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New Trade Competition Act
Thailand’s new Trade Competition Act B.E. 2560 (2017) (the “New TCA”) came into effect on 5th October 2017 and entirely replaced the older TCA, which had remained relatively unchanged for almost 20 years.
Therefore, in this article, we have highlighted essential rules and regulation that came into our attention which, in our view, are shareable and useful for all business operators as follows:
Merger Control Rules
The new concept of “Merger Control Rules” is introduced under new TCA. These new rules consist of (i) the pre-closing approval which applies to the merger or acquisition that may result in a “monopoly” or create a “domination”. The application of pre-closing approval shall be submitted with the Office of the Trade Competition Commission (so-called the “OTCC”) before the completion of closing; and (ii) the post-closing notification which applies to the merger or acquisition which may materially reduce competition in any relevant market. The post-closing notification shall be submitted with the OTCC within a certain period after the closing is completed.
Interestingly, as publicly announced in March 2020, Charoen Pokphand Group (“CP Group”) conditionally agreed to acquire shares of Tesco Holdings Ltd. and Tesco Holdings BV (collectively referred to as “Lotus”) – including Thailand and Malaysian outlets – which worth approx. USD 10.6 billion. The acquisition triggered OTCC’s concern and has raised a legal issue whether this particular transaction shall be subject to a pre-closing approval or post-closing notification. Although this legal issue is arguable, OTCC published its comment that this deal, between two gigantic companies who have large market shares in wholesaling and retailing markets, could potentially lead CP Group to become a dominant market player, and, consequently, the pre-closing approval might be applied.
1. A “Monopoly” is where there is only one business operator in a given market, which has the power to freely determine the price or quantity of its goods or services and has a turnover of at least THB 1 Billion.
2. A business operator is presumed to be dominant in a relevant market if: (a) it has, in a relevant market, at least 50% market share and turnover of at least THB 1 Billion in the previous year; or (b) it is one of the top three operators having at least 75% market share in aggregate in any relevant market and a turnover of at least THB 1 Billion in the previous year – details as shown in the announcement of the OTCC on the criteria of the dominant market position.
Under the new TCA, the business operators whether in the same or different market are prohibited to make any commitments which caused a monopoly, reduction, or limitation of competition in such market (so-called “Cartel Regulation”) or otherwise the criminal penalty would be applied. For instance, a group of car manufacturers are prohibited to enter into a mutual commitment to develop and improve car engines to reduce fuel consumption since there are in the same market and may cause the limitation of competition.
Nevertheless, there are some exceptions applied to the commitment made between the business operators who are not in the same market as follows:
- The commitment between the business operators who have relationship between each other in term of policy or commanding power.
- The agreement with the purposes of production development, distribution development and promotion of technological or economic progress.
- The agreement between franchisor or licensor and franchisee or licensee.
Can a business operator who has a large market share in a certain market conduct a market survey? Is there any violation against the provisions stipulated under the new TCA?
The collection of sales information of all products from department stores or convenience stores to study consumers’ needs and preferences does not violate the new TCA since it is not an anti-competitive commitment whether horizontal (i.e. between competitors in the same market) or vertical (i.e. with other business operators, such as between a retailer and a distributor) which caused a monopoly, reduction, or limitation of competition in the market. However, the new TCA strictly prohibits (i) the abuse of dominant power such as unfair price fixing, unfair dealing and unreasonable interference, (ii) Cartel Regulation and (iii) unfair trade practice such as misuse of market power and unfair trade conditions.