Thailand: The Trade Competition Act

Last Updated: 5 June 2001
Article by Pimvimol Vipamaneerut

On February 10, 1999, the Thai Parliament adopted the "Trade Competition Act" with the aim of creating fair competition among private enterprises in Thailand.1 The Trade Competition Act (the "Competition Act") came into effect on April 30, 1999, thirty days after its publication in the Gov-ernment Gazette on March 31, 1999.

The Competition Act applies to all enterprises and business activities in Thailand with the exception of state enterprises, cooperatives, agricultural and cooperative groups, government agencies, and certain enterprises exempted by the Act. It replaces the old "1979 Price-Fixing and Anti-Monopoly Law" which did not provide proper protection for consumers and small businesses, especially with the privatization process presently being undertaken in Thailand.

The reader must accept that the new Competition Act is vague and, in some instances, ambiguous. This makes interpretation and compliance with the Competition Act something of a guessing game. It will be left to Ministerial Regulations and the courts to clarify the legal application of this new law.

Need For Proper Competition Laws

History has shown that competition laws are a necessity for all developed countries with free market economies in order to ensure and encourage the development of fair competition. Proper competi-tion laws normally protect consumers against unfair trade practices such as monopolies and high resale price maintenance, while ensuring fair treatment to businesses. Hence, fair competition is beneficial to small and medium-sized enterprises, the development of which might otherwise suffer and be compromised by the unfair practices of market-dominant competitors. Nonetheless, when it works right, fair competition provides consumers with competitive product prices.

By enacting the Competition Act, the Parliament intended to put in place a set of rules which will allow the Government to monitor and ensure the development of fair private sector competition in Thailand. In this respect, a Trade Competition Commission (the "Commission") has been estab-lished with the authority to oversee and ensure compliance with the Act as well as give recommendations to the Minister in the issuance of Ministerial Regulations.

Main Provisions Of The Competition Act

Under the Act, business operators are prohibited from banding together to conduct any business or transaction that would create a monopoly or unfair competition. "Business Operator" is defined as a distributor, manufacturer for distribution, procurer or importer into the Kingdom for distribution, or buyer for manufacturing or redistribution of goods, or provider of services in the business.

The Competition Act is domestic in orientation, intended to apply to unfair competition practices taking place within Thailand or affecting the Thai market. The only provision having an element of extra-territoriality is Section 28, which stipulates that customers or end-users must be given the opportunity to buy products or services directly from a business operator outside Thailand.

While some unfair practices covered by the Act are strictly prohibited, some may be exempted by the Commission upon application (see Exemption and Notification Process).

Reproduced below are the main provisions of the Competition Act, with our comments immediately following each Section:

"Section 25. A Business Operator Having Power Over the Market is prohibited from conduct-ing any of the following acts:

    1. to unfairly fix or maintain the levels of sale or purchase prices of goods or services;
    2. to set conditions which, directly or indirectly, unfairly compel other business operators who are customers of the Business Operator to limit the provision of services, production, purchase or distribution of goods, or their opportunity to choose to buy or sell goods, ac-cept or provide services or obtain credit from other business operators;
    3. to suspend, reduce or limit services, production, purchase, distribution, delivery, or im-portation into the Kingdom without reasonable grounds, or to destroy or damage goods in order to reduce supply to less than market demand; and
    4. to interfere with the business operations of other people without reasonable grounds."

Section 25 was adopted in order to address and reduce the risk of unfair practices by market-dominant enterprises. A "Business Operator Having Power Over the Market" is broadly defined under the Competition Act as follows: "One or more business operators in any certain goods or service market whose market share and total sales revenue exceed the level prescribed, with due consideration to market competition, by the Commission […]."

In the absence of a definition of "market share" and prescribed percentage of market share and total sales volume necessary to qualify as a "Business Operator Having Power Over the Market", it is difficult at this stage to express any opinion as to the scope of application of this provision. Section 30, however, states that any "Business Operator Having Power Over the Market" whose market share exceeds 75% may be ordered by the Commission to suspend, stop or change its market share. In view of Section 30, we think that any enterprise whose "market share" is at least 75% and probably less as may be announced by the Commission in the near future would be deemed a "Business Operator Having Power Over the Market".

"Section 26. A Business Operator is prohibited from conducting business mergers which may create a monopoly or unfair competition as prescribed and announced by the Commission in the Government Gazette, unless permission is obtained from the Commission.

The announcement of prescript by the Commission as mentioned in paragraph one must state that it shall apply to business mergers that result in the acquisition of market share, total sales reve-nue, amount of capital, amount of shares or amount of assets of not less than a certain amount.

Business mergers as mentioned in paragraph one shall include:

    1. a merger between manufacturer and manufacturer, distributor and dis-tribu-tor, manufac-turer and distributor, or service provider and service provider, which results in the continued existence of one business and the demise of another, or the establishment of a new business;
    2. the purchase of assets, whether in whole or in part, of another business to gain control over business management policy, supervision or administration;
    3. the purchase of shares, whether in whole or in part, of another business to gain control over business management policy, supervision or administration.

An application for permission under paragraph one shall be filed by the Business Operator with the Commission in accordance with Section 35."

Through Section 26, the Parliament provides for the possibility of prohibiting and/or restricting monopolies or cartels which are the greatest threats to competition. As drafted, this Section may have far-reaching consequences for actual dominant enterprises, but it is for the Commission to define the term "monopoly" and to announce the scope of application of this Section.

"Section 27. A Business Operator is prohibited from joining another Business Operator to con-duct any act of monopolizing or reducing competition or limiting competition in the market of any certain goods or services in any of the following manners:

    1. fixing the sales price of goods or services to be the same or at an agreed price, or limiting the sales volume of goods or services;
    2. fixing the purchase price of goods or services to be the same or at an agreed price, or by limiting the purchase volume of goods or services;
    3. entering into an agreement to take over or control the market;
    4. fixing agreements or conditions in a conniving manner to enable the other party to win a bid or tender for the sale of goods or services or to prevent the other party from competing in a bid or tender for the sale of goods or services;
    5. allocating areas where each Business Operator may distribute or reduce the distribution of goods or services, or specifying customers to whom each Business Operator may distribute goods or services without competition from the other Business Operators;
    6. allocating areas where each Business Operator may purchase goods or services or speci-fying customers from whom the Business Operator may purchase goods or services;
    7. fixing the volume of goods or services which each Business Operator may manufacture, purchase, distribute or provide in order to keep the volume less than the market demand;
    8. lowering the quality of goods or services compared with the previous manufacture, distri-bution or provision but maintaining or raising the price;
    9. appointing or assigning a person as sole distributor or provider of the same type or cate-gory of goods or services;
    10. fixing conditions or methods of practice in the purchase or distribution of goods or serv-ices to be of the same pattern or as agreed.

In case business reasons necessitate any act under (5), (6,) (7), (8), (9) or (10) in any certain period, the Business Operator shall file an application for permission with the Commission in ac-cordance with Section 35."

Section 27 is intended to prohibit any unfair practices by and between Business Operators. To fall under this Section, three conditions must be fulfilled: (a) two or more Business Operators must "join" together, i.e. enter into an agreement; (b) this agreement must result in an act or practice of monopolizing or reducing or limiting competition; and (c) the act or practice must fall under the enumerated practices, i.e. (1) to (10). With this Section, Business Operators will have to diligently analyze any agreements concluded, both horizontally (as in the case of an agreement between two distributors or two manufacturers) and vertically (e.g., an agreement between a distributor and a manufacturer).

"Section 28. A Business Operator having a business relationship, whether by contract, policy, partnership, shareholding, or any other relationship of like nature with a business operator outside the Kingdom, is prohibited from performing any activity which will restrict the freedom of a person in the Kingdom desirous of purchasing goods or services for his/her own use, to purchase the goods or services directly from the business operator outside the Kingdom."

Under Section 28, customers and end-users must be given the opportunity to buy products or serv-ices directly from a business operator outside Thailand. This may have an impact on exclusive distributorship agreements executed between affiliated companies. Indeed, the consumers’ right to buy directly from a manufacturer or distributor located outside Thailand is protected to a certain extent, provided that the purchase is for their own use. It should be noted, however, that this Sec-tion does not address the problem consumers may face with regard to after-sales services in Thailand for products acquired abroad. Therefore, it is still advisable to inquire about the avail-ability of after-sales services in Thailand before taking advantage of this Section.

"Section 29. A Business Operator is prohibited from performing any act contrary to free and fair competition and which results in the destruction, damage, obstruction, hindrance or restriction of the operations of other business operators, in order to prevent them from operating their business or cause the dissolution of their business."

Section 29 is aimed at restricting unfair practices by any Business Operator that would adversely affect other business operators. At this stage, it is hoped that any act performed in good faith by a Business Operator would not fall under this Section but again, it is for the Commission to determine the scope of application of this Section.

Exemption And Notification Process

While some unfair practices covered by the Act are strictly prohibited (Sections 25, 27[1-4], 28 and 29), some may be exempted by the Commission upon application (Sections 26 and 27 [5-10]).

Business Operators who intend to enter into any agreement or perform any act which falls under Sections 26 and 27(5-10), must apply for permission by filing an application with the Commission.

The Commission shall render its decision whether to grant permission or not in writing within 90 days. Under the Act, the applicant is given the right to appeal any such order of the Commission to the "Appeals Consideration Commission", a body established to review decisions of the Commis-sion.

The notification process also applies to agreements or practices falling under Section 27(5-10) which existed prior to the enactment of the Competition Act, thereby giving the Act a retroactive effect.

Furthermore, the Commission is given the authority to issue written orders to business operators violating, in its opinion, Sections 25 to 29, requiring them to suspend, stop or correct and alter unfair practices. While such orders must be grounded, business operators are also given the op-portunity to appeal such decisions to the "Appeals Consideration Commission".

Penalties

Failure to abide by the above provisions of the Competition Act could result in jail terms of be-tween one to three years and/or fines ranging from two to six million baht. Note that under the Competition Act, such penalties may be applied not only to the enterprises but also to their manag-ing director, managing partner or person in charge of operations unless the offense at stake was committed without his/her knowledge or consent and/or reasonable measures were taken to prevent such offense.

Furthermore, the Act also allows any person suffering damages attributable to violation of Sections 25 to 29 to claim for damages by filing a lawsuit through the Consumer Protection Commission.

Governing Body

As stated above, the Commission has been given the authority to oversee and ensure compliance with the Act and give recommendations to the Minister in the issuance of Ministerial Regulations.

The Competition Act has been criticized for the unlimited power given to those acting on behalf of the Commission. Indeed, these individuals are vested with the same authority as investigating offi-cers under the Criminal Procedure Code. In performing their duties under the Competition Act, government officials are given extraordinary powers, such as entering business premises under reasonable suspicion of committing a violation without search warrants, and are vested with the same authority as administrative officials and police under the Penal Code for arresting violators.

Furthermore, as stated above, the Commission has the authority to issue written orders to Business Operators who, in its opinion, are in violation of Sections 25 to 29 and to any "Business Operator Having Power Over the Market" whose market share exceeds 75%. In issuing such orders, the Commission is again given a great deal of discretion in prescribing rules, procedures, conditions and time frame for compliance.

Conclusion

The Competition Act, while needed in the suite of modern business practices regulatory enactments, unfortunately can be legitimately criticized for the ambiguities of its terms, which give the Act a very broad application. In view of the uncertainty concerning the scope of application of the Act, it is hoped that the Commission will urgently recommend further legislation and that organic laws will be adopted in the near future.

Footnotes

1The Act was adopted together with "The Act on the Price of Goods and Services" and the "Anti-Dumping and Counter-Subsidization Act", thereby giving Thailand a set of new laws the purpose of which is to prevent unfair trade practices. "The Act on the Price of Goods and Services" aims at preventing the fixing of purchase and distribution prices and/or the setting of unfair conditions and trade practices, while the "Anti-Dumping and Counter-Subsidization Act" provides procedures and criteria for dealing with anti-dumping and counter-subsidization cases.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions