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Thailand’s Draft New Trade Competition Act

Summary: The draft new Trade Competition Act (TCA) was approved by the Cabinet in October 2016, and the National Legislative Assembly on 23 March 2017 and 24 March 2017. The TCA will be proposed by the Prime Minister to the King for royal endorsement. Once endorsed, the TCA will be published in the government gazette, and the TCA will become effective after 90 days from its publication in the government gazette.

The current Trade Competition Act B.E. 2542 (1999) shall be repealed and replaced by the TCA.

Scope of Application

The TCA applies to any business operator engaging in agricultural, industrial, commercial, financial, insurance, service or other businesses to be prescribed by the Ministerial Regulations.

The TCA will not be applicable to various organisations including, (a) government agencies, and (b) state enterprises and public organizations for actions in accordance with the laws or Cabinet Resolutions by reason of national security, public interest, or public utility. This is different from the current law which excludes all state enterprises under the law on budgetary procedure from its application.

Office of Trade Competition Commission

The Office of Trade Competition Commission, which was originally part of the Department of Internal Trade, Ministry of Commerce, will now be established as an independent and separate legal body being neither a government agency nor a state enterprise.

Anti-competitive behaviour

1. Abuse of Market Dominance

A business operator with market dominance is prohibited from conducting the following activities:

  • unfairly fixing or maintaining the purchasing or selling price level for goods and services;
  • unfairly setting conditions that requires other business operators who are its trading partners to limit the provision of services, the manufacturing, the purchase or the sale of goods, or to limit their opportunity in buying or selling goods, receiving or providing services, or in procuring credit from other business operators;
  • suspending, reducing or limiting the provision of services, the manufacturing, the purchasing, the sale, the delivery, and the importation without reasonable ground as well as destroying or causing damages to the goods so as to reduce the quantity thereof to be lower than the demand of the market; and
  • intervening in the business operations of others without reasonable ground.

The restrictive practices are in many ways similar to which were prescribed in the current law.

2. Mergers and Acquisitions

Under the TCA, there are both pre-merger approval and post-notification requirements which can be summarised as follows:

Pre-merger approval

Prior approval from the Trade Competition Commission (TCC) is required for any merger that may result in a monopoly or is with a business operator having market dominance.

Post-notification

The TCA also incorporates the mechanism of post-notification for the business operators who have merged their business in a manner which may cause a significant reduction of competition in the market in accordance with criteria to be prescribed by the TCC.

The business operators must notify such merger to the TCC within 7 days from the date of the merger.

Exception

The pre-merger approval and post-notification requirements do not apply to any merger for the purpose of internal restructuring between the business operators who are related by policy or control power according to the criteria set by the TCC.

The pre-approval requirement also appeared in the current law (although no notification on pre-merger approval has ever been issued under the current law) whereas the post-notification is not.

3. Restrictive Joint Trade Practices (Cartel Practices)

No business operator shall jointly with another business operator competing within the same market do anything that constitutes a monopoly or a reduction of competition or a restriction of competition in such market in any of the following areas:

  1. fixing purchasing or selling price or any trading conditions which will directly or indirectly affect the price of goods or services;
  2. limiting the quantity of goods or service to be manufactured, bought, sold or provided as agreed;
  3. setting terms of agreement or conditions in a collusive manner in order to enable one party to win a bid or tender for the supply of goods or services or in order to prevent one party from participating in a bid or tender for the goods or services; or
  4. designating a locality that each business operator will sell or reduce the sale or purchase of goods or services in such locality or designate purchasers or sellers to whom each business operator will sell or purchase goods or services whereby other business operators will not purchase or sell the said goods or services.

These legal restrictions will not be applicable to the business operators in accordance with the criteria set by the TCC.

In addition, no business operator shall jointly with any other business operator act in a manner that is a monopoly or a reduction of competition or a restriction of competition in any market of any goods or any services in any of the following areas:

  1. setting certain conditions such as fixing purchasing or selling price or any trading conditions which will directly or indirectly affect the price of goods or services between the business operators who are not the competitors within the same market;
  2. reducing the quality of goods or services to be lower than that previously manufactured, sold or serviced;
  3. appointing or assigning any person to be exclusive seller of goods or services of the same kind or category;
  4. setting conditions or practices in respect to the purchase or sale of goods or services so that they be the same as agreed upon; or
  5. any kind of mutual agreement as prescribed by the TCC.

These legal restrictions will not be applicable to the following cases:

  1. the actions between the business operators pursuant to the criteria specified by the TCC;
  2. the mutual agreement in the business for the purpose of production development, distribution of products, and promoting technical or economic progress;
  3. mutual agreement in the form of business with agreement between business operators of different levels, in which one party grants the rights in goods or services, trademark, business operation procedure or support in business operation and, another party receives the rights with duty to pay for such rights, fees or other considerations as specified in the agreement; or
  4. other types of agreement or forms of business as prescribed by the Ministerial Regulation with
    recommendation of the TCC.

The mutual agreement pursuant to (2) and (3) must not create limitation that exceeds the need to achieve the above benefit, and must not give rise to monopoly or materially limit the competition within that market, taking into account any impact on consumers.

Under the current law, some restrictive joint trade practices are strictly prohibited whereas the others are permitted upon approval. In contrast, TCA prohibits certain joint trade practices subject to exception whereby the approval is not possible.

4. Unfair Trade Practice

A business operator is also prohibited from taking any action which will cause damages to other business operators in the following manners:

  • unfairly impeding the business of other business operators;
  • unfairly using market power or superior bargaining power;
  • setting trading conditions which will unfairly obstruct the business of other business operators; or
  • doing any other manners to be prescribed by the TCC.

5. Restrictive Trade Practices with Overseas Business Operator

A business operator is also prohibited from entering into agreements with overseas business operator which will result in a monopoly or unfairly limit trade competition and which will have significant adverse impact on the economy or benefit of overall consumers.

Pre-consultation

For the benefit of business operator, the TCA has created a channel for a business operator to submit their queries to the TCC for their consideration in advance on matters related to abuse of market dominance, restrictive joint trade practices, unfair trade practice and restrictive trade practice with overseas business operator in accordance with the TCA.

Consequences of Breach

Civil claim and criminal penalties are stipulated in the current law. The administrative penalties are now
introduced in the TCA in the addition to civil claim and criminal penalties

By Chatchavej Chitvarakorn (Partner), Kanokon Worachanyawong (Partner),
and Nicharee Dejakaisaya (Associate) © April 2017
Khun Chatchavej can be reached at Chatchavej@siampremier.com