A recent report suggest that violations of competition laws were negatively affecting the Vietnamese market, particularly in the dairy and petrol segments.
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| It has been thought that Dairy companies worked together to increase milk prices (Photo: NLD) |
The report assessing the competition in economic sectors was released by the Competition Management Department under the Ministry of Industry & Trade on October 14.
According to research, dairy products have the fastest growth rates in Vietnam’s food industry however, this market also has the potential violations of competition laws, causing damage to customers. The violations can be identified as the coordination between dairy companies in a bid to fix their selling prices as milk exporters and importers drove prices up.
Milk exporters sell their products through intermediate parties, not directly to importers. Thus, the imported milk prices in Vietnam are marked up very high.
In other cases, importers and exporters coordinated to avoid import taxes by declaring import prices, which are lower than the actual price. In order to legalise their expenditures, importers can transfer most of the money generated from the difference between selling and buying prices into expenditures on advertising, promotions, etc. Eventually, consumers pay the price.
Furthermore, Vietnamese consumers often prefer imported dairy products over domestic. The higher prices rise, the better sales milk companies gain through advertising programmes.
Several companies have taken this opportunity to boost their sales by increasing their prices.
Additionally, milk prices are affected by advertisements, which provide misleading information to customers or bad stories on competitors or marketing programmes through experts and doctors.
Although the department has not found any evidence showing that dairy companies had coordinated together to raise milk prices, the authority affirmed that it was a possibility.
As for the petrol market, limited competition has controlled prices. Vietnam now has a total of 10 petrol companies importing and trading petrol. All of them are government operated companies. Vietnam National Petroleum Corporation (Petrolimex) accounts for 60% of the market share.
Although these companies have their own management mechanism on petrol prices, currently petrol is a product having only “one price” because there is no competition in this market. Domestic petrol prices have not been affected by the world’s petrol market. Through retail price adjustments, these petrol companies impose the same adjustment rate and apply it at nearly the same time.
According to the report, this action may violate competition laws on negotiation and fixing selling prices.
| Five manufacturing industries including milk, steel, cement, farming food and fertilizer, as well as five service industries including banking, insurance, petrol, telecommunication and aviation, were reviewed for compliance to competition laws. Among them, the manufacturing sector was found to be in the most violations of the competition laws. |