luận văn thạc sĩ new features of 2018 competition law on anti competitive practices and enforcement solutions

MINISTRY OF EDUCATION AND TRAINING
FOREIGN TRADE UNIVERSITY

MASTER THESIS

NEW FEATURES OF 2018 COMPETITION LAW ON
ANTI-COMPETITIVE PRACTICES AND
ENFORCEMENT SOLUTIONS

Specialization: International Trade Policy and Law

FULL NAME: Phan Thi Thu Huong

Hanoi –2020


MINISTRY OF EDUCATION AND TRAINING
FOREIGN TRADE UNIVERSITY

MASTER THESIS

NEW FEATURES OF 2018 COMPETITION LAW ON
ANTI-COMPETITIVE PRACTICES AND
ENFORCEMENT SOLUTIONS

Major: Economics
Specialization: International Trade Policy and Law

Code: 8310106

Full name: Phan Thi Thu Huong

Supervisor: Assoc. Prof, Dr. Nguyen Minh Hang

Hanoi –2020


STATEMENT OF ORIGINAL AUTHORSHIP
I declare that this thesis was composed by myself, that the work contained
herein is my own and under the direction and supervision of Assoc. Prof, Dr.
Nguyen Minh Hang, except where explicitly stated otherwise in the text, and that
this work has not been submitted for any other degree or processional
qualification except as specified.
I am fully responsible for the content of this master thesis as well as this
declaration.
Hanoi, 25 January 2019
Author

Phan Thi Thu Huong


ACKNOWLEDGEMENT
During the completion of this master thesis, I received the guidance and
valuable help from the lecturers, family and friends. With great respect and deep
gratitude, I would like to express sincere thanks to:
Assoc. Prof, Dr. Nguyen Minh Hang, Head of the Law Department of Foreign
Trade University (FTU) who wholeheartedly helped, supported and encouraged me
from the initial to the final level of this dissertation. She provided me with
comprehensive guide from choosing the topic, outlining the thesis and editing this
research.
Professors and lecturers from FTU as well as World Trade Institute in the
Master of International Trade Policy and Law Intake Four, who not only spread

profound knowledge and information in the fields of economy and law but also
generated strong motivation for me while I was taking this course as well.
Last but not least, I would like to express my sincere thanks to my family,
my colleagues and my friends, who have always by my side encouraging,
supporting, contributing valuable ideas and giving me favourable conditions for
me to complete this scientific research.


TABLE OF CONTENTS
STATEMENT OF ORIGINAL AUTHORSHIP
ACKNOWLEDGEMENT..........................................................................................
TABLE OF CONTENTS ............................................................................................
LIST OF FIGURES & TABLES ...............................................................................
LIST OF ABBREVIATIONS .....................................................................................
SUMMARY OF THESIS RESEARCH RESULTS .................................................
CHAPTER 1: INTRODUCTION..........................................................................1
1.1 RESEARCH RATIONALE......................................................................................................... 1
1.2 LITERATURE REVIEW............................................................................................................ 2
1.3 RESEARCH OBJECTIVES....................................................................................................... 4
1.4 RESEARCH QUESTIONS......................................................................................................... 4
1.5 SCOPE OF RESEARCH............................................................................................................. 4
1.6 RESEARCH METHODOLOGY................................................................................................ 5
1.7 THESIS OUTLINE...................................................................................................................... 6
CHAPTER 2: THE PRINCIPLE OF COMPETITION AND COMPETITION
LAW......................................................................................................................... 7
2.1 THE CONCEPT OF COMPETITION......................................................................7
2.2 FUNDAMENTALS OF COMPETITION LAW.........................................................9
2.2.1 INTRODUCTION OF COMPETITION LAW........................................................... 9
2.2.2 OBJECTIVES OF COMPETITION LAW.............................................................. 10
2.2.3 BENEFITS OF COMPETITION LAW.................................................................. 15

2.3 DEFINITION OF ANTI-COMPETITIVE PRACTICES..........................................17
CHAPTER 3: NEW FEATURES OF 2018 COMPETITION LAW ON ANTICOMPETITIVE PRACTICES............................................................................ 22
3.1 THE EVOLVEMENT OF VIETNAM’S COMPETITION LAW................................ 22
3.1.1 VIETNAM ECONOMY REVIEW PRIOR TO THE INTRODUCTION OF COMPETITION
LAW.......................................................................................................................... 22
3.1.2 OVERVIEW OF VIETNAM’S COMPETITION LAW.............................................. 25
3.1.3 PROBLEMS EMERGING FROM THE 2004 COMPETITION LAW IN VIETNAM.....27


3.2 NEW FEATURES OF 2018 COMPETITION LAW ON ANTI-COMPETITIVE
PRACTICES....................................................................................................................................... 38

3.2.1 NEW FEATURES ON ANTI-COMPETITIVE AGREEMENTS..................................39
3.2.2 NEW FEATURES ON ABUSE OF DOMINANT POSITION, ABUSE OF MONOPOLY
POSITION.................................................................................................................. 49
3.2.3 NEW FEATURES ON ECONOMIC CONCENTRATION.......................................... 55
CHAPTER 4: ENFORCEMENT SOLUTIONS AND RECOMMENDATION
FOR NEW FEATURES OF 2018 COMPETITION LAW ON ANTICOMPETITIVE PRACTICES............................................................................ 63
4.1 ENFORCEMENT SOLUTIONS FOR NEW FEATURES OF 2018 COMPETITION
LAW ON ANTI-COMPETITIVE PRACTICES.............................................................. 63
4.1.1 AIMS AND REQUIREMENTS.............................................................................. 63
4.1.2 IMPLEMENTATION PLAN................................................................................. 64
4.1.3 ENFORCEMENT SOLUTIONS.......................................................................... 70
4.2 RECOMMENDATIONS....................................................................................... 82
CHAPTER 5: CONCLUSION............................................................................. 84
REFERENCES...................................................................................................... 86


LIST OF FIGURES & TABLES
FIGURES

Figure 3.1: Anti-competitive practices....................................................................................... 27
Figure 3.2: Challenges and shortcomings implementing 2004 competition law.......28
Figure 3.3: Market shares of telecommunications companies in 2011.......................... 37
Figure 3.4: 2004 versus 2008 exemption review timelines................................................ 48
Figure 3.5: 2004 versus 2018 review timelines...................................................................... 60

TABLES
Table 2.1: Objectives in competition laws of selected east asian and asean
countries.................................................................................................................. 11
Table 3.1: The economic freedom index of vietnam between 1995 and 2003.........24
Table 3.2: 2004 versus 2008 competition law on provisions of the acts..................40
Table 3.3: 2004 versus 2008 competition law on restrictive agreements.................44
Table 3.4: 2004 versus 2018 competition law on scope of exemptions...................45
Table 3.5: 2004 versus 2008 defining dominance.................................................... 51
Table 3.6: 2004 versus 2018 prohibited acts of abuse.............................................. 54
Table 3.7: 2004 versus 2018 criteria for notification............................................... 56
Table 3.8: 2004 versus 2018 prohibitions against economic concentration.............58
Table 4.1: Assignment of tasks on implementing competition law................................69


LIST OF ABBREVIATIONS
AEC

ASEAN Economic Community

CPV

Communist Party of Vietnam

MIC

Ministry of Information and Communications

MOF

Ministry of Finance

MOIT

Ministry of Industry and Trade

MOJ

Ministry of Justice

NCC

National Competition Commission

OECD

Organization for Economic Cooperation and Development

R&D

Research and Development

SOE

State-owned enterprise

UNCTAD

United Nations Conference on Trade and Development

UNDP

United Nations Development Programme

VASEP

Vietnam Association of Seafood Exporters and Producers

VCA

Vietnam Competition Authority

VCC

Vietnam Competition Council

VCCA

Vietnam Competition and Consumer Authority

VCCI

Vietnam Chamber of Commerce and Industry

VIAC

Vietnam International Arbitration Center

VOV

Voice of Viet Nam

VTV

Viet Nam Television

WTO

World Trade Organization


SUMMARY OF THESIS RESEARCH RESULTS
The thesis “New features of 2018 Competition Law on Anti-competitive
practices and enforcement solutions” focuses on identifying new features on anticompetitive agreements, abuse of dominant or monopoly position and economic
concentration as compared to the 2004 Competition Law. In general, Vietnam
enacted the first Competition Law to keep up with the trend of global economy. In
spite of the advantages that Competition Law has initially brought to Vietnam
competitive market, it posed some limitations and shortcomings regarding scope of
application, approaches to anti-competitive practices and unfair competition and
regulatory body structure. Therefore, 2018 Competition Law was enacted to address
the issues emerged. It supplemented, removed and introduced new concepts and
provisions to correct from the experiences and to match the current situation. The
thesis concludes with some enforcement solutions that require the coordination from
various parts in the market to make the Competition Law effective.

CHAPTER 1:
INTRODUCTION 1.1 Research Rationale
The transformation of the mechanism of economic management and
international integration requires not only a complete and suitable legislation
system for new economic activities, but also a basic knowledge on respective law
areas. The introduction of Competition Law has led to essential demand on
equipping knowledge and raising awareness on Competition Law and Policy for
people in relevant field. As being a new area of law, it is necessary to study
carefully the knowledge of Competition Law and develop it to match the
Vietnamese economy.
As competition, ownership and freewill are three key elements in the
market economy, the law that regulates the competitive activities is an
indispensable condition to run that system. Law on Competition, which sets up
principle rules for economic activities, has become the standard of the market
economy. If there is no Competition Law, there is no appropriate competition and
the market cannot function properly. Besides, the risks of unfair competition acts
without legal basis to prevent will damage the important objectives of the
economic policy. Competition Law makes businesses aware of competitive
behaviours and facilities, thereby building a suitable competitive strategy without
violating the law. Understanding the need for this new area of law, on December
rd

3

2004, the Competition Law was passed by the National Assembly of the

Socialist Republic of Vietnam at its 6

th

session with the goal of meeting the

requirements of regulating economic competition activities in Vietnam. The
promulgation of Competition Law is an important milestone in improving the
legal documents, regulating the market economy in a new era of globalization
and international economic integration. The improvement of the legal documents
reflects the process of standardization and harmonization of Vietnamese law with
the laws of developed countries. It is also one of the conditions for Vietnam to
join and exercise our commitments in World Trade Organization (WTO).
The introduction of the 2004 Competition Law is an important milestone in
the process of creating a unified legal system for competitive activities of
1


enterprises in the market. However, after more than 12 years of implementation,
with the changes of the socio-economic context, the trend of international
integration, as well as the occurrence of limitations, the 2004 Competition Law
needs to be amended and supplemented to enhance performance, to meet the
requirements and demands of practice in the new situation. Therefore, in June
2018, Vietnam passed a new Competition Law, replacing the 2004 version. This
2018 Competition Law is to (i) meet the requirements in the trend of economic
integration and in accordance with international commitments; (ii) ensure the
adaptation to the business environment and (iii) overcome the limitations of the
Competition Law 2004. From the above reasons, the topic “New features of 2018
Competition Law on Anti-competitive practices and the enforcement solutions” is
selected. This thesis shall give information about general theory of Competition
Law and further analyses the new features of 2018 Competition Law in Vietnam
focusing on Anti-competitive practices. Finally, the thesis shall give information
about the solutions for its enforcement.

1.2 Literature Review
In recent years, a number of researches including books, newspapers and
reports have approached the topics related to Competition Law in general and in
Vietnam, in particular. However, there are not many studies on 2018 Competition
Law as this revised area of law was issued last year. Therefore, previous
researches mostly covered 2004 Competition Law or proposed new law. This
section is to review some notable researches.
Firstly, some books have focused primarily on the theory of Competition Law
and mentioned some practical cases, namely Giao Trinh Phap Luat Canh Tranh by
Tang Van Nghia (2013) and Giao Trinh Luat Canh Tranh by Le Danh Vinh, Hoang
Xuan Bac and Nguyen Ngoc Son (2010). These books are must-have materials for
studies on Competition Law. They provided fundamental concepts on all subjects of
Competition Law so that readers can have an overall picture of what it is and how it
works nationally and internationally. Another book written by Massimo Motta
(2009) titled Competition Policy: Theory and Practice, however, drew on important
issues that were Anti-competitive practices and stated

2


out policy implications demanded for these issues. This book integrated theory
and practice from case studies giving a clear and thorough way for anyone who
desires to understand competition issues.
Other sources such as ASEAN Regional Guidelines on Competition Policy
published by ASEAN (2010), Study on Competition Laws for Developing
Economies by Asia-Pacific Economic Cooperation (1999) or The Objectives of
Competition Law written by Cassey Lee (2015) delivered detailed theory on
objectives and benefits of Competition Law as reasons to why it is crucial to
introduce this area of law worldwide. While the Guidelines released by ASEAN
went on with information about scope of application and role and responsibilities

of Competition regulatory body and enforcement powers, the Study done by
Asia-Pacific Economic Cooperation discussed how the introduction of
Competition Law would affect the world as well as the impact it would have on
society and on developing countries with Competition Law in place. It also
illustrated some limits and risks when enacting Competition Law.
Apart from some materials, which merely emphasize theories of
Competition Law, there are some other papers apply those concepts on
international scale and on Vietnam thereof. Competition Law Enforcement of
Vietnam and the Necessity of a Transparent Regional Competition Policy by
Phan Cong Thanh (2015), discussed the enforcement of Vietnam’s Competition
Law and recommended a competition policy to Vietnam’s government and
competition authorities.
After the Competition Law in Vietnam is put in place, some recent materials
approached by illustrating and analysing the problems and argued for a need for a
new Competition Law. Annual Report 2014 by Vietnam Competition Authority
(VCA) (2014) provided details of investigation and settlement on competition
cases which violated existing Competition Law. Another paper titled OECD Peer
Reviews of Competition Law and Policy by OECD (2018) offered overall review
of current Competition Law Framework and its existing problems then proposed
new Competition Law.

3


As various problems, during enforcement, occurred in 2004 Competition
Law, a new version of the law is demanded to promulgate. Several recent
publications have then examined new key features of the 2018 Competition Law
including scope of application, regulatory bodies restructure, competition
restraining agreements, market dominance, economic concentration, and unfair
practices. Koushan Das (2019) with his topic of Vietnam’s Competition Law And

Its Impact On Foreign Companies, or Vietnam’s new Competition Law 2018
posted by Le Minh Thuy (2018), or New Competition Law of Vietnam by Phuong
Nguyen, Duc Tran (2018) are some examples.
In general, although there have been a number of national and international
researches conducted on this topic, there have not been any master theses with
comprehensive research on this topic in Vietnam.
1.3 Research Objectives
The research aims to explore the new Competition Law in Vietnam to
examine key new features of the 2018 Competition Law on Anti-competitive
practices including regulations on controlling anti-competitive agreements, abuse
of dominant position, abuse of monopoly position and economic concentration
and finally provides recommendations for its enforcement in Vietnam.
1.4 Research Questions
The objectives of the research are derived from the research questions as
follows:
 What are the fundamentals of Competition Law?
 How has the Competition Law in Vietnam involved over the years?
 What problems did the Competition Law in Vietnam experience,
especially regulations on Anti-competitive practices?
 What are the new features of the new 2018 Competition Law in
Vietnam, especially on Anti-competition practices?
 How to enforce its new features?
1.5 Scope of research
The research examines the concepts and regulations of Competition Law
globally and in Vietnam and further focuses on actual situation of Competition
4


Law in Vietnam between 2004 and 2018. The scope of this thesis is as follows:
As for geographical scope, the study shall cover the theories of competition

as well as Competition Law in the world, a number of developed and developing
countries in the ASEAN region, countries with experiences in issuing and
enforcing Competition Law and demonstrate how they are applied in Vietnam.
As for time scope, the research shall examine on the development of
Vietnam’s Competition Law from 2004 up to now. A detailed analysis on the key
new features of the new Competition Law 2018, especially on Anti-competitive
practices in Vietnam shall be conducted after a revision of the Competition Law
2004. It then deepens its study on how those new features will be enforced and
further gives some recommendations.
1.6 Research methodology
In order to successfully achieve the goals and objectives, various research
methods have been combined and used at the same time to maximise efficiency
while completing this research. Two key methods consist of theoretical research
method and practical research method.
 Theoretical research method:
This thesis will combine economic theories as well as legal
documents. The thesis will then conduct a chain of methods including
classifying, analysing, synthesizing and systematizing the theories
collected.
 Practical research method:
This thesis will examine closely the reality of applying the
Competition Law 2004 to identify existing issues, then observe the
new features of the new Competition Law 2018 on Anti-competitive
practices

to

determine

the

improvements

and

gives

some

recommendations on where they should be issued further guidelines to
better implement this new Competition Law.
This research also used a number of common research methods in the field of
law, including:

5


 Traditional research methods such as analysis, statistics and
commentary;
 Method of comparing laws to highlight the specific and distinctive
features in each country’s legal system of competition;
 Comparative and reconciliation method to illustrate the differences
between 2004 Competition Law and 2018 Competition Law in Vietnam,
whereby indicates the improvements of the new version of law.

1.7 Thesis outline
Chapter 1: Introduction
Chapter 2: Fundamentals of Competition and Competition Law
Chapter 3: New features of 2018 Competition Law on Anti-Competitive
practices

Chapter 4: Enforcement solutions and recommendations for new features of
2018 Competition Law on Anti-Competitive practices
Chapter 5: Conclusion

6


CHAPTER 2: FUNDAMENTALS OF COMPETITION AND
COMPETITION LAW
This chapter shall provide crucial concepts and fundamentals relevant to
Competition Law in general to create a clear background of this area of law
before inspecting and analysing thoroughly the key elements that make a
difference for Vietnam’s 2018 Competition Law.
2.1 The concept of Competition
Along with the changes of the socio-economy in the development of
community, people are always looking for motivations in developing their socioeconomic forms. Economic competition is a broad concept, studied and
developed in various dimensions such as economics, political economy, business
and law. Due to the rapid development of trade and industry as well as industrial
organization, the issues raised in economic growth are the interpretations of
evolvement of the theories of economics and theories of competition. Mostly,
there are corresponding sections in economic theories to deal with and address
competition issues. One of the prominent problems facing competition policies is
to both find a way to create economic growth and prevent monopolization and
abuse of dominance of major economic entities. On the other hand, ensuring that
the market is open and equal in terms of opportunity to access for competitors is
always an objective of competition policies. Thereby, competition theory is a
foundation for planning and implementing competition policy.
With the characteristics of a transition economy, Vietnam really applies
principles of the market mechanisms that have been unknown in the centrally
planned economy. People have been used to using a new kind of motivation of

development, which is competition. Competition has brought to the market and
social life a new, flexible, diversified, abundant and growing elements, while
raised many social problems that were previously only found in books, such as
bankruptcy, fraudulent business and unfair competition (Le Danh Vinh, Hoang
Xuan Bac and Nguyen Ngoc Son 2010). Over 20 years of developing the market
economy, competition is not new in the socio-economic life and in the legal
sciences of Vietnam. However, in our legislative work and competition law
7


enforcement, we have too little experience. Therefore, it is essential to
systematize the competition theories that economists and legal scientists have
built over nearly 5 centuries of the market economy.
Competition in general term can be understood as a struggle for the better.
According to Business Dictionary (2020), competition in economic terms means
rivalry amongst sellers, who try to get what others are seeking simultaneously
including profits, sales and market share by offering the best price, quality and
service. With an identical definition, Samuel Johnson (1755 cited in James Case,
2008) described competition as the act of endeavouring to gain what others
endeavour to gain at the same time. Stigler (1988 cited in Enn Listra 2015, p.26)
defined the term similarly, which was a rivalry between individuals or groups or
countries. However, he declared it would be a competition once two or more parties
strive for something that not all can get. More specific, the UK Office of Fair
Trading and Competition Commission (2010, cited in Whish and Bailey 2012, p.3)
described ‘competition’ as a process of rivalry between firms attempting to win
customers’ favour. Yet, until now, scientists seem unable to be satisfied with any
concepts of competition. Because as a social phenomenon unique to the market
economy, competition appears in all areas, every stage of the business process and is
associated with all entities in the market. Therefore, competition is regarded at
different angles depending on the intentions and approaches of the scientists.

Although it has been identified slightly different, according to economic
theories, competition is a unique product of a market economy, a soul and a driving
force for the development of the market. Thus, competition is described with three
key characteristics consisting of (i): happening amongst business entities, where it
can only exist if the parties have the freedom to act in the market, (ii): being rivalry
between enterprises, or in other words, competition is the way to resolve conflicts of
potential business interests with the decisive role belonging to consumers, and (iii):
the aim of competing in buy and sell market of firms.

In short, the differences and diversity of approaches of competition theories
reflect the diversity in the concept of economic competition, which contributes to
the creation of more opportunities for policy formulation, Competition Law
8


according to each country's economy and characteristics. The competitive
theories basically show the unity of management that competitive markets will
bring about better results than monopoly markets and yield many benefits to
consumers. . This was also concluded by the UK Government (cited in Whish
and Bailey, 2012, p.18) in the White Paper that competition between firms helps
markets strong and effective. It brings consumers advantages, encourages firms
to innovate to reduce stagnancy, lessen production costs, and boost incentives for
efficient organization of production.
2.2 Fundamentals of Competition Law
2.2.1 Introduction of Competition Law
Competition Law is defined as a system of regulations constructed to
control and eliminate anti-competitive practices of businesses (Li and Li 2014). It
is a general concept including law against unfair competition, law against
restraints of competition, regulations governing competition legal activities and
all regulations governing competition activities in the relevant legal documents,

in which, the most basic content covers two major areas comprising law against
unfair competition and law against restraints of competition (Tang Van Nghia
2013). In brief, competition law is an area of law enacted to protect freedom of
competition, market structure as well as fair and equal competitive environment.
Laws, in general, exist due to the objective needs to manage social relations
and must be in line with the social factors of the economy, culture, and the level
of development. The basis for introduction of Competition Law is the existence
of a market economy whose fundamental principles are freedom of contract and
freedom of trade, and from there, freedom of competition. Once introduced, the
function of Competition Law is to regulate competition relations by regulating
behavioural models for business entities as well as necessary solutions for those
who violate competition principles. In other words, the enactment of the
Competition Law aims at creating a legal basis to ensure a fair and equal
competitive environment for firms in the market economy.
In countries with long history of Competition Law, although there are
different forms of competition, Competition Law is basically divided into two
9


large categories due to the distinctive characteristics in its scope of application.
They are law against unfair competition and law against restraints of competition
(Tang Van Nghia 2013). The reason is on account of the differences in the degree
of the acts and the range of the negative impacts on the market, procedures as
well as measure application, although in general, those illegal competitive acts
generate adverse effect on the normal operation of the market.
Competition Law exists to safeguard competitive activities in a free market
economy, where the allocation of resources is based on supply and demand in
free markets and is not under government regulation. This area of law is to
protect competition between firms by governing the performance of market
power of single firms or between firms, which results in higher prices, less

choice, lower quality and less innovation in products and services (Jones and
Sufrin 2016). There used to be a term of ‘invisible hand’ initiated in Adam
Smith’s work, where he suggested that freedom to compete without interventions
from governments such as price controls would produce more benefits to free
markets (Colino 2011). However, it is believed that ‘competition sows the seeds
of its own destruction’ (Colino 2011). It is in a sense that left alone to determine
their own performance, firms will have two tendencies. They will either run their
businesses so successfully that they are in a position where they can impede
others from competing, or they might collude to act together or combine to
behave as monopolists. Those two practices may produce the most profits for
them, yet destroy the society as a whole. Therefore, Competition Law is essential
to address market failures, which is summarized as follows: (i): to fight
restrictive agreements between businesses, (ii): to handle imperfect competitive
markets such as oligopoly or monopoly, (iii): to deal with dominant firms who
benefit from market power, and (iv): to avert mergers, which results in market
concentration (Jones and Sufrin 2016).
2.2.2 Objectives of Competition Law
It is argued that Competition Law enacted with the purpose of protecting
consumers’ right by allowing them to enjoy the low prices, innovation and diverse
production out of competition (Hovenkamp 2005). Nevertheless, the goals of

10


Competition Law are occasionally not expressed clearly in the law, yet rather
implied. This section of the research shall examine the primary objectives
inferred from Competition Law. The table below is an example of some highlight
objectives including welfare, efficiency, free and fair competition and economic
development stated in selected countries’ Competition Law.
Table 2.1: Objectives in Competition Laws of Selected East Asian and ASEAN

Countries
Country

Objectives

Japan

• Free and fair competition

Source:

• Entrepreneurship

Act on Prohibition of Private

• Employment and national income

Monopolization and Maintenance of

• Democracy and development

Fair Trade (Act No. 54 of April 14,

• Consumer welfare

1947)
Republic of Korea

• Entrepreneurship

Source:

• Consumer protection

Monopoly Regulation and Fair Trade

• Balanced development

Act, 1980

• Free and fair competition

Indonesia

• Public welfare
• Free and fair competition (equal business

Source:
Law of the Republic of Indonesia No.

opportunities)
• Efficiency (effective and efficient business

5 of 1999 Concerning the Ban on
Monopolistic Practices and Unfair

activities)

Business Competition
Malaysia

• Economic development

Source:

• Process of Competition

Competition Act 2010

• Consumer welfare

11


• Efficiency

Singapore

• Efficiency
• Competitiveness of economy

Source:
/>(Accessed 11 May
2015) />ages/Competition%20Act.aspx
(Accessed 11 May 2015)
Thailand
Source:

• Free and fair competition

/>uploadfile/255609191022214222490.pdf
(Accessed 11 May 2015)
Vietnam
Source:

• Management over competition

/>
• Consumer protection

extendpages.aspx?id=9&CateID=194(Ac

• Trade remedies against imports

cessed 11 May 2015)

Source: Lee 2015
2.2.2.1 Economic efficiency
Economic efficiency is defined as the ability of firms to attain potentially
maximum profit given the fixed costs and other factors (Abdulai and Huffman
2000). In other words, the market is believed as having economic efficiency if it use
and allocate the resources effectively. Competition Law always aims to protect and
encourage competition in the market. In a competitive economy, resources will be
used most effectively and appropriately. Enterprises are always under pressure to
reduce their production costs to have a competitive advantage. Low prices of goods
and services will benefit consumers. When there is no barrier to entry, even

12

in a monopoly position, enterprises still have to set a competitive price for goods
and services, because if the price is high, the potential competitors will have the
opportunity to enter the market (Tang Van Nghia 2013). Competition Law,
therefore, encourage firms to create efficiency by conducting research and
development (R&D) to produce at the lowest costs and to fulfil consumers’
demand (ASEAN 2010).
It is often assumed that efficiency is affiliated with welfare, in a sense that
enhancing efficiency leads to welfare maximization and vice versa (Lee 2015).
This section shall discuss three prominent types of efficiency consisting of
allocative, productive, and dynamic to have better knowledge of this term.
Allocative efficiency occurs when market participants use accurate and
available information in the market to make decisions on resource allocation.
When information is used as a basis for decision making, firms know which
projects are most profitable and they can allocate their resources to produce
products, which customers favour (Jones and Sufrin 2016). This allocative
efficiency also emerges when private and public organizations devote their
resources to the most profitable and most beneficial projects for a large number
of people, thereby promoting economic development.
Productive efficiency refers to cost minimization (Lee 2015). Firms employ
the least expensive production techniques to produce the quantities of desired
goods and services. In general, it is often said that economic efficiency means
producing right amount (Allocative efficiency) of products and services in the
right way (Productive efficiency).
Dynamic efficiency is another objective of Competition Law. It is as a result
of technological progress (Lee 2015). This efficiency results from the advances
in production process or new products or services innovated and developed to
appeal to customers. This type of efficiency is even argued as the most important
for improving welfare (Jones and Sufrin 2016).
2.2.2.2 Economic growth and development
Economic growth and development may sound similar but these terms are

not identical. Economic growth is a main indicator of economic development
13


(ASEAN 2010). To a country, pursuing economic growth is vital but not sufficient
for its development. Economic growth refers to a state of an economy not only
having productivity rises but also proceeding with operating new markets and
diversifying their products and services (Hermes and Lensink 1996). On the other
hand, according to Nafziger (2006), economic development implies a broader
concept of economic growth combined with the improvement of population’s wellbeing, the better quality of education and labour skills, technical advances and other
measures. Having competition in the markets between firms with the goal of
bringing more efficiency and less waste in producing goods and services will result
in higher level of economic growth and development. The markets will then be able
to redistribute resources more quickly making society better off. Gradually economic
growth will contribute to greater economic development (ASEAN 2010).

2.2.2.3 Welfare
Undoubtedly, welfare is a very important objective of competition law
consisting of consumer, social and total welfare. Basically, consumer welfare
refers to consumer surplus, social welfare is a combination of consumer and
producer surplus and total welfare means the total value of output produced (Lee
2015). Introduction of Competition Law brings about great benefits for
consumers regarding more choice of products and services, better quality and
lower prices. Consumer welfare protection is to address any imbalance of market
power incurred between consumers and producers, which results from
information asymmetries, weak bargaining power toward producers and high
transaction costs (ASEAN 2010). Competition Law enacted along with consumer
protection policies to solve those issues.
2.2.2.4 Free and Fair Competition
Protecting and encouraging competitive process is the objective of Competition

Law that has been most frequently mentioned. If it is believed that Competition
Policy creates a “level-playing field” for market participants to be more competitive,
then Competition Law is to set out “rules of the game” to protect the whole
competition process rather than players in the market (ASEAN 2010). Therefore,
having Competition Law in place to promote fairness and effectiveness

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in the market leads to improvements in economic efficiency, economic growth
and development and consumer welfare (ASEAN 2010). Ensuring free and fair
competition can be considered as the core objective of Competition Law. As to
this point, it is clear that competition helps maximise welfare, it is necessary to
understand what it means by “free” and “fair”.
Free could be interpreted as free entry and exit from the market, where there
are no barriers of any forms to prevent new firms from entering the market (Lee
2015). For example, firms may limit pricing or invest in excess production
capacity in protest of potential newcomers. Free can also mean no restriction on
buyers or sellers when competing with their competitors. For instance,
wholesaler might restrict its retailers from selling under the prices fixed by them.
Fair is more complex. Fair in general concept can be understood as envyfree (Lee 2015). In competition context, a firm would consider as playing fair if it
does not attain greater surplus with the given resources. According to Odland
(2012), who provided a number of definitions of fair, where he mentioned one is
consider fair if he possesses impartiality and honesty, in a sense of free from selfinterest, prejudice, or favouritism. Other definition he provided was complying
the rules or standards, without cheating or attempting to gain inequitable
advantage over others.
On that account, Competition Law promulgated to ensure higher quality of
economy as well as its participants and eventually enhanced welfare.
2.2.3 Benefits of Competition Law
2.2.3.1 Ensuring a free and fair competitive environment

As clearly discussed, an important legal basis to create conditions and ensure
the existence of competition is regulations on trade freedom and the right to equally
exist of businesses. Only when being free to enter the market, free to enter into
agreements and having ownership guaranteed, then the participants in the market
will be capable of determining the mode of their businesses. Competition will then
be able to happen and take effect. As a specialized law field of the market economy,
Competition Law protects competition by fighting unhealthy competitive acts and
remove any competitive restriction in the market, thereby,

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protecting the freedom of doing business between market players, protecting the
competitive environment, and protecting the healthiness of market relations (Le
Danh Vinh, Hoang Xuan Bac and Nguyen Ngoc Son 2010).
2.2.3.2 Assisting other laws
Evenett (2005) stated that Competition Law can complement other laws and
policies such as industrial policies. Acts governed by Competition Law are
directly related to acts in various fields such as civil, commercial, industrial
property and advertising. It means, with the enactment of the Competition Law,
in the current legal system governing competition, in addition to the Competition
Law, there are other relevant legal regulations that altogether influence a certain
scope of competitive practices (Tang Van Nghia 2013). Therefore, identifying the
scope of the Competition Law in relation to the provisions in other relevant legal
documents requires a consistent interpretation and application in the basis of
Competition Law having supreme power over other legal documents in a
common matter. Hence, coordination between the relevant state management
agencies is required to enforce Competition Law.
2.2.3.3 Promoting globalization
The process of economic globalization with the introduction of many

international economic organisations has promoted the formation of large regional
and world markets through the elimination of tariff and non-tariff barriers. Once
freedom is upheld as an inviolable principle with the prompting of the law of value
and human nature, spontaneous competition practices with excessive and extreme
tendencies will emerge in international trade, which is the downside of trade
liberalisation. Competition now is displayed not only in the rivalry between
manufacturers of goods or services, but also in the contest between two markets and
two economic sectors. In international trade relations, international economic forces
often use tricks by taking advantage of their financial strength to seize and
manipulate markets of developing countries with lower levels of development (Le
Danh Vinh, Hoang Xuan Bac and Nguyen Ngoc Son 2010).

In that context, as a legal tool used to eliminate unhealthy practices in the
national market, Competition Law plays an important role in protecting the
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