CHAPTER 22

TRADE REGULATION AND MONOPOLIES

 

In this chapter, we consider two statutes that are intended to regulate certain commercial activities. The Trade Competition Act is intended to regulate certain trade practices that are considered to be unfair and also to regulate monopolies in business. The Price of Goods and Services Act enables the government to intervene in order to control the prices or supply of goods and services.

 

Trade Competition Act The Trade Competition Act came into force on 22 March 2000.

 

Regulation The Act sets up a Trade Competition Committee to oversee policy, implement the Act and draft regulations and orders under the Act.

 

Application The Act applies to all business activities owned by business operators. It does not apply to state enterprises, state-awarded concessions, agriculture, and businesses exempted by regulations.

 

Prohibited monopolies and unfair trade practices The Act distinguishes between actions taken by business operators having a dominant market position and other business operators. There are greater restrictions placed on businesses that have dominant market position. A business operator with dominant market position means a situation where one or more business operators have market share and total sales revenue, exceeding the level permitted under the Act.

 

The Committee also has power to order the suspension, stoppage or changing of the market share of a business operator having dominant market position when that share exceeds 75%.

 

Restrictions on businesses with dominant market influence A business operator with a dominant market position is prohibited from conducting any of the following:

 

  1. To fix or maintain unfair purchase or selling prices, such as to sell its products below average total costs with the effect of driving out competitors and preventing new market entries, or to engage in selective discounting or price-cutting as a means of preserving dominant position and to exclude a new competitor from entering the market.

 

  1. To set conditions by means of which the business's customers may not offer services, produce, purchase or distribute goods, or are prevented from buying or selling goods, offering or receiving services, or seeking credit from other undertakings.

 

  1. To limit, reduce or suspend services, production, purchases, distribution, delivery or importation into Thailand, without reasonable grounds, or to destroy or cause destruction of goods in order to reduce supply to be less than demand.

 

  1. To interfere with the business operations of third parties, without reasonable grounds.

 

Unfair trade practices Business operators with or without a dominant market position may not join with another business operator, the effect of which is to reduce or eliminate competition in any market for goods or services by:

 

    1. Fixing the sale price of goods or services so as to be the same as an agreed price, or restricting the volume of sales of goods or services;

 

    1. Fixing the purchase price of goods or services so as to be the same as an agreed price, or restricting the volume of sales of goods or services;

 

    1. Entering into an agreement to control the market;

 

    1. Entering into an agreement to enable one of the parties to obtain a bid to sell or purchase goods or services or to prevent a party from entering into a bid to purchase or sell goods or services;

 

    1. Imposing restrictions on competition by business operators outside Thailand, that have relationships with business operators in Thailand, or in a business operator's contract territory; or

 

    1. Performing any unfair act which results in the destruction, damage, obstruction, hindrance or restriction of the operations of other business operators, in order to prevent other business operators from operating their businesses or to cause an operator to dissolve his business.

 

Monopolies and unfair trade practices The Act prohibits the existence or acquisition of a monopolistic position. No merger may take place between two business operators which may result in a monopoly or reduce competition. The term "merger" is defined as follows:

 

  1. A merger between manufacturers, distributors, manufacturer and distributor, or between service providers, which causes one business operator to cease to exist and the other business operator to maintain its existence, or which results in the creation of a new undertaking.

 

  1. The acquisition of the assets, in part or in whole, of one undertaking by another undertaking in order to control its business policy, operations or management.

 

  1. The acquisition of the shares, in part or in whole, of one undertaking by another undertaking in order to control its business policy, operations or management.

 

Exemptions Generally the Act prohibits a business operator from joining with another business operator, if the effect is to lessen or eliminate competition in the market. However a business operator may apply for an exemption, if the type of anti-competitive practice falls into the following categories:

 

  1. designating a locality in which each business operator may sell or reduce the sale of goods or services, or designating customers to whom each business operator shall sell goods or services without competition from other business operator.

 

  1. designating a locality in which each business operator shall purchase goods or obtain services or designating a person from whom such business operator may purchase goods or services

 

  1. determining the quantity of goods or services that each business operator may manufacture, purchase, sell or offer, in order to limit the volume of goods or services so as to be less than market demand.

 

  1. reducing the quality of goods or services so as to be lower than that manufactured, sold or serviced previously, by selling the same goods at the old or higher prices.

 

  1. appointing a person to be the exclusive seller of goods or services of the same kind or category.

 

  1. determining conditions or practices with respect to the purchase or sale of goods or services so that they may be of the same type, as agreed upon.

 

Application for exemption The Commission is given authority to grant an exemption. A business operator seeking may apply to the Commission, stating the reasons and necessity for the restrictive trade practice, the method of proceeding and the duration of the activity. The Commission has a duty to examine the application within 90 days. If after review, the Commission is of the opinion that the restriction to the competition benefits the promotion of business, does not cause serious damage to the economy and does not affect material benefits to consumers, the Commission shall grant permission for such practice.

 

If permission is refused, there is a right of appeal to the Appeal Committee, exercisable within 30 days of receipt of the order. The Appeal Committee's decision must be given within 90 days.

 

Enforcement The Act sets out a range of fines and imprisonment for breaches of duties imposed by the Act.  If the offender is a juristic person, the managing director, managing partner or person in charge of the business can be made personally liable.

 

What is a ‘dominant market position’? Since the Act was passed, attempts have been made by the Commission to define what constitutes a dominant market position. At the outset, the view taken was that a business that controlled one third of the market and generated one billion Baht in annual sales was a dominant business. This blanket approach has now been abandoned in favour of an approach that considers the nature of each industry individually, and defines dominant market position in relation to one industry only.

 

The Commission has completed reports on one or two industrial sectors and has presented its proposals for definition of what constitutes a dominant market position in each sector to the Cabinet for consideration.  To date, none of these reports have been approved and thus there is no acknowledged definition of what is a dominant market position, either generally or in relation to any particular industry.

 

Prices of Goods and Services Act (1992)

 

Purpose This Act is intended to enable the government to impose controls on the price of goods and services. It applies to all businesses including agriculture, industry, commerce and services.

 

Enforcement Enforcement of the Act is through a committee called the Committee on Price of Merchandise and Service or the Provincial Committee on Price of Merchandise and Service.

 

Exclusion The Act is not applicable to central government or local government.

 

Powers In order to control the purchase price, distribution price or cases of unfair trade, the Council of Ministers shall have authority to prescribe any goods or services as controlled goods or services.

 

The Committee has, amongst other things, power to:

 

  1. prescribe the volume, storage place, cost, expenses, production plan, plan for import, plan for export, purchase plan, distribution plan, plan to change the price or other detail or discount in distribution, production process and method of distribution of controlled goods or services;

 

  1. prescribe the storage or increase the volume of reserve of controlled goods and prescribing area and place for reserve of controlled goods;

 

  1. prohibit or permit the export or import into any area the controlled goods;

 

  1. order a business operator to improve efficiency in production, to import into Thailand, purchase, distribute or store controlled goods or services, including to stop or to reduce the expense prescribed as excessive;

 

  1. arrange for rationing in the purchase and distribution of controlled goods or services;

 

  1. order the sale of controlled goods or services according to the volume and price prescribed, including ordering the sale to the authority or any person as prescribed;

 

  1. prohibit the sale gift, use, transfer or change the condition of controlled goods or services in excess of the volume prescribed;

 

  1. prescribe measures to protect hoarding of controlled goods or services or possession of controlled goods in excess of the volume prescribed.

 

A business operator may not do any thing with intent to cause the price to become lower or higher than appropriate or cause upheaval to the price of any goods or services.

 

No person may hoard controlled goods in excess of the volume prescribed or keep controlled goods in a place other than that notified to a competent official, nor take out controlled goods for distribution or offer for sale as normal or refuse to distribute or delay the distribution or delivery of the controlled goods, without good reason.

 

No operator of controlled services may cease to provide normal services or refuse to provide services or delay services, without good reason.

 

Enforcement The Act provides for a system of fines and imprisonment for breach of particular duties imposed. Where the offender is a juristic person, the managing director, managing partner or person responsible for management may face personal liability.

 

Revised 1 December 2006

 

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