16 June 2010
Criticised for being ineffective, the Trade Competition Act B.E. 2542 of Thailand (Trade Competition Law) is facing an overhaul. The law regulates trade by restricting monopolistic and unfair trade practices in Thailand in order to level the playing field for all businesses. The Ministry of Commerce is expected to propose its amendments to the Cabinet before August 2010.
The Trade Competition Law
Promulgated on April 30, 1999, the Trade Competition Law replaced the Price Fixing and Anti-Monopoly Act of 1979.
The Trade Competition Law seeks to promote free and fair trade competition and restrict any trade practice that creates a monopoly or reduces or restricts competition. The following anticompetitive trade practices are prohibited under the Trade Competition Law:
- Abuse of market dominance
- Mergers that cause monopolies/unfair competition
- Collusive practices that create monopolies/reduction of competition
- Agreements that restrict purchase of goods or services directly from overseas
- Unfair trade practices.
A business operator who fails to comply with the provisions of the Trade Competition Law could be subject to imprisonment for a period of one to three years and/or a fine ranging from THB 2 million to THB 6 million.
The Trade Competition Law applies to all business operators, including manufacturers, sellers, importers and buyers. It does not apply to government sectors, state enterprises, agriculturalists/cooperatives or other businesses exempted by law.
The Trade Competition Law is enforced by the Trade Competition Commission (the Commission), which consists of the Minister of Commerce, the Permanent Secretary of the Ministry of Commerce, the Director General of the Department of Internal Trade, the Permanent Secretary of the Ministry of Finance, and 8-12 “qualified persons with knowledge and experience in law, economics, commerce, business administration or public administration.”
The Commission is empowered to do the following:
- Consider complaints
- Prescribe rules for business operators with a market dominant position
- Consider applications for business mergers
- Initiate the joint reduction or restriction of competition
- Give orders for suspension, cessation, correction or variation of activities by business operators.
The Trade Competition Law is widely seen as playing no role, and having no impact, on the trade practices of business operators. It fails to influence overall competition in the domestic market. Business operators have little fear of committing any prohibited trade practice proscribed by the Trade Competition Law.
The law's ineffectiveness has been attributed to several causes, such as:
- Lack of due process and transparency in administering and enforcing the law
- Broad discretionary authority of the Commission
- Lack of clear rules or guidelines for implementation
- Ineffective structure and composition of the Commission, which contributes to its lack of independence.
The Minister of Commerce, Pornthiva Nakasai, assigned the Department of Internal Trade to study and examine the Trade Competition Law and prepare a draft bill (the Bill) to be presented to the Cabinet for its consideration.
The Bill aims to rectify or eliminate several issues which are considered obstacles in enforcing the Trade Competition Law. It is anticipated to focus on:
- Changing the structure and composition of the Commission by including representatives from public or consumer organisations to solve the conflict of interest issue
- Upgrading the status of the Office of Trade Commission to an independent body
- Increasing transparency in administering and enforcing the law
- Strengthening the penalties imposed on business operators who violate the law
- Creating fair competition between state-owned enterprises and the private sector by expanding the scope of the law to apply to state-owned enterprises that operate businesses that compete with the private sector.
In addition, concerned parties are advocating the need to establish guidelines and definitions of technical terms specified in the Trade Competition Law, such as merger, market dominance, monopoly and price discrimination.
The first draft of the Bill was proposed to the Cabinet for consideration in early March 2010. However, the Council of State suggested to the Minister of Commerce that the Bill be revised, because it contains some problematic provisions that again could become an obstacle in enforcing the law. The Cabinet approved the withdrawal of the first draft of the Bill by the Minister of Commerce for further revisions.
The Bill will have to face further revisions and public hearings before it is passed. It will face strong opposition from parties whose interests it will adversely affect. However, an overhaul of the law is essential to elevate from paper to practice the lofty objective of the law — free and fair trade. Competition should be defined and re-defined to adapt to changing economic and business climates. This will ensure the benefits of competition are not hampered by any anticompetitive activities.