Competition authority looks into M&As by foreign retailers A spate of mergers and acquisitions in the retail market, with foreign names bowling over local players, has put domestic firms on high alert and forced Vietnamese authorities to intervene.   The increased presence of foreign retailers has been putting the squeeze on local rivals  Photo: Le Toan At the end of April, Prime Minister Nguyen Xuan Phuc asked relevant state agencies to investigate foreign retailers’ merger and acquisition activities. The move came after the PM received a proposal from the Ho Chi Minh City Union of Business Associations (HUBA). Immediately following the prime minister’s request, the Ministry of Industry and Trade’s Vietnam Competition Authority (VCA) began looking into the acquisition of Metro Cash & Carry Ltd., which was recently renamed as MM Mega VN Ltd. after being taken over by the Thai giant Berli Jucker. Notably, the VCA also required MM Mega VN to report on the combined market share of all parties participating in the deal during the 2013-2014 period. Market share data will allow the government to investigate possible anti-competitive practices, such as the takeover of huge portions of the market by companies in a dominant market position, which would go against Vietnamese legislation on fair competition. According to the prevailing Law on Competition from 2004, an enterprise is deemed to be in a dominant market position if it has a market share of 30 per cent or more in the relevant market. The reports must be submitted by MM Mega VN no later than May 30. Stronger actions are likely to be taken based on HUBA’s proposal. The PM gave the nod for the Government Inspectorate to investigate alleged violations by foreign retailers and by local authorities in licensing their operations. “In large retail chains such as Lotte, Big C, Circle K, and Metro Cash & Carry, goods like rice, cane or beet sugar, cigarettes and cigars, and crude and processed oil are widely sold without any government supervision,” stated HUBA chairman Huynh Van Minh. In fact, under Circular 34/2013/TT-BCT dated December 24, 2013, foreign-invested enterprises are not permitted to distribute these types of goods. HUBA also pointed out that domestic suppliers and customers are being harmed by the rapid expansion of foreign players in the field. “Unlike local supermarkets, it is not easy for local producers to become suppliers for foreign retailers, due mainly to the high discount rates required,” the association reported. The effectiveness of government campaigns, such as the “Vietnamese use Vietnamese Goods” or the “Price stabilisation” campaign, is limited for foreign retail companies. Opening up the retail market was one of Vietnam’s commitments in order to join the World Trade Organization (WTO) in 2007. Since 2009, 100 per cent foreign-owned firms have been allowed to operate in the market. The Economic Needs Test (ENT) – a protective tool to assesses the necessity for retailers to open new outlets – has also failed to prevent foreign players from expanding their network. “Local authorities wanted to attract foreign investments and interpreted the ENT at their discretion, leading to the inappropriate licensing of outlets,” president of Hanoi Supermarket Association Vu Vinh Phu told VIR. HUBA estimates that over 50 per cent of the local retail market has been acquired by foreign firms, and is urging authorities to cease business licensing for new outlets of foreign retailers until revised policies are introduced. By Thu Xuan, VIR