A resale fixed price agreement between a supplier and its distributors considered an anti-cmpetitive agreement prohibited by law

In the process of distributing goods, suppliers often issue sales policies including the pricing policy applied across their distribution systems. Managing the prices of goods and services is crucial not only for businesses but also for ensuring market fairness and transparency. However, certain agreements between suppliers and distributors regarding pricing may negatively impact market prices and consumer rights, potentially violating competition laws. This article will analyze the provision of law related to the prohibited agreement on resale fixed price between suppliers and distributors, as well as the respective penalties. 

1. Conditions for resale fixed price agreement between a supplier and a distributor considered an anti-competitive agreement prohibited by law

For businesses operating at different stages of the same supply chain, such as suppliers and distributors, an agreement may be prohibited if it meets all the following conditions: 

• The agreement between the supplier and the distributor is anti-competitive. 
• This agreement significantly impacts or has the potential to significantly impact competition in the market.

Accordingly, a resale fixed price agreement between a supplier and a distributor, whether direct or indirect, is considered an anti-competitive agreement under Article 11.1 of the 2018 Competition Law. However, in terms of the specific manifestation of this agreement, competition law currently has no specific regulations or guidances. 

Based on global competition law practices and the norm in Vietnam, direct or indirect resale fixed price agreements may manifest through the following behaviors: 

Direct resale fixed price: 

– Agreements on specific price levels for goods; 

– Agreements to increase prices by a specific amount or setting percentage; 

– Agreements to prevent price reductions or to reduce prices by a specific amount or setting percentage; 

– Agreements on pricing formulas or price components; 

– Agreements on minimum prices for goods; 

– Agreements to maintain or set prices within a certain range; 

– Agreements to notify or consult each other before increasing or decreasing prices; 

– Agreements on pricing levels for negotiating contracts with any third party. 

Indirect resale fixed price: 

– Such agreements as mentioned above applied to other related goods; 

– Agreements not to offer discounts, promotions, credits, or to not implement after-sales services, customer care, or related commercial conditions affecting prices; 

– Agreements between suppliers and agents or distributors on minimum resale prices for goods; 

– Exchanges of information on prices and promotional, discount, or rebate programs. 

In terms of the impact of the anti-competitive agreement: Determining whether a resale fixed price agreement between a supplier and a distributor violates competition law depends on the impact of these agreements. Pursuant to Article 11.3 of Decree 35/2020/ND-CP, an agreement that does not significantly impact competition when each participating party’s market share is less than 15% is not considered an anti-competitive agreement. 

2. Administrative penalties for the violation of the law on competition 

According to Articles 4 and 7 of Decree 75/2019/ND-CP on administrative penalties in the competition sector, issued by the Government on September 26, 2019, suppliers and distributors may be subject to the administrative penalties as follows: 

• Main Penalty: An administrative fine ranging from 1% to 5% of the total revenue from the relevant market in the fiscal year preceding the violation. If the total revenue for the preceding fiscal year is zero, a fine of VND 100,000,000 to VND 200,000,000 will apply. 

• Additional Penalty: Confiscation of profits obtained from the violation. 

• Corrective Measures: Required removal of illegal terms from contracts, agreements, or business transactions. 

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