Failure to notify an economic concentration: Once the fine is paid, is the M&A transaction safe?

The sanction by the Vietnam Competition Commission (VCC) of nearly VND 900 million by BAF Vietnam Agriculture Joint Stock Company and Thanh Xuan Clean Agriculture Development Joint Stock Company for failing to fulfill the obligation to notify economic concentration not only attracts attention because this is one of the rare cases that are publicly announced.[1] Behind this sanctioning decision, there is also a more important legal question for the business community and the M&A consultants in Vietnam: after being sanctioned for not notifying, do enterprises still have to carry out the procedures for notifying economic concentration?

This design aims to prevent early deals that have the potential to reduce competition in the market, rather than waiting for the consequences to be dealt with.

At first glance, the answer seems quite simple. If the enterprise violates the notification obligation, it must continue to perform that obligation after being sanctioned. However, when compared with the Competition Law 2018 and its guiding documents, the problem is not as clear as many people think.

Fines are not the most notable point

According to information published by the VCC, the transaction between BAF and Thanh Xuan is subject to notification of economic concentration, but the parties have completed the acquisition without carrying out the prescribed procedures. The VCC determined that this was a violation of Clause 1, Article 44 of the Competition Law 2018 and sanctioned two enterprises with a total amount of nearly 900 million VND. After that, this agency announced that the enterprises had completed the implementation of the decision to handle the case.

It is worth noting that the information does not mention that the enterprise must submit a notification dossier after being sanctioned, nor does it indicate whether the VCChas conducted a transaction appraisal or made a conclusion on whether the transaction is allowed to continue or not. This gap leads to a question that the current Competition Law has not clearly answered: does the payment of fines mean that the obligation to notify has ended or is it just that the enterprise has completed the sanction for procedural violations?

The law only stipulates "prior notice", but says nothing about "later notice"

Vietnam's centralized economic control mechanism is built according to the pre-inspection model. Enterprises that meet the threshold of total assets, revenue, transaction value or combined market share must notify the VCC before making transactions. Only after being reviewed by the competition authority will the transaction be implemented.

This design aims to prevent early deals that have the potential to reduce competition in the market, rather than waiting for the consequences to be dealt with.

However, the new Competition Law only fully stipulates the scenario of enterprises complying with the notification obligation. For the case where the enterprise has completed the transaction and is found to have not notified, the law has not stipulated a corresponding handling mechanism.

The law does not stipulate that enterprises must carry out notification procedures after the transaction has been completed. Decree No. 35/2020/ND-CP also does not establish a post-inspection appraisal process in this case. The regulations on sanctioning administrative violations also do not define "forced implementation of procedures for notification of economic concentration" as a remedial measure[2].

In other words, the law clearly stipulates what businesses must do before the transaction takes place, but leaves open the answer to the situation where the transaction has been completed and the violation is only detected later.

This gap creates two different interpretations

From a theoretical perspective, there is a view that the obligation to notify cannot be lost just because the enterprise has violated. If only a fine is imposed without continuing to evaluate the transaction, the pre-inspection mechanism will be disabled. Under this approach, the VCC still needs to consider the nature of the transaction to determine whether the deal will have a significant competitive limiting impact.

On the contrary, another interpretation comes from the current regulations themselves. The obligation to notify is designed to be an obligation that must be performed before a transaction takes place. Once the transaction is complete, technical "advance notice" is no longer possible. While the law has not established a mechanism for additional notification or post-inspection appraisal, requiring enterprises to return to carry out this procedure will lack a clear legal basis.

The BAF case shows that at least in public information, the VCC chooses to handle the act of not notifying with fines and confirming that the enterprise has completed the handling decision, instead of announcing a request for the enterprise to continue carrying out the notification procedure. Although it is not possible to confirm whether the full text of Decision No. 122/QD-CT has other contents or not because it has not been fully announced, the way the management agency communicates also reflects that this is not an obligation emphasized in this case.

What businesses really need to know is that after being sanctioned, their transactions are considered legal or are still at risk of being reviewed in the future.

International experience goes the other way

In the European Union, the United States, and many developed economies, making transactions without approval is also very severely sanctioned. However, the goal of the competition authority is not only to impose administrative sanctions but also to ensure that transactions are assessed for competitive impact.

Even if the enterprise has completed the transaction, the competition authority can still continue to investigate, request the provision of relevant documents, assess the relevant market, and in necessary cases, may force the enterprise to divest, split or apply other remedial measures. In other words, fines are not a substitute for trading control.

Vietnamese law currently does not clearly stipulate this mechanism. That not only gives rise to different understandings between businesses and regulators, but also affects the predictability of the legal environment for high-value M&A transactions.

What businesses need to pay attention to is not only the penalty

From a practical point of view, the question of "whether to notify again" is probably not the most important issue. What businesses really need to know is that after being sanctioned, their transactions are considered legal or are still at risk of being reviewed in the future.

If the law does not clearly define the legal consequences after sanctioning, the enterprise will face an uncertain period of time. The transaction has been completed, the penalty has been paid, but whether the risk of competition has ended is still a matter of unclear answer.

For high-value M&A deals, this uncertainty can affect investment decisions, the ability to raise capital, legal due diligence, and even the value of the transaction.

It's time to improve the post-inspection mechanism

The BAF case is not only an administrative sanction but also shows that there is a gap between the pre-inspection mechanism and the enforcement practice. When an enterprise fails to fulfill the notification obligation, the law needs to clearly define three issues: whether the competition authority continues to evaluate the transaction or not; whether the sanction simultaneously closes the process of controlling economic concentration; and in the event that the transaction has the potential to significantly restrict competition, what measures can the VCC apply after the transaction has been completed. Clarifying these contents will help businesses have a basis to predict legal risks, and at the same time improve the effectiveness of the economic concentration control mechanism.

Practice from the BAF case shows that the question worth discussing is no longer "whether the enterprise has paid the fine or not", but after paying the fine, how will the legal status of the M&A transaction itself be determined. As long as the law does not definitively answer that question, the gap between regulation and practice will continue to exist, and each decision of the VCC will not only address a specific case but also contribute to shaping the understanding of the mechanism of control of economic concentration in Vietnam.

Lawyer Nguyen Van Phuc

HM&P Law Firm