VIETNAM COMPETITION COURT LANDS FIRST PUNCH ON SOE

UNCLAS HANOI 000467 STATE FOR EAP/MLS MBROWN AND EAP/EP USTR FOR DBISBEE USAID FOR DAA/ASIA MELLIS AND EAA DSHARMA E.O. 12958: N/A TAGS: ECON EAID EFIN EINV KCOR KPRV PGOV VM SUBJECT: VIETNAM COMPETITION COURT LANDS FIRST PUNCH ON SOE ¶1. (U) Summary: The first decision by Vietnam's new anti-trust court delivered a knock-down punch to a state-owned company, slapping the airline fuel monopoly with a $168,000 fine for refusing fuel service to a private airline. That the first decision by the newly-formed Vietnamese Competition Council came against a state-owned enterprise (SOE) was both a surprising and an encouraging first step. The next case targets an alleged price-fixing scheme between state-owned and private car insurers, and numerous other anti-trust cases are also on the docket awaiting a hearing. End summary. AN UNEXPECTED STRIKE AGAINST THE STATE-OWNED SECTOR -------------- ¶2. (U) The April 2009 decision by the Competition Council (VCC) caught many observers by surprise. It not only fined airline fueling monopoly Air Petro Company (Vinapco) for refusing to service a private carrier but also recommended that the Government of Vietnam break up the fueling monopoly. The VCC is part of the Vietnamese Competition Administration Department (VCAD) under the Ministry of Industry and Trade (MOIT),and arose out of the 2005 Competition Law that the United States helped Vietnam draft through its Star Program. The United States, through USAID and the Federal Trade Commission, continue to advise the VCC in institution-building and regulatory reform. The GVN has also asked the United States for assistance in revising the Consumer Protection Law in 2012. ¶3. (U) In April 2008, Vinapco denied fuel service to private domestic carrier Pacific Airlines (predecessor to Jetstar) after a dispute over fueling charges. Because Vinapco has the monopoly on fueling, its unilateral punitive action resulted in 30 Pacific flights being delayed, affecting over 5,000 passengers. Faced with a public outcry, Transportation Minister Ho Nghia Dung had to intervene and order Vinapco to resume fueling Pacific. Vinapco is also a subsidiary of the SOE, Vietnam Airlines. INSURERS ARE NEXT -------------- ¶4. (U) Next on the docket is an investigation of approximately 16 insurance companies for allegedly colluding to fix insurance prices, according to press reports. The suspect companies, which include both private and SOEs, allegedly signed a written agreement to collectively increase fees for auto insurance policies by 3.95 percent. According to the Competition Law companies can be fined up to 10% percent of their fiscal turnover for signing a collective agreement that constrains competitiveness. ¶5. (SBU) COMMENT: We are encouraged by the GVN's willingness to hold its SOEs accountable in an open forum like the Competition Council, and allow the local press to cover and comment widely on the case. Although these are promising development, we would caution against reading too much into it. The GVN has yet to divest itself from its SOEs in any meaningful manner. MICHALAK