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Home PageNews & PublicationsQuestions arise about passage of proposed Amendments to the Foreign Business Act

Questions arise about passage of proposed Amendments to the Foreign Business Act

On 8th August 2007, the National Legislative Assembly (NLA), at the behest of the Minister of Commerce, returned the Amendment (Amendment) to the Foreign Business Act (Act) to the Extraordinary Committee on the Foreign Business Act (Committee) for further review and revision after the Amendment’s second reading by the NLA. Details regarding the Amendment are available at: http://www.siamlaw.co.th/publications/11jan07.htm

During the second reading proposed changes were adopted to further expand the definition of “foreigner”. The Amendment as previously proposed and approved by the Cabinet and the NLA at its first reading will add Thai incorporated companies whose voting rights are foreign-controlled to the Act’s current definition of a “foreigner” subject to the Act. The current definition captures only Thai incorporated companies in which foreigners hold a majority of the shares.

The NLA voted to extend the Act’s coverage further to Thai incorporated companies in which foreigners:

  • have the authority to appoint or dismiss a majority of the directors or
  • have the right to direct the company’s business strategy or direction.

The NLA also voted to apply the criteria used in determining whether a Thai incorporated company is to be deemed to be a “foreigner” to all levels in any multiple tier holding structure.

Following the addition of management control to the other criteria in determining whether a Thai company is a “foreigner” for the Act’s purposes, the Commerce Minister asked that the Amendment be withdrawn and sent to the Committee for further review and revision of the transitional provisions in the grandfathering clauses and the businesses to be included in the lists of those prohibited or restricted to foreigners.

However, since the NLA has adopted the expanded definition of “foreigner”, the Committee will not be reconsidering the definition of “foreigner”. Thus, if the Amendment is adopted, the FBA’s definition of “foreigner” will encompass Thai incorporated companies in which foreigners:

  • own a majority of the shares; or
  • control a majority of the shareholders’ voting rights; or
  • have the authority to appoint or dismiss a majority of the directors or
  • have the right to direct the company’s business strategy or direction.

It is not known when the Amendment may be returned to the NLA for final approval before enactment. The likely outcome of the Committee’s further review of the Amendment is also uncertain. There are reports that there is doubt whether any amendment will be passed during the NLA’s term. The Commerce Minister, Khun Krirkkrai Jirapaet, is reported in one of Thailand’s English-language newspapers to have said “Now I can’t tell if this government will be able to pass this law within its term.

January 2007 The New Rules for Market Dominance
The Trade Competition Act B.E. 2542 (1999) came into affect on May 1, 1999. The main objective of the Act was to create free and fair trade for Thailand’s business community. However, the aim of the Act has not been achieved during the past eight years and it could be argued that the Act had become a ‘Paper Tiger’ since it was promulgated. Rawat Chomsri discusses.

The New Rules for Market Dominance – January 2007

The Trade Competition Act B.E. 2542 (1999) came into affect on May 1, 1999. The main objective of the Act was to create free and fair trade for Thailand’s business community. However, the aim of the Act has not been achieved during the past eight years and it could be argued that the Act had become a ‘Paper Tiger’ since it was promulgated. The inefficacy of the Act has largely been due to that fact that no Royal Decree had been issued determining the meaning of ‘Market Dominance’. Since enactment, many consumer groups have tried to push past governments to issue the Royal Decree to define Market Dominance but until recently, their efforts were ignored. The lack of action on this issue may well have been due to the fact that the definition of Market Dominance is likely to have an adverse effect on the business groups that back political parties.

The Commerce Minister, Mr Krirkkrai Jiraphaet however, has now acted and a new definition of Market Dominance was proposed at the Cabinet on January 9th. After serious discussion, the definition of Market Dominance has now been approved. The approved definition will be turned into a Royal Decree and will then be promulgated in the Government Gazette. It is expected that the Royal Decree will be promulgated in late January or early February 2007.

Market dominance will now be defined as follows:

  1. Any business operator selling any product or rendering any service, whose market share in the past year was 50 percent or higher and whose sale proceeds in the previous year amounted to 1 billion Baht or above, or
  2. The first three business operators of any product or service, whose market share during the previous year was a total of 75 percent or higher and whose sales proceeds during the past year amounted to 1 billion Baht or above with the exception of a business operator whose market share in the past year was below 10 percent or a business operator whose sales proceeds of the past year were below 1 billion baht.

It is worth knowing that being an entity that has market dominance is not an offence in itself. An entity which has market dominance is still able to carry on business or trade as normal. It becomes an offence only when the entity is in breach of a prohibition under Section 25 of the Trade Competition Act of B.E. 2542, for instance:

  • fixing the buying or selling prices of goods or services in an unfair manner,
  • imposing coercive conditions on customers in an unfair manner,
  • halting, reducing or restricting services, production and import without reasonable cause and (4) intervening in the business operations of others without reasonable cause