2021/2022 – Another eventful year for Thai competition law
30 November 2021
Thailand had an unprecedented year for competition law in 2020. Notably, the year saw one of the most notable conditional merger decisions – relating to the sale of world-renowned “Tesco Lotus” to the CP Group – imposed since the Trade Competition Act B.E. 2560 (the Act) entered into force.
Developments this year included new guidelines on unfair trade practices for small and medium businesses, a revamping of the merger control notification form, and a record number (over 36) of competition law complaints as reported by the Office of Trade Competition Commission (the Commission or OTCC). On top of all this, there have been two public hearings on draft implementing rules and the OTCC, in common with its counterparts abroad, is closely watching developments in the digital economy.
A spike in competition law enforcement
The high number of complaints made to the Commission this year confirms Thai business operators’ and consumers’ growing awareness and willingness to make use of their local competition law. The Commission has issued various rulings that serve as precedents and insights into the Commission’s interpretation of the law, including on the scope of unfair trade practices.
In particular, this year the Commission has released over 20 rulings, 14 of which relate to unfair trade practices. Three relate to the e-commerce sector and two relate to published merger filings (one pre-closing approval and one post-closing notification). The Commission also imposed its first penalty for an unfair pricing practice. The fine was imposed on a fruit wholesaler and represented more than 5% of its annual revenue.
In relation to merger control, the Commission imposed fines on acquirers in two deals for having failed to file their transaction after closing within the statutory period. As is the case in other jurisdictions, failing to file is an offence in Thailand and the fact that these particular filings were required to be made post-closing was not an excuse. Interestingly, the Commission also fined a director of the acquirer in one case and a non-director authorised by the company to lead the merger in the other case.
Sanctioning individuals for failing to file a deal is remarkable. Thailand has shown this year that, as with some of its assertive international counterparts, it will not hesitate to impose fines, including the maximum amount permitted by law, on both legal entities and their directors and even on other personnel directly involved in the offence.
New regulations for digital platforms
Throughout the Covid-19 pandemic, online businesses flourished, especially in the food delivery industry as a result of dine-in restrictions. Following complaints, the Commission has been carefully monitoring e-commerce platform operators and in November 2020 issued the “Guidelines on Unfair Trade Practices between Digital Platform Operators for Food Delivery and Restaurant Operators” (Food Delivery Guidelines). These share some features with similar guidelines or rulings adopted abroad (including in China) and became a key focus for the Commission this year. Practices prohibited by the Food Delivery Guidelines include:
- demanding unfair commission fees or a share of the gross profit at an increased rate or a rate that is different from other restaurant operators that offer the same type of products, without any justifiable reason;
- demanding unfair advertisement fees or promotion fees without any justifiable reason;
- enforcing exclusivity which prohibits restaurant operators from offering products on other digital platforms;
- enforcing a “Rate Parity Clause” which requires restaurant operators to offer products at the same price across different platforms;
- prolonging credit terms; and
- imposing a termination clause when restaurant operators refuse to comply with unfair requests.
In addition to food delivery platforms, the Commission also scrutinised other e-commerce platform businesses. Although no guidelines have yet been issued, the Commission issued a press release on 29 January 2021 criticising Shopee, a popular online retail shopping platform, for its plan to change the application’s delivery options from allowing customers to choose between multiple logistic operators to offering only the platform’s selected logistic partners. The Commission’s view was that this new delivery policy might be considered an abuse of dominance or an unfair practice by imposing unfair trade conditions that limit consumers’ options.
Protection of SMEs
The Commission also issued “Guidelines on Fair Trade Practices concerning Credit Terms for Small and Medium Enterprises (SMEs)” (the Credit Terms Guidelines) on 24 May 2021. According to statistics provided by the Office of SMEs Promotion in Thailand, around 3.1 million SMEs1 operate in Thailand, amounting to up to 99.5% of total Thai business operators. The OTCC views SMEs as the backbone of Thailand: critical players in the Thai economy which are facing a lack of financial liquidity that affects their ability to compete in the market efficiently.
According to the authority, the financial liquidity shortage arises primarily from unfair trade practices connected to the existence of lengthy credit terms in Thailand. The Commission considers that this credit term issue is rooted in SMEs’ lower bargaining power against bigger corporations. This has been exacerbated during the Covid-19 pandemic with SMEs having been disproportionately badly affected by government business closure orders. The Credit Terms Guidelines, scheduled to come into effect on 16 December 2021, attempt to protect SMEs, including by limiting the credit term for payments to SMEs to 45 days maximum or 30 days in relation to agricultural products.
The Commission’s acknowledgement of the importance of protecting SMEs was already apparent in the CP/Tesco deal (and in particular in the conditions imposed on the parties regarding their dealings with SME vendors) and in the Food Delivery Guidelines where the OTCC is obviously keen to increase protection for restaurants.
Advancing merger control administration
The OTCC used its experience of over 19 merger notifications and five merger pre-closing approvals2 to date to overhaul the merger post-closing notification form. It has changed it from a 4-page form to a more extensive 15-page information request list relating to the merger. The new version of the merger notification form will come into force on 1 February 2022.
More importantly, in the updated merger notification form, the Commission requests clearer details of the relevant parties, including a full list of directors, shareholders, details of companies within the scope of “Single Economic Entity” as prescribed by the relevant OTCC regulation, a complete structure chart presenting each merging party and its group companies pre- and post-transaction and information on the revenue streams of each party broken down by each relevant product market. In particular, although this form concerns post-closing operations, the Commission now also requires additional market-related information, including an analysis of the relevant market, recent market share details and revenue data of the parties for each market. As such, it almost matches the level of detail required for pre-merger approval.
Our experience, especially in pre-closing filing procedures, also shows that the OTCC is fine-tuning its day-to-day management of cases, including pre-notification consultation, in a reflection of practice in some other jurisdictions.
Increasing cooperation between regulators
To promote efficient enforcement, the Commission acknowledges the importance of cooperation and collaboration with other government agencies, both nationally and internationally.
Domestically, on 22 November 2021, the Commission signed a Memorandum of Understanding on cooperation with respect to the supervision of competition in the energy sector between itself and the Energy Regulatory Commission (ERC). The ERC was the first authority to enforce merger control rules in Thailand in 2018 in the GPSC/Glow case.
On the international front, the Chairperson of the Commission, Prof. Sakon Varanyuwatana, participated in the first ASEAN Heads of Competition Agencies Meeting on 11 October 2021, debating various trending issues in Thai competition law enforcement. On 25 October 2021, he also held bilateral discussions with Mr. Kazuyuki Furuya, Chairman of Japan Fair Trade Commission (JFTC) on the governance of competition in the digital landscape and the collaboration between the Thai and Japanese competition authorities.
These initiatives confirm the increasing sophistication of the OTCC and its awareness of the importance of its role in the development of the Thai regulatory framework.
What to expect in 2022
Particularly given the global trends of antitrust enforcement in the digital sector, we foresee the Commission focusing on regulating the sector through enforcement activities, guidelines or other rulings. This likely focus was indicated at a seminar held on 29 November 2021 for the public and private sectors to gain insights into the online travel agency, e-commerce, online food delivery and fruit wholesaling industries and how competition law regulates them.
Regarding its merger control practice, the OTCC has hinted that it may launch reforms of the Thai merger control rules to better address competition concerns that may arise from vertical mergers. These are not explicitly covered in current regulations. We also expect the pre-closing merger control form to be updated, potentially requiring even more information.
In addition, the market anticipates important movements in the enforcement of competition rules in the telecommunication sector in 2022. The sector is supervised by an industry-specific regulator, the National Broadcasting and Telecommunication Commission.
Lastly, as the Commission has recently entered into an MOU with the ERC, we expect to see developments in competition enforcement in the energy sector.
1. Office of the SMEs Promotion of Thailand (August 2021). Number of SME operators under the new definition. Office of the SMEs Promotion of Thailand https://app.powerbi.com/view?r=eyJrIjoiMThkMDMyMTctMTZiMy00MTgzLWJkMDgtMjRmNWM1MmE2MGU1IiwidCI6ImExZmZjMjhhLTEzZmMtNDhiMC05NGRmLWYyYWIyOGUwNWNhNSIsImMiOjEwfQ==
2. Based on the OTCC’s annual reports 2017-2020 and published rulings to date.