Full Name: Nguyen Trong Tue

ID: 1200024
FINAL EXAM BUSINESS LAW
Note:
1) For the sake of clarity, each contract is denoted by a letter. We will use the letter to refer to its
corresponding contract throughout this document.
Contract A: Sanjay, on behalf of VNMC, made an oral offer to Tran, saying that if Tran
invests in VNMC, the company will buy all of the tires it uses, which is estimated at about
100,000 tires over the course of three years, starting from 2015. Tran accepted the offer by
investing $500,000 in VNMC for a 5% stake.
Contract B: Dhan, Dep, Simon and Tran, the CEOs of the four tire suppliers controlling
98% of the market in Vietnam, signed a written contract, in which:
a) They agreed on the price.
b) They agreed not to steal existing customers from each other, with a list of existing
customers included. VNMC is listed as a customer of Trans company.
2) List of abbreviations:
CC: Civil Code
CL: Competition Law
EL: Enterprise Law
OADI: Ordinance on Anti-Dumping of Imports into Vietnam

i)

ii)
iii)

iv)

1. Internal Objective Memo describing Trans legal position

1.1. QUESTIONS PRESENTED
Under the Enterprise Law (EL) of Vietnam, was Contract A valid and VNMC obligated to
fulfill Contract A? Given the fact that:
a) It was made before the formation of VNMC.
b) It was approved by Sanjay, the CEO of VNMC, while it was a transaction between the
company and one of its shareholder (Tran).
Was Contract B, in which the parties who control 98% of the market agreed on price and
customers, valid under the Competition Law (CL) of Vietnam?
Did Simons company violate Contract B in terms of stealing existing customers from the other
three suppliers and breaking the agreement on price when Simon informed that he will be
seeking for new customers if he cannot increase his companys market share by 30%,
cutting the price, selling his tires for 25% less than any of his competitors, and entering
into a 3 year contract with VNMC, which was listed as a customer of Trans company? If it
did, will Simons company be held liable for its violation?
Did Simons company commit an act of dumping of imported goods under the Ordinance on
Anti-Dumping of Imports into Vietnam, when it cut the price and sold its tires for 25% less
than any of its competitors?

v) Did VNMC break Contract A when it entered into a 3 years tire supply agreement with Simons
company and announced that it would not be buying tires from Trans?
1.2. ANSWERS
i) Yes. Because according to the EL, Sanjay is allowed to enter into contracts in service of
enterprise establishment before making business registration, and therefore VNMC will be
obligated to fulfil those contracts once it is established.
ii) No. Because according to the CL, Contract B is one type of competition restriction agreements
that is prohibited.
iii) Simons company did violate Contract B in terms of stealing existing customers from the other
three suppliers and breaking the agreement on price, but it will not be held liable for its
violation because Contract B was invalid.
iv) Yes. Because it sold tires at a price lower the normal price as stipulated in Ordinance on AntiDumping of Imports into Vietnam (OADI), Article 2 and Article 3.
v) Yes. Because it must take over all obligations resulting from the contracts made by its founding
members, shareholders and authorized representatives in service of its establishment.
1.3. DISCUSSION
1.3.1. Contract A was valid and VNMC is obligated to fulfil it.
According to the EL, Article 14, founding members, shareholders and authorized representatives
of a company are allowed to enter into contracts in service of enterprise establishment before
making business registration (Clause 1), and all rights and obligations resulting from those
contracts will be taken over by the enterprise that are established afterward (Clause 2).
Contract A states that if Tran invests in VNMC, the company will buy all of the tires it uses
from Trans company. This contract served for the purpose of the establishment of VNMC.
Therefore, Sanjay, one of VNMCs founding members and shareholders who has a 30% stake,
was allowed to enter into Contract A with Tran, on behalf of VNMC.
However, the two parties in Contract A was 1) VNMC and 2) Tran one of its shareholders.
According to the EL, Article 59, Clause 1, contracts or transactions between a company and its
members, authorized representatives, director or general director, or representative-at-law must
be approved by the Members Council. It means Sanjay, the CEO of the VNMC does not have
the authority, on behalf of the company, to enter into contracts with Tran, who is also a
shareholder of VNMC. However, this rule applies only when the company has existed.
Therefore, it cannot applies to Contract A, which was made prior to the establishment of VNMC.
Conclusion: Contract A was valid and VNMC is obligated to fulfil it.

1.3.2. Contract B violated the CL, and therefore was invalid.

The CL, Article 8, states that competition restriction agreements include agreements on directly
or indirectly fixing goods or service prices (Clause 1), and agreements on distributing outlets,
sources of supply of goods, provision of services (Clause 2). These competition agreements are
prohibited if the parties of which have combined market share of 30% or more as stated in the
CL, Article 9, Clause 2.

In Contract B, Dhan, Dep, Simon, and Tran made a list of existing customers and agreed not to
steal existing customers from each other. This action is considered as an agreement on
distributing outlets (CL, Article 8, Clause 1). They also agreed on price, which means they
directly fix the price of tires (CL, Article 8, Clause 2). The four company of Contract B control
98% (greater than 30%) of the tire market, therefore Contract B is prohibited (CL, Article 9,
Clause 2).
According the CL, Article 10, there are also cases of exemption with regard to prohibited
competition restriction agreements described in CL, Article 9, Clause 2. However, the parties
must submit an exemption application, and according to CL, Article 25, only the Trade Minister
and the Prime Minister have the authority to decide on exemption. In this case, the four tire
suppliers privately agreed with each other without an approval from the Trade Minister or the
Prime Minister. Therefore, Contract B was not eligible for exemption.
Besides, the four supplier may commit acts of abusing the dominant position on the market.
According to the CL, Article 11, Clause 2c, a group of four enterprises which have total market
share of 75% or more on relevant market is considered to hold the dominant position on the
market if they take concerted action to restrict competition. In this case, the four tire suppliers
have total market share of 98% (> 75%) and acted together to fix the price and distribute
customers. Therefore, they are holding the dominant position in the tire market in Vietnam.
According to the CL, Article 13, enterprise or groups of enterprise holding the dominant
position on the market are prohibited from performing a number of acts, including: selling
goods, providing services at prices lower than the aggregate costs in order to eliminate
competitors (Clause 1), and imposing irrational buying or selling prices of goods or services
or fixing minimum re-selling prices causing damage to customers (Clause 2). Therefore, if the
agreement of not selling any tires for below a certain agreed upon price is to aim at eliminate
competitors or causes damage for customers, it is prohibited. However, the conclusion on
whether the 4 suppliers commit acts of abusing the dominant position on the market depends on
the details of Contract B, which is not clearly specified in the case.
Conclusion: Contract B violated the CL, and therefore was invalid.

1.3.3. Simon violated Contract B, but will be not held liable for its violation.
Simons company violated Contract B, in terms of trying to steal existing customers from the
three other suppliers, because the four suppliers control 98% of the tire market (2% left); and in
order for Simons company to increase its market share by 30%, it must steal at least 28% of
existing customers from the other three. In addition, it entered into a contract with VNMC, which
was listed as a customer of Trans company.
Simons company also violated Contract B in terms of breaking the agreement on price when
sold tires at a lower price than that of his competitors, including the other three parties in
Contract B.
However, as explained in the section 1.4.2, Contract B was invalid, therefore Simons company
is not obligated to fulfill it.
Conclusion: Simon violated Contract B, but will not be held liable for its violation.

1.3.4. Simons company committed an act of dumping of imported goods into Vietnam
The OADI, Article 3, states that, goods from a country or territory shall be deemed to be
dumped when they are imported into Vietnam if such goods are sold at a price lower the normal
price, which is the comparable price in normal commercial conditions of similar goods which
are being sold on the local market of the country or territory which exported such goods.
However, enterprises are allowed to sell a certain amount of dumping, but this amount does not
exceed 2% of total volume, quantity or value of similar goods imported into Vietnam. Besides,
according to the OADI, Article 6, Clause 2, dumping of goods imported to Vietnam is subjected
to anti-dumping measures if it causes or threatens to cause significant loss to a domestic
manufacturing industry. An organization or individual representing a domestic manufacturing
industry can request an application of anti-dumping measures to the investigating agency
according to the OADI, Article 8.
In this case, Simons company sold all of its tires for 25% lower than any of his competitors,
therefore it violate both the Article 2 and Article 3 of the OADI. It also threatens to cause
significant loss to the tire manufacturing industry of Vietnam, therefore it may be subjected to
anti-dumping measures.
Conclusion: Simons company committed an act of dumping of imported goods into Vietnam.

1.3.5. VNMC did break Contract A

As stated in the section 1.3.1, Contract A was valid and VNMC is obligated to fulfil it.
Therefore, when VNMC unilaterally terminated Contract A, Trans company has the right to
demand payment and compensation from VNMC according to the CC, Article 426.

1.4. CONCLUSION
Contract A is valid and VNMC is obligated to fulfill all the terms specified in the contract. Trans
company has the right to demand payment and compensation from VNMC for unilateral
terminating Contract A. Simons company did violate Contract B, in terms of stealing existing
customers and breaking the agreement on price. However, Contract B is invalid, and Simon
company is not held liable for its violation. Simons company also committed an act of dumping
goods imported into Vietnam, and may be subjected to anti-dumping measures.

2. Letter summarizing the findings of the Objective Memo

TO: Mr. Tran
FROM: Nguyen Trong Tue
DATE: December 17, 2014
RE: Recommendation

Dear Mr. Tran,

According to the findings in the Objective Memo of your legal position, I would like to give you
some recommendations with regard to your case as follows:
1. Although Contract A was made prior to the establishment of VNMC, it is still valid according
to the EL, Article 14, Clause 1 and Clause 2. Besides, it also does not conflict with the EL,
Article 59, Clause 1, because this rule only applies to the existing enterprises; while Contract A
was made before the formation of VNMC. Therefore, VNMC is obligated to fulfill all the terms
specified in the contract. Your company has the right to demand payment and compensation from
VNMC due to its unilateral termination of Contract A according to the CC, Article 426.
However, because the contract was made orally, you may be at a disadvantage if Sanjay denies
that he did enter into such a contract with you. You need to carefully prepare evidence and
witnesses before filing a lawsuit against VNMC.
2. Contract B between you, Dhan, Dep and Simon is invalid, because it is one type of
competition restriction agreements that are prohibited under the Competition Law, according to
CL, Article 8, Article 1 and Article 2 and the CL, Article 9, Clause 2. Therefore, VNMC is not
obligated to this contract. Besides, you and the other three parties of Contract B may also commit
acts of abusing the dominant position on the market (depending on the detailed terms in the
contract), according to the CL, Article 11, Clause 2c and the CL, Article 13, Clause 1 and
Clause 2. Therefore, although Simons company did violate Contract B, you should not file a
lawsuit against it for stealing your existing customers and breaking the agreement on price,
because you and the other parties may be subjected to sanctions as a results of breaking the
Competition Law.
3. Simons company did commit an act of dumping of imported goods into Vietnam under the
Ordinance on Anti-Dumping of Imports into Vietnam (OADI), according to the OADI, Article
3. Therefore, it may be subjected to anti-dumping measures according to OADI, Article 6,
Clause 2. In order to protect your interests, you should request an application of anti-dumping
measures to the investigating agency in as a company representing the domestic tire
manufacturing industry. You can do this together with Dhan and Dep to enhance the persuasion
of your application.

I hope my suggestions would help.

Sincerely,
Nguyen Trong Tue