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
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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
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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