Sky-high livestock prices may breach competition law

Although many livestock companies could face an inspection to ensure they follow through on commitments to cut their prices, the market outlook still looks dreary in spite of the government’s call to stabilise the selling cost of live pigs.

Sky-high livestock prices may breach competition law
Sky-high livestock prices may breach competition law

The Ministry of Industry and Trade wants to see stabilisation of the selling price of live pigs in order to avoid unfair competition. At a recent seminar on the situation, Cao Xuan Quang, head of the Consumer Protection Division at the Vietnam Competition and Consumer Protection Authority (VCCA), stated that the hike in pork prices has created difficulties for consumers.

Amid the COVID-19 pandemic, the competition agency of Vietnam has already drawn attention to the issue, and the VCCA is gathering information to learn about the collective increase of the price offered by husbandry companies across the country.

Although the high price of pork was previously attributed in part to African swine fever, there has been increasing scepticism that some companies have been taking advantage of their dominant position to exploit consumers by charging irrationally high prices for live hogs. It suggests a potential breach of Article 27 under Vietnam’s Law on Competition.

The total number of pigs slaughtered by the 15 largest enterprises accounts for 35-40 per cent of the total supply, while the rest comes from local farms and households.

Pursuant to the Law on Competition, an enterprise is deemed to hold a dominant market position when it has substantial market power or has 30 per cent or more of the market share in the relevant market.

The substantial market, known as the ability of a company to raise price profitably above the competitive level, is determined by a variety of factors, including market shares in the relevant market; financial strength and size; barriers to market entry and expansion to other enterprises; ability to obtain, assess, and control the goods distribution and consumption market or sources of supply; advantages in technology and technical infrastructure; right to own, obtain, and assess infrastructure; right to own or use subject matters of intellectual property; and ability to transfer to other sources of supply or demand associated with other goods and related services.

A breach of Article 27 of the Law on Competition by engaging in prohibited acts of abuse of dominant position would see the violator given a fine ranging from 1 to 10 per cent of their total turnover earned from the relevant market in the financial year preceding the year in which the violation is committed.

In addition, the profits illegally obtained from the violation of the enterprise engaged in the prohibited conduct also may be confiscated. The company that abuses its dominant position may also be forced to carry out restructuring.

Violators of the Law on Competition, depending on the nature and seriousness of the violation, can be prosecuted for criminal liability. Under the Penal Code, criminal penalties in the field of competition include fines of up to VND3 billion ($130,000) and a term of imprisonment of up to five years. Additionally, if loss or damage is caused to other parties, compensation must be paid.

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