With its 1979 Pricing and Monopoly Control Act, later replaced in 1999 by the Trade Competition Act (TCA), Thailand became one of the first ASEAN countries to regulate anti-competitive practices. The business competition law of 2017, known as the âNew TCA,â applies to unfair business practices in many industries, including what is likely to be a particular focus on the e-commerce industry.
Although Thailand has not always been known for its strict enforcement of antitrust measures, the recently revised law has tightened several loopholes and has been used more assertively in the context of company mergers. Thailand’s highest competition law authority, the Trade Competition Commission (TCC), has also taken a more proactive stance in carrying out its duties, which also include cracking down on unfair business practices.
Recent development of antitrust law
From 2018 to early 2020, the TCC issued a series of new antitrust guidelines clarifying the criteria for identifying offenses, such as abuse of dominance, conduct of unfair business practices, and entering into anti-competitive mergers. Regulatory responses included the provision of cease and desist orders and the initiation of fact-finding procedures in cases requiring administrative or criminal investigations.
Other guidelines have also been published concerning retail and wholesale trade, as well as unfair trading practices for franchisees. These changes were accompanied by action: after identifying a manufacturer that was abusing its dominant position in the market, TCC fined the offending company THB 12 million. Two other violators were fined 10% of their respective total annual turnover, after being caught engaging in unfair trade practices.
These developments, all of which occurred in 2019, helped usher in a new era for TCC. Although the Commission has long been seen as ‘soft’ on antitrust matters, this recent period marked the first time in its history that three separate investigations involving legislative action were conducted at this level of enforcement.
Most recent TCC cases have revolved around unfair treatment and barriers to competition such as refusal to sell, exclusivity and territorial restrictions. Yet the current embodiment of TCC takes an entirely modern approach to antitrust regulation, encompassing a fairly comprehensive range of business activities – including mergers.
The new TCA requires companies to file pre- and post-merger reports in certain circumstances. By definition, mergers include:
(1) Mergers between producers, sellers, producers and sellers, or service providers, resulting in the maintenance of a business and the closure of the businesses of others, or the creation of a new business;
(2) Acquisition of all or part of the assets of another enterprise in order to control its policy, administration, direction or management in accordance with the criteria prescribed in the opinion of the Commission.
(3) Acquisition of all or part of the shares of the other company, directly or indirectly, in order to control policy, business administration, direction or management in accordance with the criteria prescribed in the Commission notification.
The required reports are designed to strengthen the notification process. In the first case, notification is required to request TCC authorization for mergers where the combined entity would create a monopoly or control the majority of market shares. The TCC then has 90 days, with the possibility of extending the deadline by an additional 15 days, to make a decision on the merger. As part of this process, TCC may impose additional conditions when issuing the pre-merger authorization. Any party who disagrees with this decision may appeal to the administrative court within 60 days from the date of the decision.
Post-merger notification may be required if the outcome of the transaction significantly decreases the competitiveness of a particular market. A post-merger report is also required following transactions where one of the parties involved has sales exceeding THB 1 billion in its current market, but the merger does not result in a dominant commercial position or create no monopoly. This type of notification must be submitted within seven (7) days of the completion of the merger.
Exemptions may be provided under certain conditions for uncharacterized joint actions, if mergers are necessary to support the distribution of goods or to help the development of production without significantly affecting competition in the market, and if the market share cumulative amount of participating parties does not exceed 10 percent.
Abuse of dominant position
The above reporting requirements, in addition to the general application of antitrust law, require companies to know if they are abusing their dominant position to either monopolize or diminish a certain market share. Before entering into a deal, companies should consider whether they are putting in place unfair pricing systems that revolve around squeezing margins, low prices, excessive prices, or predatory pricing that affects the overall price of goods or services. in today’s market.
Another area of ââconcern is imposing unfair conditions that restrict the service or production capacity of a trading partner. This category covers the limitation of their ability to buy or sell products and to hinder their ability to buy, sell, receive or provide services by means of a quantity limitation. Other practices with antitrust implications include exclusivity agreements, maintaining resale prices, loyalty discounts, refusal to supply and forcing quantity.
Most importantly, TCC scrutinizes companies that are seen as dominant in a certain market. If a company’s market share is at least 50%, with sales totaling over THB 1 billion in the past year, they will likely be on TCC’s radar. Special attention is also given to the activities of one of the top three trading operators which have a combined market share of 75 percent, with sales value exceeding THB 1 billion in the previous year.
Verification of unfair commercial practices
Your business practices may be considered unfair if they do not comply with the TCA’s renewed antitrust policy on abuse of market dominance. Potential infractions include bid-rigging, where one party has agreed to set the conditions for a second party not to participate in or win an auction. Market sharing – when competitors conspire to divide markets among themselves – is also considered a criminal offense.
Other offenses include unjustly obstructing business operations by lowering the quality standards of goods or services. In some cases, it is also prohibited to establish unfair trade terms surrounding the sale or purchase of a particular product or service, including the application of an exclusive distribution agreement.
Ignorance of the law is no excuse
Some companies may not know they are violating the TCA’s new antitrust policies, especially if they control a significant market share. They may unknowingly violate recently updated regulations, which nevertheless put them in the crosshairs of TCC. Those who break applicable laws may be subject to heavy fines and / or jail time.
The new ATT also has extraterritorial reach, if the issue at hand affects consumers and the economy of Thailand through prohibited agreements between or among local and foreign parties.
Now more than ever, as TCC takes a more proactive stance on enforcement, it is critical that businesses stay on the right side of the law. For expert legal advice on all business matters and to ensure that your business relationship and future strategy is up to Thailand’s current antitrust law, contact Kudun & Partners today.