In April 2014, the Vietnam Competition Authority (“VCA”) received a complaint from Trading Tourism Co., Ltd. (“ABTours”). ABTours claimed that Anh Duong Manufacturing Trading Services Import & Export Co., Ltd. (“Anh Duong”) was abusing its dominant position in relation to organized tours from Russia, Ukraine and other Commonwealth of Independent States (together, “CIS”). On 5 May, 2014, based on the complaint, the VCA commenced a preliminary investigation (Case No 14 KN HCT 01) and on 17 June, 2014, it escalated the matter to an official investigation.
The VCA completed its investigation in 2015 and submitted its dossier and conclusions to the Vietnam Competition Council (“VCC”) on 28 March, 2016. On 31 March, 2016, a case handling sub-committee was formed to handle this investigation and Decision 10/QD-HDCT was issued on 30 December, 2016. The VCC recently issued a press release in relation to this decision. The information in this update is derived from the press release, the VCA’s 2015 Annual Report and public reports of the case.
According to the complaint, Anh Duong, a partner of Pegas Touristik Group (a company with its registered address at 21 Hannover street, London, UK) had signed exclusive contracts with hotels in Nha Trang, Phan Thiet, Phan Rang and Phu Quoc Island, which prevented its competitors from being able to book rooms in these hotels.
Under these contracts, the hotels were obliged to only accept bookings for CIS tourists from Anh Duong and had refused such bookings from ABTours and other companies despite having vacancies. The contracts between Anh Duong and 43 hotels in the Khanh Hoa area were specifically identified by the VCC as containing one of the following restrictions:
- “Party A (hotels) only the right to confirm the booking for Russian tourists, Ukraine, and CIS countries fly by plane to Cam Ranh of party B (Anh Duong) … (except for online booking) “; or
- “The hotel reserves the right not to sell, recommend or authorize any individual or travel company to sell other tours to Pegas’s customers. Pegas’s tour guide is responsible for selling these tours … the hotel is not allowed to sign contracts with rival companies of Pegas to provide flight services from Russia to Cam Ranh. ” (translations are from the translated press release)
The VCC determined that the relevant market is the travel service market for CIS tourists entering Vietnam at all tourist destinations across the country. The VCC further determined that Anh Duong’s market share was 51.6% at the time of the investigation. The basis for these determinations were not set out in the press release so it is not clear how the VCC distinguished this market from more broadly defined tourist markets.
According to Article 11(1) of the Competition Law, a firm is considered dominant if it has a relevant market share of 30% or more, or is capable of substantially restraining competition. Given the determined relevant market share, the VCC found that Anh Duong had a dominant position in the defined market.
According to Article 13 of the Competition Law, dominant firms are prohibited from:
- Selling below total prime cost with the aim of excluding competitors;
- Fixing an unreasonable price or a minimum resale price causing loss to customers;
- Restraining production or distribution, limiting a market, or impeding technical or technological development, thereby causing loss to customers;
- Applying different commercial conditions to the same transactions with the intention of creating inequality in competition;
- Imposing conditions in contracts for purchase and sale or forcing other enterprises to agree to obligations which are not related in a direct way to the subject matter of the contract; or
- Preventing market participation by new competitors.
The VCC determined that Anh Duong had forced hotels to accept unrelated obligations including forcing hotels to publish online prices at least 15-20% higher than the contract prices and to not recommend, sell or allow other parties to sell tours to Anh Duong booked guests. The VCC also determined that Anh Duong had acted to prevent entry by placing restrictions on hotels in dealing with non-Anh Duong booked CIS tourists and on certain flights to Cam Ranh.
In its press release, the VCC noted that Anh Duong had voluntarily terminated this conduct and had eliminated the relevant contractual provisions. The VCC further noted that ABTours had withdrawn its complaint. While the press release was not clear, our understanding is that, given these circumstances, the VCC decided to stay a resolution and demanded that Anh Duong pay a settlement fee of VND 50 million (approximately USD 2,200).
For any further information concerning this alert, please contact your usual DFDL advisor or contact:
Regional Competition Counsel/Senior Consultant
Hoang Phong Anh
Country Partner, Vietnam; Head of Hanoi Office