The draft Price Law is supposed to consolidate in one law a number of earlier regulations, including in particular the Price Ordinance, Circular 122, Decree 170, Decree 75, and Decree 101.

It combines the previously scattered price-related provisions into one single law, thereby giving them higher legal status (a law instead of a circular, decree or an ordinance). The new draft Price Law also contains additional obligations and a list of prohibited acts. In comparison with the Price Ordinance, the draft Price Law extends prohibited acts to the “application of different prices (including different prices regarding wholesale or retail price) when providing the same kinds of goods or services for other organisations and individuals.” In comparison with the Price Ordinance (effective since 2002), and Circular 122 (effective since 2010), the draft Price Law provides new definitions and additional provisions relating to public announcement of price information, price appraisal, settlement of violations on price and price appraisal activities.

The draft Price Law overlaps partly with other laws, in particular the Competition Law (with regards to monopoly prices), and the tax laws (with regards to transfer pricing). Whilst the consolidation of scattered provisions into one law is generally a good step, the resulting overlaps with other existing laws (such as the competition law and the tax laws) is likely to lead to problems in the interpretation and application of the new draft Price Law.

With regards to price controls, the draft Price Law contains a large number of measures, including amongst others price stabilisation, price determination, price consultation, price registration- and declaration, public announcement of price information and price appraisal. The new draft Price Law further provides that only “important and essential goods and services” are subject to price stabilisation and only goods and services “important to production and peoples’ lives” are subject to price determination. The draft Price Law does not define any of the products or services subject to price stabilisation and price determination, but leaves discretion to the prime minister and government to specify the list.

Therefore, it remains to be seen in how far the state will interfere into the market. The new draft Price Law further authorises the ministries and provincial people’s committees to make decisions and announcement on the application of price stabilisation measures on goods or services, depending on the scope of the measure (e.g., national or regional). Similar to previous regulations, the list of products and services subject to price stabilisation and determination can be amended from time to time. We note that this is likely to leave huge discretion to the government and may result in uncertainty for the companies affected by price stabilisation and price determination measures.

As an example of the difficulties the new Price Law may cause, take the above-mentioned prohibition of application of different prices. It is often justified to sell products and services to customers at different prices. But under the new draft Price Law, a seller cannot even give a discount to a particular customer, even though this would not be an issue under the Competition Law (unless the seller holds a monopoly or the reward or discount would lead to a dominant position). We believe that it is inconsistent if the same acts are considered a breach of the Price Law, but are not in breach of the Competition Law.

It is commercially unreasonable and legally unnecessary to keep sellers from giving rewards to trusted customers or discounts to different kinds of customers (for example customers who buy large amounts). Sellers may also apply higher prices to new customers, before a trusted long-term relation is established. Finally, it is quite usual that sellers sell at different prices in different locations, to cover for transportation and other related costs.

Although the draft Price Law mentions that “in specific cases related to price and price control of specific goods and services or price appraisal not in violation of this Law (i.e. the draft Law), the latter shall apply against the former”, and “in cases of differences between specific law on price, price appraisal and this Law, the latter shall apply”, it is still unclear whether competition law or the draft Price Law shall prevail in such case.

Whilst EuroCham fully understands the need to keep inflation under control, it is unfortunate that the draft Price Law has not taken into account many of the recommendations that were made with regards to Circular 122 on Price Stabilisation. The new Price Law is again drafted in a way that will create uncertainty in the business community. For example, the circumstances of “abnormal fluctuations” of prices in Articles 9 and 10 of the new Price Law are very vaguely defined, leaving a very broad discretion for state authorities. Further, the term “socio-economic development policies of the state” is used in various places in the draft Price Law (e.g. in Article 6), but it is unclear what these policies are.

Further, under the new draft Price Law, in addition to the government and prime minister, all other relevant ministries at the national level and provincial people’s committees are explicitly entitled to apply price determination measures (such as specifying standard, maximum and minimum prices as well as to determine price brackets) and control price components.

This will potentially lead to overlap between the powers and authority of the central and provincial authorities. Granting authority to apply price determination measures to a local people’s committees may also create inconsistent practices in different locations in respect of the same goods or services. Also, there is no requirement on how long in advance businesses must register their price (changes) and there is no time limit for state authorities to respond to the businesses on their registration files. The lack of a deadline to respond to registration files leaves the businesses in great uncertainty.

It is also troubling that the draft Price Law does not provide for any explicit obligation of state authorities to keep information supplied by businesses for the purposes of price controls confidential.

Further, even though the new draft Price Law applies to both domestic and foreign-invested companies, the real issue for investors is that passing the new draft Price Law will result in heavy additional administrative burdens for companies and their staff. We also believe that the New Price Law may run against Vietnam’s aspirations to graduate to “Market Economy Status” (MES) under European Union (EU) rules. In particular, we note that Vietnam has already met the first criterion on “lack on government interference on decisions of enterprises, directly or indirectly, including through the use of state-fixed prices”. The draft Price Law, if implemented, would question this good progress: Even though there is a gradual shift to price valuations based on market mechanisms, the draft Price Law still shows deep state and government involvement into price building.

To mitigate the above mentioned potential issues, we recommend: First, clearly defining what is “abnormal fluctuation” or “abnormal change” in prices. We suggest defining “abnormal” as: “in the minimum of 15 consecutive days, the price increase more than 20 per cent as compared to the price before fluctuation.” Only in cases in which the seller wants to change pricing above the rate specified, he would require approval. Second, we propose to specify exactly the list of goods and services subject to price stabilisation and price determination, and such list should be kept short to really essential goods. Third, we recommend removing the above mentioned prohibition of “Application of different prices (including different prices regarding wholesale or retail price) when providing the same kinds of goods or services for other organisations and individuals.”

In this context we also suggest removing from the draft Price Law all provisions relating to competition and monopoly issues, as these are sufficiently addressed in the existing Competition Law. The same is true for provisions relating to transfer pricing, as they are better addressed in tax laws.

Moreover, we also recommend including clear timelines for state authorities to respond to the businesses on their registration files. We finally strongly advise to include into the draft Price Law an explicit obligation for the state authorities involved to keep information supplied by businesses for the purposes of price management measures confidential.

Source: VIR.