Thailand Trade Competition Act: Market Dominance, Cartels and Merger Filings

Who is subject to Thailand's Trade Competition Act

"Business" under the Act is extremely broad: undertakings performed for the purpose of trade in agriculture, industry, commerce, finance, insurance and services are all covered; "business operator" includes distributors, producers for distribution, importers for distribution, purchasers of goods for production or redistribution, and providers of services (Section 5). In other words, virtually every company doing business in Thailand — including the Thai entities of foreign-invested groups — falls within its scope.

There are only four statutory exemptions (Section 4):

• Government administrative agencies: acts of the central administration, provincial administration and local administration;
• State enterprises, public organisations and other State agencies: but only insofar as their acts are performed in accordance with the law or resolutions of the Council of Ministers and are necessary for maintaining State security, public interests, public benefits or providing public utilities — ordinary commercial conduct of State enterprises is not automatically exempt;
• Farmers' organisations: farmers' groups, co-operatives and co-operative federations recognised by law whose object is the occupational interest of farmers;
• Sectors with their own competition legislation: businesses whose trade competition is already regulated by specific law.

How a dominant market position is determined

A "business operator with a dominant position in a market" means one or more business operators in a particular market whose market share and sales volume exceed the thresholds prescribed in the Notification of the Trade Competition Commission, with market competitive factors also to be considered in the determination — including the number of business operators in the market, investment scale, access to essential production inputs, distribution channels, business networks, necessary infrastructure, State regulation and so on (Section 5).

Two practical points. First, combined calculation of related operators — the market shares and sales volumes of all business operators related to one another through policies or managerial power must be combined, and once the combined figures cross the threshold, each related entity is deemed a dominant operator. Second, the Commission must review the share and sales-volume thresholds at least once every 3 years (Section 5).

Prohibited zone 1: abuse of a dominant market position

A business operator with a dominant position in a market must not carry out any of the following acts (Section 50):

• Unreasonable pricing: unreasonably fixing or maintaining purchasing or selling prices of goods or fees for services;
• Unfairly restricting trade partners: fixing conditions in an unfair manner requiring other business operators that are its trade partners to restrict services, production, purchase or distribution, or restricting their opportunities to purchase or sell goods, receive or provide services, or obtain credit from other business operators;
• Artificially creating shortages: suspending, reducing or restricting services, production, purchase, distribution, delivery or importation without justifiable reasons, or destroying or damaging goods, with a view to bringing supply below market demand;
• Interfering in others' businesses: intervening in the business operation of other persons without justifiable reasons.

Note: this section binds only businesses that reach the dominance thresholds, but the consequence of violating it is criminal liability (see the penalties section below).

Prohibited zone 2: hard-core cartels

No business operator may, acting in concert with competitors in the same market, carry out any of the following acts amounting to a monopoly or a reduction or restriction of competition (Section 54):

• Price fixing: directly or indirectly fixing purchasing or selling prices or any trade conditions that affect the price of goods or services;
• Output restriction: restricting, as agreed, the volume of goods or services each business operator will produce, purchase, distribute or provide;
• Bid rigging: collusively fixing terms or conditions to enable one party to win a bid or tender for goods or services, or to prevent one party from participating in it;
• Market or customer allocation: fixing the areas in which each business operator may sell or purchase, or designating the counterparties with whom each may deal, and requiring other business operators to comply.

The only statutory exception is conduct amongst business operators related through policies or managerial power under the rules prescribed in the Commission's Notification (Section 54) — that is, intra-group arrangements are not treated as cartels. Hard-core cartels are likewise criminal offences.

Prohibited zone 3: other competition-restricting agreements

Even between parties that are not competitors in the same market, business operators are prohibited from jointly carrying out the following acts amounting to a monopoly or a reduction or restriction of competition (Section 55): fixing, amongst non-competitors, the conditions listed in Section 54 (1), (2) or (4); reducing the quality of goods or services below the previous level; appointing a sole distributor or sole provider of the same goods or services; fixing purchase, distribution or service conditions in order to secure performance as agreed; and other forms of mutual agreement prescribed in the Commission's Notification.

Section 56, however, provides important exemptions (Section 56):

• conduct amongst business operators related through policies or managerial power (intra-group arrangements);
• trade agreements aimed at developing the production or distribution of goods and promoting technical or economic advancement;
• licensing-style business models between operators at different levels — one party grants the right to use goods, services, trademarks, business methods or business support, and the other pays royalties, fees or other remuneration (common franchising falls into this category);
• other agreed terms or business models prescribed in the Ministerial Regulation on the advice of the Commission.

Note that the exemptions have boundaries: agreements in the second and third categories must not impose restrictions beyond what is necessary to achieve those benefits, must not create monopolistic power or materially restrict competition in the market concerned, and must have regard to impacts on consumers (Section 56).

Prohibited zone 4: unfair trade practices and restrictive contracts with foreign operators

No business operator may carry out any of the following acts that prejudice other business operators (Section 57): unfairly causing barriers to the business operations of others; unfairly exploiting superior market power or bargaining power; unfairly fixing trade conditions that restrict or impede the business operations of others; and other acts prescribed in the Commission's Notification. This is the catch-all provision most frequently invoked in practice — disputes over supplier squeezing, channel blocking and unreasonable exclusivity terms mostly land here.

In addition, a domestic business operator must not, without reasonable justification, enter into a juristic act or contract with a foreign business operator that results in unfair monopolistic conduct or trade restriction and seriously affects the economy and the interests of consumers in general (Section 58) — cross-border exclusive agency and import-restriction arrangements need to be reviewed against this section.

Merger control: a two-tier system of notification and permission

Thailand's merger control has two tiers (Section 51):

• Post-closing notification tier: a business merger that may result in a significant reduction of competition in a particular market (determined under the rules in the Commission's Notification) must be notified to the Commission within 7 days from the date of the merger's completion;
• Prior permission tier: a proposed business merger that may result in a monopoly or a dominant market position may only proceed after obtaining the Commission's prior permission.

A regulated "business merger" takes three forms (Section 51):

Intra-group restructuring exemption: a merger between business operators related through policies or managerial power, carried out for the purpose of internal restructuring, is exempt from both the notification and the permission requirements (Section 51). The minimum market-share, sales-volume, capital, share or asset amounts that trigger the notification obligation are likewise prescribed by Commission Notification — the exact figures are subject to the official prescriptions (our firm can help confirm them).

Procedurally, the Commission must decide on a permission application within 90 days from receipt, extendable by no more than 15 days where necessary; in its review it considers reasonable necessity in the business, benefits to the promotion of business operation, absence of serious damage to the economy and absence of impact on the important legitimate interests of consumers in general, and it may attach time limits or conditions when granting permission (Section 52). A permitted business operator must implement the merger within the period and on the conditions of the permission; in case of breach, the Commission may revoke the permission in whole or in part (Section 53). An operator that disagrees with the Commission's decision may bring an action before the Administrative Court within 60 days from the date of receiving notice of it (Section 52).

Consequences of violation: criminal, administrative and civil tracks

Criminal liability (abuse of dominance and hard-core cartels)

Violating Section 50 or Section 54 carries imprisonment of up to 2 years, or a fine of up to 10% of income in the year in which the offence is committed, or both; if the offence is committed in the first year of business operation, the fine is capped at THB 1 million (Section 72). Where a juristic person's offence results from the instruction, act or omission of a director, manager or person responsible for its operation, that individual bears the same criminal liability (Section 77). Offences under the Act may be settled by the Commission by way of payment of a fine, and once the fine is paid in full the case is extinguished (Section 79).

Administrative liability (mergers and other violations)

• Failing to notify a notifiable merger (violation of Section 51 paragraph one): an administrative fine of up to THB 200,000, plus a further fine of up to THB 10,000 per day throughout the continuance of the violation (Section 80);
• Merging without required permission or breaching permission conditions: an administrative fine of up to 0.5% of the merger transaction value (Section 81);
• Competition-restricting agreements, unfair trade practices and restrictive contracts with foreign operators (violations of Sections 55, 57 and 58): an administrative fine of up to 10% of income in the year of the offence, capped at THB 1 million for offences in the first year of business (Section 82);
• Where the offender is a juristic person, the responsible directors, managers and similar individuals may likewise be subject to administrative fines (Section 84); in imposing fines the Commission must have regard to the gravity of the circumstances of the offence (Section 85).

Civil claims and regulatory orders

A person suffering damage from a violation of Section 50, Section 51 paragraph two, Section 54, 55, 57 or 58 has the right to claim damages from the violator, and the Consumer Protection Board or an association or foundation accredited by it may sue on behalf of consumers or its members (Section 69); however, the action must be brought within 1 year from the date the injured person knew or should have known of the damage, failing which the right lapses (Section 70). In addition, where the Commission has evidence justifying the belief that a business operator is violating or will violate the law, it may order the operator in writing to suspend, cease or rectify the conduct; an operator that disagrees may bring an action before the Administrative Court within 60 days (Section 60).

Advance compliance: you can ask the regulator before doing the deal

For business arrangements you are unsure about, the Act provides an official advance-confirmation channel: a business operator may apply to the Commission in advance for consideration and a ruling on proposed conduct as a dominant operator (Section 50 situations) or on business models falling under Sections 54, 55, 57 or 58; the ruling binds only the applicant, the Commission may attach conditions, and the ruling will be revoked if the information submitted in the application is materially incorrect or incomplete (Section 59).

Practical advice: businesses of a certain scale should first check the current Notifications to confirm whether they fall within the dominance thresholds; before signing exclusive distribution, resale price restriction or cross-border agency agreements, self-check against Sections 54, 55 and 57; and before signing any share or asset acquisition, run a competition-law threshold test to determine whether the deal falls in the notification tier or the permission tier. The SLF legal team can assist with these threshold checks, agreement compliance reviews, and notifications and permission applications to the Trade Competition Commission.

FAQ

Our company is not large — do we still have to comply with Thailand's Trade Competition Act?

Yes. The prohibition on abuse of a dominant market position (Section 50) binds only dominant businesses that meet the thresholds set by Commission Notification, but the Section 54 cartel prohibition, Section 55 competition-restricting agreements and Section 57 unfair trade practices apply to any business operator regardless of size. The only exemptions under Section 4 are government administrative agencies, specified statutory functions of State enterprises and other State agencies, farmers' co-operative organisations, and sectors already governed by their own competition legislation.

When does an M&A deal in Thailand need to be notified to, or approved by, the Trade Competition Commission?

There are two tiers: a merger that may significantly reduce competition in a market must be notified to the Commission within 7 days from the date of completion; a merger that may result in a monopoly or create a dominant market position requires the Commission's prior permission, on which the Commission must in principle decide within 90 days, extendable by 15 days where necessary (Sections 51 and 52). Intra-group restructurings are exempt; the specific turnover, asset and other numeric thresholds are prescribed by Commission Notification, and our firm can help confirm them.

What are the penalties for violating Thailand's Trade Competition Act?

Abuse of dominance and hard-core cartels are criminal offences carrying up to 2 years' imprisonment or a fine of up to 10% of income in the year of the offence, with the fine capped at THB 1 million for offences in the first year of business (Section 72); failing to make a required merger notification is fined up to THB 200,000 plus up to THB 10,000 per day (Section 80); merging without required permission is fined up to 0.5% of the transaction value (Section 81); competition-restricting agreements and unfair trade practices are fined up to 10% of income in the year of the offence (Section 82). Responsible directors and managers may also be held personally liable at the same time (Sections 77 and 84).

If we are unsure whether a business arrangement is lawful, can we confirm with the regulator in advance?

Yes. Section 59 allows a business operator to apply to the Trade Competition Commission in advance for a ruling on proposed conduct under Sections 50, 54, 55, 57 or 58; the ruling binds only the applicant, the Commission may attach conditions, and it will be revoked if the information submitted is materially incorrect or incomplete. A party damaged by a violation may also claim damages under Section 69, but note the 1-year limitation period under Section 70.

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