On October 5th, 2017, the new Trade Competition Act B.E. 2560 (2017) (“2017 Act”) become an officially enforced law. It has replaced a previous competition law in Thailand, i.e. the Trade Competition Act B.E. 2542 (1999) (“1999 Act”) which had remained relatively unchanged for almost 20 years.
The reasoning behind the enactment of the 2017 Act is to increase the intensity and effectiveness of the previous Act in 1999. Referred by many in the business and legal communities as the “Paper Tiger” because of its lack of sufficient teeth receding to penalties and the ambiguous language included in areas detailing unfair trade practices or abusive competition activities. These examples and others had proven difficult to penalize and enforce under the 1999 Act.
The significant changes in the 2017 Act are as follows:
1. State-Owned Enterprises Exemption
The provisions of the 1999 Act shall not be applied to the acts of state-owned enterprises setting up under the law on budget process which this exemption was too broad and that opened a room for the state-owned enterprises to conduct unfair trade practices or abusive competition activities against private sectors. However, in the 2017 Act, it precisely specifies that the provisions shall not apply to only the acts of state-owned enterprises, public organizations, or other government agencies provided that they conduct their undertakings according to the laws or resolutions of the Cabinet which are necessary for the benefit of maintaining national securities, public interests, the interests of society, or the provisions of public utility.
2. Separation of Trade Competition Bureau
In the past, the Trade Competition Bureau (“Bureau”) was under the Ministry of Commerce and that somehow the process of work was very awkward and time-consuming. Under the 2017 Act, the Bureau will be transformed to be an independent agency working under its own control, budget and direction which it is believing that this will allow the Bureau to conduct its work more efficient.
3. The Trade Competition Commission
In the 1999 Act, the Trade Competition Commission (“Commission”) consisted of members from both political affairs and civil servants. However, in the 2017 Act, the members of Commission have been changed to consist of persons who have experiences and expertise over 10 years in law, economics, finance and accountancy, industrial, business administration, and consumer protection and also prohibit persons who are in positions or involve with, e.g. political positions or parties, civil servants, staffs or employees of government authorities, election committee, ombudsman, auditor general of Thailand committee, institute or association for the trade purpose. It is hoping that this will create more transparent and efficient for conducting the work of the Commission.
4. Public Hearing
The 2017 Act prescribes the provision which has never appeared in the 1999 Act that the Commission opens a room for public and stakeholder to provide their opinion and that such opinion will be considered before issuing of regulations or notifications on competition that are to be generally applicable.
5. Business Operator with a Dominant Position of Market Power
The 2017 Act prescribes more precise meaning of “Business Operator with a Dominant Position of Market Power” and empowers the Commission to review the criteria of such market dominant players with at least once in three years.
The market dominant players are not automatically considered as breaching of this 2017 Act unless they conduct one of the following behaviors:
(i) unfairly fixing or maintaining the level of purchasing or selling price of goods or services;
(ii) unfairly fixing conditions requiring other business operations who are his or her trading partners to restrict services, productions, purchase or distribution of goods or restrict opportunities in purchasing or selling goods, receiving or providing services or obtaining credits from other business operators;
(iii) suspending, reducing or limiting provision of services, manufacturing purchase, sale, delivery, and 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 demand of the market; or
(iiii) intervening in the business operation of others without any appropriate reason.
6. Merger of Businesses
In the 1999 Act, the provision in relation to controlling or restricting of merger of businesses was completely unenforceable due to no rules and regulation specifying details of criteria of controlling or restricting of merger of businesses.
The 2017 Act prescribes definition of merger of businesses which includes:
• merger among producers, sellers, producers and sellers or service provides resulting in one business remaining and the other business terminating or a new business coming into existence;
• Acquisition of all or part of the assets of other business in order to control its policy, business administration, direction or management; and
• Acquisition of all or part of stocks of the other business, whether directly or indirectly, in order to control policy, business administration, direction or management.
It also provides that any business operator planning to conduct a merger which may cause a monopoly or result in a dominant position in the market shall obtain approval from the Commission and any business operator conducting a merger which may substantially reduce competition in a market under the criteria prescribed by the Commission shall require notifying the outcome of such merger to the Commission within 7 days from the date of merging.
7. Anti-Competitive Arrangement (Cartel)
The 2017 Act clearly distinguishes between hardcore cartels and non-hardcore cartels arrangements.
Hardcore Cartels are considered as agreements between competitors competing within the same market to do anything that causes a monopoly or reducing of competition or a restriction of competition in such market in any of the following areas:
(i) Fixing purchasing or selling price or any trading conditions which will directly or indirectly affect the price of goods or services;
(ii) Limiting the quantity of goods or services;
(iii) Bid-rigging; or
(iiii) 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 restrictions will not be applied to the business operators who have relationship between each other in term of policy or commanding power as prescribed by the Commission.
Non-Hardcore Cartels are considered as agreements between competitors who competing in other markets of goods or services in any of the following areas:
(i) 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;
(ii) Reducing the quality of goods or services to be in the conditions lower than those previously produced, sold, or provide;
(iii) Appointing or entrusting any person as a sole distributor;
(iiii) Fixing conditions or practicing in respect to the purchase or sale of goods or services so that they will be the same as agreed; or
(iiiii) Other agreements as prescribed by the Commission.
These restrictions will not be applied to the business operators who have relationship between each other in term of policy or commanding power as prescribed in the Commission, Agreements for developing product, licensing agreements’ and some specific forms of business as prescribed by the Ministerial Regulations.
8. Unfair Trade Practices
The 2017 Act clearly prescribes conditions of “Catch All Provisions” which are one of the following behaviors:
• unfairly obstructing the business operation of other business operators;
• unfairly utilizing superior market power or superior bargaining power;
• unfairly setting trading conditions that restrict or prevent the business operation of others; or
• conducting in other ways prescribed by the Commission.
9. Local Business Operators having Juristic Act with Overseas Business Operates
The 2017 Act prohibits local business operators carrying out any juristic act or entering into any contract with overseas business operators without appropriate justification where that action will result in a monopoly condition or unfairly restrict trade, as well as cause serious harm to the economy and consumers benefit as a whole.
The 2017 Act empowers the Commission to consider imposing substantial administrative fines on its own and to request the public prosecutor to prosecute wrongdoers to the jurisdiction court, i.e. the Intellectual Property and International Trade Court of Thailand, when criminal sanctions are envisaged. In addition, if the public prosecutor refuses to prosecute the case, the Commission is empowered to request the Attorney General to consider the case and then submit an order for further prosecution. However, if the Attorney General opines that the case still lacks evidence, the Attorney General shall inform the said issue to the Commission and then set up a joint working group in order to search for additional evidence for further prosecution.
It is hoped that the 2017 Act will be more enforceable than the previous 1999 Act and that would help preventing unfair trade practices or abusive competition activities in the Thai market.
Author: Panisa Suwanmatajarn and Onnicha Khongthon