VietNamNet Bridge – CP Vietnam and Emivest Vietnam might have to pay fines totaling 10% of their total revenues in fiscal 2011 if they were found violating the Competition Law.

The Vietnam Competition Authority under the Ministry of Industry and Trade has decided to conduct an investigation into CP and Emivest following their recent unreasonable chicken egg price hikes.

CP has written to the HCMC Department of Industry and Trade, saying that it only holds a 16% share in the local egg market in an attempt to avoid being sanctioned under the Competition Law.

However, a source told the Daily that the authorities are collecting data to identify the actual market shares of these two firms. They have sufficient grounds for an investigation into these two companies to find whether they have made use of their dominant market positions to overprice their eggs.

There has not been any official statistics on the number of eggs nationwide as a basis for CP to determine its market share released. On the other hand, the authorities have substantial evidence showing that CP and Emivest are holding a market share of more than 30%, said the source.

Under the Competition Law, the authorities only need to collect sales invoices of CP at a local tax department or a supermarket to determine the percentage of its sales revenue over the total revenue of all egg traders in the local market.

It is most likely that these two firms are holding a combined market share of over 30%. Under the law, if enterprises holding a dominant market share of 30% or more raise prices without good reasons, they will face specific sanctions.

Moreover, as large companies, the sales records of CP and Emivest are quite sufficient compared to farming households and small businesses. Therefore, it is easy to prove they have taken advantage of their market dominance.

After the investigation, it will take a few months until the official conclusions come out. However, if proven guilty, CP and Emivest would be subject to penalties of up to 10% of their total revenue in the previous financial year, said the source.

Speaking at a meeting between municipal departments and corporate participants in the price stabilization program last Friday, Le Ngoc Dao, deputy director of the HCMC Trade Department, said she had learned that the Vietnam Competition Authority would launch an investigation into CP and Emivest.

Dao Thi Huong Lan, director of the HCMC Department of Finance, said the investigation would help clarify whether CP’s market share is 16% as it has stated or 30% as the State agencies allege. If they are found going against the Competition Law, the most severe punishment for CP and Emivest is deprivation of the right to do business, she said.

The authorities this week will check revenue and expenses of CP and Emivest during the recent sudden rise in egg prices. The inspectors will be tax departments of the localities where factories of the two companies are based.

The HCMC egg market has regained stability and prices have been brought down to the levels before the price hike on January 4. Therefore, the authorities will not take urgent measures.

In addition, the authorities will continue to follow the market developments to prevent similar incidents.

During the egg market volatility, price stabilizers fulfilled their role by boosting supply, keeping prices and organizing mobile sales trips.

The distribution systems piled pressure on the suppliers that raised prices unreasonably, greatly contributing to market stability.

Source: SGT