of dominance 3.1.2 Recent practices related to abuses of dominance... particular, they are Vinapco, Megastar, K+, “eclectric pole war” between EVN and VNPT, medicine and milk price increases 3.1.3 Basic rules: Generally, Vietnamese competition law also has two basic rules that are similar to those of the EU and the US: (1) against all abusive conduct, which includes but is not limited to abusive pricing, and (2) mandate to protect competition, however, in several particular... predation if prices are above average variable cost (AVC), in EU prices above AVC but below average total cost (ATC) may be condemned as predation Theories and case law in both two systems consider AVC as a benchmark for any presumption of predatory behviour Recently, economic theories and discussions of competition agencies in both EU and US have suggested another benchmark – average avoidable cost (AAC)... emphasize cases of absolute monopoly This is a difference between Vietnamese law and other countries‟ policies US antitrust laws and EU competition laws use terms such as “dominant position” and “monopoly power” with a relatively similar meaning “Monopoly position” in the EU and US laws is not 19 separated from “dominant position” or having “monopoly power” The VLC stipulates that an enterprise shall . FACULTY OF LAW UNIVERSITY OF LAW TRAN HOANG NGA REGULATIONS AGAINST ABUSIVE PRICING -A COMPARISON OF EU, US AND VIETNAMESE LAW AND AN APPLICATION OF ITS RESULTS TO VIETNAM Field of Study:. Regulations against abusive pricing – A comparison of EU, US, and Vietnamese laws and an application of its results to Vietnam . The results of my research should provide useful ideas with respect to. consumers who wish to understand the concepts and forms of a large group of abuses of dominant position, i.e. abusive pricing, and discover ways of avoiding to do and/ or defending against such infringements.