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June 10, 2016

Proposed Amendments to Thailand’s Trade Competition Act

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Bangkok Post, Corporate Counsellor Column

Recently, the Cabinet passed a resolution that amends Thailand’s Trade Competition Act B.E. 2542 (1999). The draft amended law has since been submitted to the National Legislative Assembly for further consideration. Businesses should be aware of and prepare for the major changes ahead, as the newly proposed law may become effective at the end of this year.

The Office of Thai Trade Competition Commission (OTCC) is the main enforcer of Thailand’s Trade Competition Act. Overall, the Act aims to regulate fair competition among business operators in the following key areas:

  • Unlawful exercise of market dominance;
  • A merger which may form a monopoly, causing unfair competition;
  • Collusion which forms a monopoly, restricting competition; and
  • Catch-all unfair trade practices.

The amended Trade Competition Act introduces more stringent and extensive provisions as well as higher penalties for violations. The Act, as currently drafted, will introduce the following key amendments:

The definition of “Business Operator” will be broadened.  Under the draft, “Business Operator” now includes affiliate companies as well as group companies. If a company within a company group engages in anticompetitive practices, the OTCC would focus its investigation on the entire group of companies, not only the individual company.

Violations committed outside Thailand are punishable.  Any violations of the Act which are committed outside of Thailand, whether partly or fully, that have an anticompetitive effect on Thailand would be punishable in Thailand. As a result, companies that previously relied on territorial divides to engage in anticompetitive behavior from overseas which have an anticompetitive effect on Thailand could now be subject to punishment in Thailand.

OTCC must be notified of certain merger activities.  The OTCC will be notified of merger activities that may cause a substantive reduction in competition prior to the merger, and the relevant financial statements will be continuously filed at the OTCC for it to monitor the effect of the merger for three consecutive years.

Criminal penalties will be adjusted.  There will be criminal penalties for certain violations of the Act. A fine may amount to 20 percent of a company’s revenue in the year of the violation. This has the potential to result in significantly higher fines. If there is a violation of the OTCC’s order, administrative sanctions may be imposed and the OTCC will determine the fine.

The OTCC, at its discretion, may decrease the fines imposed on business operators that are not the main actors in collusion or restriction of competition causing severe impact to the market, if they cooperate with the OTCC to provide substantial evidence of the violation.

State enterprises will be subject to the Act.  Under the current Act, state enterprises were immune from the provisions of the Act. Under the amended Act, however, they will not be immune unless they fall within exceptions that are granted to state enterprises in the fields of national security, public benefit, common interest, and public utility.

State enterprises that are subject to the Act and engage in anticompetitive practices may incur both criminal and civil penalties. This is because the private sector would be competing with these state enterprises.

The definition of “Market Dominant Operator” will be reviewed periodically. Under the existing Trade Competition Act, the criteria to be classified as a “Market Dominant Operator” (MDO) are as follows:

  • Any Business Operator in any particular goods or services market which has a market share in the previous year of 50 percent or more and has a sales turnover of at least THB 1 billion; or
  • Any Business Operator falling within the top three Business Operators in any particular goods or services market which together have a market share in the previous year of 75 percent and sales turnover of at least THB 1 billion (unless one of these three Business Operators has a market share in the previous year of lower than 10 percent or sales turnover of less than THB 1 billion).

Under the draft law, this longstanding definition of “Market Dominant Operator” (MDO) will be reviewed and revised at least once every five years. The OTCC is empowered to determine the criteria to be classified as an MDO.

If a Business Operator is classified as an MDO, its obligations and scrutiny under the Act would be higher. For example, Section 25 of the Act, which prohibits unreasonably fixing or maintaining purchase or sale prices of goods or fees for services, only applies to MDOs. Business Operators should therefore keep abreast of the Act’s amendments to determine whether or not they are classified as an MDO, as they may be subject to more provisions.

Companies face much heftier fines for violations of Thailand’s Trade Competition Act. Business owners should therefore ensure that they fully understand and comply with the amended Act. The OTCC is undergoing structural reform to increase its impartiality and independence in terms of personnel. The prospect of an increased budget for the OTCC is also on the horizon, which will enable the OTCC to more effectively enforce trade competition laws and regulations in Thailand.

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