Comments on Competition in the Distribution Service Sector in Vietnam

The increasing rate of investment by large foreign distributors in Vietnam shows a huge potential for the distribution service sector in our country. This market is estimated to have an annual turnover of 20 billion USD and a growth rate of up to 30%/year, with nearly 85% of urban residents in the Southern region regularly shopping at supermarkets and retail centers [56].

Their retail revenue only accounts for 10% of the country's total retail revenue, even though the growth rate of this system is over 30% per year on average. This figure may reassure many people in the distribution service sector, thinking that we are still dominating the market with the "upper hand" of 90% of the total retail revenue of the whole country. However, if we look at the whole picture of this sector of Vietnam and put it in the context of rapid economic integration and opening today, then high confidence will be a big risk. The rapid penetration of multinational retail corporations such as Metro Cash & Carry or Bourbon with customer attraction strategies demonstrating financial potential, management capacity and market analysis level that are much better than ours has somewhat shocked the Vietnamese retail market. However, due to the small number of distribution corporations as well as the system of supermarkets and shopping centers with foreign elements, the competitive pressure in the market is still low. Currently, they are implementing a fairly high market positioning strategy thanks to the advantage of modern image, hygiene, politeness... But certainly in the next few years, especially when Vietnam has to implement If the domestic distribution system does not quickly change, it is entirely possible that they will overwhelm Vietnamese retailers. In addition, the progressive consumption trend and the increasingly high quality of Vietnamese consumers will lead to the choice of a faster, more convenient, and more modern form of retail distribution service. All of this creates a huge pressure on Vietnam's distribution service system and potentially leads to the loss of market control for managers.

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1.3. Comments on the competitiveness in the distribution service sector in Vietnam

It can be seen that the investment trend in the distribution service sector has been, is and will be increasing.

increased dramatically. With the growth of distributors as well as the presence of more foreign enterprises, it has shown the reality and potential of a vibrant market in the coming time. However, outside the competitive pressure of the market economy, enterprises will have to face unfair competition.

Currently in the distribution service, it can be said that up to this point, three types of behavior have emerged. These are the behavior of abusing monopoly position, economic concentration behavior including mergers and acquisitions, and unfair competition behaviors [37].

For the first type of behavior, it usually occurs in two forms of association: vertical association between manufacturers, importers and wholesalers, retailers and horizontal association between importers, wholesalers or retailers. Although now anti-competitive behavior has occurred in vertical association, horizontal association has not occurred due to the weak scale and dispersion among distributors. However, this may change when foreign distributors are fully opened in the near future. The problem is to distinguish the boundaries in whether these associations are anti-competitive or not. In particular, the ability of foreign distributors with the potential to establish systems through methods such as large promotions, credits, and discounts will be very difficult to distinguish.

Similarly, the current concentration, merger and acquisition behaviors are insignificant, compared to the scale of domestic enterprises, there are not many outstanding enterprises. But in the future, this will become a big risk when the economy continues to develop.

What is noteworthy today is unfair competition. These behaviors are happening more and more. In fact, in Vietnam, there are signs of the following unfair competition behaviors:

 Directly compare similar products.

 Fraudulent promotion of prizes.

 Give away products to customers to try in exchange for products from other businesses.

 The act of merging businesses to divide the market, prevent new businesses from entering the market, and unify prices and services.

 Abuse of their position: Large distributors have professional systems, large advertising programs, attracting a large number of customers. These businesses often have large capital, a wide variety of products from domestic to foreign, from high to low levels. With these strengths, businesses often set strict conditions on prices, procedures, and payment terms for manufacturing businesses that want to sell their products. This easily gives rise to the problem of large distribution businesses abusing their negotiating power with these manufacturing businesses, especially small and medium-sized businesses.

 Selling below the price listed on the product.

While foreign distribution corporations known for their strong technological and financial potential are present very close to the Vietnamese market, Vietnamese distribution enterprises still have the following basic weaknesses:

Firstly, distribution services are a business sector that requires large investment capital, but domestic enterprises are often limited in capital. For these enterprises, expanding scale and reinvesting are difficult. Up to now, according to incomplete statistics, the whole country has 200 supermarkets, 32 shopping centers, 1,000 small stores selling goods throughout the provinces and cities with retail sales of goods and services of about 20 billion USD/year. This is a very modest number compared to the sales of foreign enterprises. They penetrate the Vietnamese market with a registered capital of not only tens of millions of USD but sometimes even up to hundreds of millions of USD. For example, Metro and Bourbon both have a capital of 120 million USD [ 56 ].

Second, the distribution system always requires a professional logistics system. However, in Vietnam, the system of storage warehouses, cold storages and specialized transport vehicles, equipment to ensure sales and other infrastructure systems are not synchronized, not meeting regional and international standards. Most businesses have not yet built their own sources of goods and typical products.

Third, the professionalism of domestic distributors is still very weak. Currently, there are only two retail distributors considered successful in the Vietnamese market, Metro Group and Saigon Co.op. Famous shopping malls such as Fivimart and Intimex can be counted on the fingers of one hand. Most supermarkets and shopping malls are still struggling and stuck in business. Domestic distributors have not yet built multi-level distribution channels, so they cannot create competitive prices. Most supermarkets are still not large-scale, and at the same time, they do not care much about their brands and products.

In addition, the lack of connection between domestic enterprises to build sources of goods makes the source of goods unstable in quantity and quality. This leads to the quality and quantity of output goods not being guaranteed. Contract breaches between factories, distribution enterprises and farmers often occur.

The above shortcomings have made the competitiveness of most domestic distribution enterprises poor in terms of price, quality of goods as well as the diversity of goods sold. That will lead to an unequal battle between Vietnamese distributors and foreign distributors. Especially now that Vietnam has joined the WTO, committed to expanding the service market, the risk of domestic distribution enterprises being taken over by foreign enterprises is increasing, many unfair competition behaviors arise. While Vietnamese distributors do not know how to use legal tools to protect themselves from anti-competitive behaviors, foreign distributors have a thorough understanding of competition law. This is a problem for competition management agencies as well as for each enterprise itself.

2. Current status of competition management in the distribution service sector

Faced with increasingly fierce and fierce competition between Vietnamese distribution enterprises and foreign distribution enterprises, the role of competition management is even more important. However, in the context of Vietnam, how to effectively manage competition in the distribution service sector is still a problem with many shortcomings. We need to look back at what the State as well as each enterprise itself has done in the past to orient activities in the coming years, especially now that Vietnam has become a member of the World Trade Organization (WTO).

2.1. Implementation of competition law in the field of distribution services

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Nowadays, in an effort to create a free and healthy competitive environment for

For all distribution enterprises, the State has issued a number of legal documents regulating competition in this field. To implement these legal documents as well as improve the effectiveness of competition management, the State, through the Ministries and Branches, has carried out meaningful activities such as organizing seminars, forums, conferences to propagate and popularize competition law and encourage the establishment of Distribution Associations.

On October 10, 2006, in Hanoi, the Competition Management Department organized a "Dialogue on distribution services from a competitive perspective" between state management agencies and the business community operating in the distribution service sector with the aim of finding common views in establishing a healthy competitive environment and a level playing field for businesses operating in the distribution sector.

During the dialogue, business representatives enthusiastically exchanged and shared information about the current situation and competitive trends of this type of service as well as opportunities and challenges in the competitive environment for distribution businesses and manufacturers and suppliers of goods/services when Vietnam becomes a member of the World Trade Organization.

Members of the WTO. Representatives of state management agencies also shared their views on the role and intervention of state management agencies in regulating competitive behavior in the distribution service sector as well as the enforcement of competition law in this sector.

On January 27, 2007, in Ho Chi Minh City, the Competition Management Department organized a " Discussion on distribution services from a competitive perspective " with the business community operating in the distribution service sector in the Southern region with the aim of learning the common views from the business community in building a legal framework to establish a healthy competitive environment and a level playing field for entities operating in the distribution sector [8].

Not only through the activities of the Competition Management Department, conferences and forums on competition in the distribution service sector have also been organized and implemented by other management agencies. On June 29, 2007, the Hanoi Department of Industry and the Hanoi Department of Trade organized a "Conference to meet manufacturers and distributors" with the business community operating in the distribution and production service sector in Hanoi with the aim of learning common views from the business community to create a cohesive environment as well as establish a healthy competitive environment and a level playing field for businesses operating in the distribution and production sector.

The most recent one is the “ Vietnam Post-WTO Retail Market Forum: Competition and Development ” which was recently organized by the Competition Management Department - Ministry of Industry and Trade on September 21, 2007 in Hanoi. This is an opportunity for Vietnamese retailers to meet, exchange and share information about the competitive environment in the Vietnamese retail market, and on the other hand, to carry out competition management in the retail sector in the coming time. Competition will become increasingly vibrant in the context of Vietnam implementing its WTO commitments on opening the Vietnamese retail market from January 1, 2009 [9].

It can be said that organizing conferences and forums to discuss competition in the distribution sector like this is very practical. Because that is where

so that the distribution enterprises themselves can express their concerns and representatives of the State management agencies can share their views on the increasingly fierce and fierce competition in this business sector . Through that, the enterprises have also realized the importance and necessity of raising the awareness of the business community about competition law and the role of competition management agencies in the context of the current appearance of unfair competition between manufacturers and distributors.

The distribution market in general and the domestic retail market in particular are very vibrant, with more and more foreign investors appearing. In the process of international economic integration, the intervention of the State is gradually decreasing. Instead, the role of industry associations in establishing and maintaining a healthy and fair competitive environment for retailers is becoming increasingly important. The establishment of the current Retailers Association is in line with the development laws and internal needs of this sector.

The “Vietnam Retailers Association” was established by the Minister of Home Affairs under Decision No. 1159/QD-BNV dated September 5, 2007. According to Dr. Hoang Tho Xuan, Director of the Department of Domestic Market Policy (Ministry of Industry and Trade), this event contributes to promoting the development of the Vietnamese distribution service industry through connecting domestic retailers to build and develop a retail system. With a membership of about 130 Vietnamese enterprises, organizations and individuals in the retail sector, this association creates collective strength for domestic retailers to protect their legitimate rights and interests, and to be competitive and cooperate effectively with major international retailers in the domestic market. Regarding the general direction of activities in the period of 2007 - 2010, the Association will promote its role in participating with state management agencies in the process of formulating policies and mechanisms related to retail business to create a healthy and fair competitive environment; proactively propose and draft the Retail Law to submit to competent authorities for consideration. In the last months of 2007 and 2008, the Association will focus on a number of specific tasks such as establishing an electronic news site; building and finding funding sources for training projects to improve management skills and the quality of human resources in the retail sector; building

training center and logistics and warehouse facilities for the Vietnamese retail distribution system [40].

In fact, many supermarkets still operate in a fragmented, small-scale manner, lacking market knowledge, which leads to passivity in business. Due to spontaneous formation, competition between supermarkets is increasingly fierce, which has led to the sale of goods of unknown origin, poor quality goods, goods past their expiry date, and inattentive service, which has caused dissatisfaction among customers. By operating individually, supermarkets cannot find a common voice in business, lack cohesion in ordering, and finding input sources to serve customers. These things have limited the operation of the supermarket system and the establishment of an Association for the entire supermarket system is necessary. The establishment of the Hanoi Supermarket Association has created conditions for members of the Association to strengthen cooperation and support each other in business, contributing to stabilizing the market, unifying the source of goods, selling prices, linking, exchanging experiences in business activities, and training employees in the direction of professionalism.

2.2. Develop a project to create a healthy competitive distribution environment

Currently, the State has managed competition through legal documents such as the Competition Law 2004, the Commercial Law, the Law on Consumer Protection, the Regulations on Supermarkets, Trade Centers... In particular, the Government has also developed projects to develop the domestic distribution service sector in the face of the risk of being annexed by the massive appearance of foreign distribution enterprises, typically the Decision signed on February 15, 2007: " Project on developing domestic trade to 2006 - 2010 and orientation to 2020 ", and Decision No. 0518/QD-BTM dated April 2, 2007: "Plan to implement Decision 27/2007/QD-TTg dated February 15, 2007 of the Prime Minister approving the Project on developing domestic trade to 2010 and orientation to 2020". 2020” [19].

With the general goal of "Building a strong and modern domestic trade, based on a reasonable structure of systems and distribution channels with the participation of economic components and types of organization and operation".