Thailand’s Trade Competition Commission issued new guidelines on unfair trade practices in a notification published in the Government Gazette on February 18, 2022, coming into effect the following day. The new guidelines repealed and replaced the commission’s previous ones, which had been in use since November 2, 2018.
As with the previous version, the new guidelines were issued under section 57 of the Trade Competition Act, B.E. 2560 (2017) (TCA) which prohibits unfair trade practices that cause damage to other business operators. These new guidelines were formulated in response to new types of unfair trade practices that have arisen due to changing business models and other economic developments. In addition to recategorizing the conduct at issue, the new guidelines widen the scope of behaviors deemed unfair under the TCA.
The new guidelines include the following key elements:
- Explicit principles of free and fair trade
The new guidelines specify that business operators should observe free and fair trade and must refrain from causing damage to other business operators. While this is already one of the core underlying principles of the TCA, the new guidelines put this principle in writing.
2. Additional examples of loss and damages
Allegations of unfair trade practices (i.e., violation of section 57 of the TCA) require proof of losses and damages by the affected party. In addition to economic losses (e.g., of revenue, market value, or manufacturing opportunities—which were already cited in the previous guidelines—the new guidelines also take into account loss of market share, of opportunities for selling and purchasing goods or services, and of opportunities for carrying out business with others, as well as increases in costs or expenses.
3. Adjusted criteria for determining superior bargaining power
In general, business operators are considered to have superior bargaining power when a trade partner must significantly rely on that operator for a business transaction (i.e., purchase or sale of goods or services). The old guidelines stipulated two possible criteria for superior bargaining power: (1) the value of the business transaction is at least 30% of the revenue generated from the total purchase or sale of that trade partner, or (2) even if the value of the transaction is below 30%, the trade partners have no other choices or the switching costs are excessive. While the new guidelines maintain the first criteria, they refine the second one by introducing a minimum value of 10% for the business transaction. This means that if the value of a business transaction between business operators is below 10% of the total revenue, none of the business operators are considered to have superior bargaining power.
4. Recategorized list of unfair conduct and new prohibited behaviors
The new guidelines refigure the list of activities fitting the TCA’s three broad categories of prohibited conduct, refine the wording of some items for clarity, and introduce several additional prohibited behaviors as follows:
- Forcing another business operator, without justification, to purchase products or services unrelated to its ordinary course of business from a business operator that abuses its market power or exploits its superior bargaining power;
- Forcing another business operator to sell or purchase products or services in an amount that is higher or lower than that operator’s needs or demands;
- Forcing another business operator to achieve a sales target that is determined in an unfair manner; and
- Any other abuse of market power and superior bargaining power, such as delaying payment for goods or services or refusing to pay fines for late payment of goods or services without justification.
A breach of the Trade Competition Commission’s guidelines can be a violation of section 57 of the TCA if damage can be proven by the affected party, with the penalty being a fine of up to 10% of total turnover for the year in which the offense is committed.
To avoid such a fine, business operators should review their business practices, contracts, and other arrangements with their trade partners to ensure compliance with the new guidelines, which have been in effect since February 19, 2022. Business and trade policies such as marketing campaigns or sales strategies that could adversely impact trade partners or other business operators should especially be avoided or undertaken with great caution.