1. Overview of Competition Law
Competition is generally beneficial for consumers as it keeps products at their minimum price. However, it is essential that a fair process of competition within the free market is protected through legislation. The primary purpose of competition law is to prevent distortion of the competitive process through anticompetitive behaviour such as:
- Abuse of Power: meaning the abuse of power by firms holding a dominant market position through anticompetitive conduct such as predatory pricing, tying, price gouging, deal refusal, etc;
- Mergers: meaning mergers, acquisitions, and joint ventures that are likely to reduce market competition in future due to their significant size and dominance; and
- Collusion and Cartels: meaning agreements and practices that restrict market competition such as setting fixed prices or market allocation (e.g. through collusion or the creation of cartels).
When otherwise competing companies agree on, for example, using a fixed price or to divide certain market areas, the benefits of competition will be lost. Further, not having to worry about competitors can cause firms to become inefficient and what might even be characterised as “lazy”. Directors might abandon issues such as customer satisfaction, innovation, and cutting costs, as others probably will too. Inevitably, legislation concerning the process of competition is required.
2. The Old Act: The Trade Competition Act B.E. 2542 (1999)
Thailand enacted its first modern competition laws in 1999 through the enactment of the Trade Competition Act B.E. 2542 (1999) (“1999 TCA”) which addressed issues of abuse of dominant market positions, together with the Pricing of Goods and Services Act B.E. 2542 (1999) which addressed issues of unfair pricing of goods and services.
Under the 1999 TCA, any merger or acquisition that may create a monopoly or unfair competition will require the approval of a newly-established Trade Competition Committee (“TCC”). Among the TCC’s powers granted under the 1999 TCA was the power to order a business operator which held more than 75% market share, and which had influence over a market to (1) suspend or cease its business operations, or (2) change its market share. The TCC could even prescribe the criteria, conditions, and time period for a business operator’s compliance with the provisions of the 1999 TCA.
3. The New Act: The Trade Competition Act B.E. 2560 (2017)
Thailand’s competition law regime has undergone several significant changes in the last few years. One of these recent developments is the implementation of the new Trade Competition Act B.E. 2560 in October 2017 (“2017 TCA”). Further, in 2018 the TCC passed several notifications clarifying particular criteria, such as the merger control regime and further details on the fundamental offences under the 2017 TCA.
Among the multiple key changes to the 1999 TCA was the expansion of the power of the TCC, establishing the TCC as a separate entity independent of the Thai Government. Another significant change is that the TCA now covers state enterprises. Under the new TCA, state entities will only be exempted in limited cases, whereas before, such entities were entirely excluded. An example of the type of circumstances where a state enterprise entity can still be exempted is when it is carrying out activities in the public interest and according to applicable laws or regulations. However, certain other groups, such as central and provincial administrations, and farmers’ groups and co-operatives, are still exempted.
Further, to provide more clarity, the 2017 TCA specifies four particular acts which are considered to cause damage to other business operators (section 57 of 2017 TCA), while the previous 1999 TCA did not and could be interpreted more broadly. Section 57 now sets out the following types of damaging conduct:
- 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; and
- conducting in other ways prescribed in the Commission’s notification.
So, what does the new and improved 2017 TCA state with regards to the three types of anticompetitive behaviour mentioned above (abuse of power, mergers, and collusion and cartels)?
A. Abuse of Power
The principle that merely having a dominant position within the market will not, by itself, result in a breach of law is retained under the 2017 TCA. It is, however, necessary to determine whether or not an entity in a dominant position engages in any improper conduct, specifically, the types of conduct listed in section 50 of the 2017 TCA. Previously under the 1999 TCA, whether a firm was considered to have a dominant position within the market or not was based on a firm’s market share and its volumes of sales. The new TCA introduces some additional assessment metrics. The TCC will now take more factors relating to competition conditions into consideration when assessing a company’s market position. For example, the TCC will now examine several other metrics such as a business operator’s number of competitors, the amount of capital, the business operator’s access to key production factors, and the business operator’s distribution channels.
B. Mergers
The 2017 TCA introduces several new requirements concerning mergers and acquisitions which may result in a monopoly or a dominant market position. Under the 2017 TCA, permission must be granted by the TCC before the date of the intended merger. A post-merger notification is required when a business operator engages in a merger that may substantially reduce competition in a market under the criteria prescribed in the Commission’ s notification. The business operator must notify the TCC of the outcome of such a merger within seven days from the date of the merger (Section 51 of 2017 TCA).
C. Collusions and Cartels
The current law makes a distinction between “hardcore” cartels and “non-hardcore” cartels. Under the 2017 TCA, the term “hardcore”, refers to firms that have come to an anti-competitive agreement on a horizontal level. These are firms competing in the same market. Non-hardcore cartels are generally conducted between firms operating in other businesses, such a manufacturer and a distributor. The previous TCA did not make this distinction and specified the same penalties for both types of cartels. However, under the 2017 TCA, non-hardcore cartels will solely be subject to administrative fines and penalties, while a hardcore cartel may be subject to criminal penalties.
With regards to penalties, the new TCA comes with another significant change. As set out above, the 2017 Act makes a distinction between administrative and criminal penalties. The TCC now has the power to impose administrative penalties and when such penalties are imposed, no criminal proceeding will be required. Under the 1999 TCA, the involvement of the public prosecutor was required, but under the current law, this will no longer be necessary. According to section 25 of the 2017 TCA, the TCC will also be able to submit a case and defend its opinion to the Attorney-General if the public prosecutor does not agree with the TCC and issues a non-prosecution order.
4. How will these Laws affect Businesses?
In order to facilitate business operations, it is possible for companies facing uncertainty under the 2017 TCA to file for an advanced ruling on whether or not a certain act is considered to be a violation of the act’s provisions, and therefore minimise their risk of such violation (applicable to sections 50, 51.2, 54, 55, 57, and 58 of the 2017 TCA).
In 2019, the TCC issued some more guidelines and started to actively pursue enforcement of the 2017 TCA, as demonstrated in August of that year when the TCC carried out its first enforcement proceedings of the 2017 TCA in three different cases. In 2020, the TCC aims to clarify the consideration for mergers in greater detail and to issue further guidelines relating to a number of regulated industries (e.g. telecommunications, financial services, and energy). Concerning the enforcement of the 2017 TCA, it is estimated (based on public announcements made by the TCC) that the number of cases relating to offences under the 2017 TCA that are currently under investigation are in the mid-double digits and is continually growing.
5. Conclusion
Altogether, the recent developments in Thai competition law provide for a greater degree of clarity and business operators can now receive more certainty regarding potential breaches of competition law. It is expected that the Thai competition law framework will undergo several more significant changes in the near future.