SRPP Publication l 10 February 2023
Merger control in Thailand is governed principally by the Trade Competition Act BE 2560 (2017) (TCA), with Trade Competition Commission of Thailand ("TCCT") managing the pertinent subordinate legislation. The TCCT's powers and responsibilities include performing administrative tasks for the TCCT and its subcommissions, monitoring TCA violations, receiving complaints about alleged TCA violations, and making recommendations to the TCCT as the enforcement agency. The Intellectual Property and International Trade Court or the Administrative Court has jurisdiction over disputes involving alleged violations of the Trade Control Act, civil claims for damages, and appeals of administrative orders issued in connection with such violations.
The TCA divides regulated mergers into two categories: those requiring prior approval (pre-merger filing) and those requiring subsequent notice (post-merger notification). As of December 29, 2018, a pre-merger filing will be necessary if the proposed merger could result in the formation of a 'monopoly' or 'business operator with dominating market power.' In contrast, a post-merger notification will be necessary if the combination could result in a "substantial reduction of competition in a market."
The TCA applies to any 'merger' by a 'business operator' that may result in (i) a 'substantial reduction of competition in a market'; or (ii) the development of a 'monopoly' or a 'business operator with dominating market power', with specific exclusions and exceptions. If a merger triggers the pre-merger filing or post-merger notification requirement, business operators must either (i) get TCCT approval or (ii) notify the TCCT..
However, the activities of the following persons are not covered by the TCA's scope of application:
Central, provincial, or local government agencies;
State enterprises, public organizations, and other governmental organizations (but only for actions specified by law or undertaken pursuant to cabinet resolutions necessary for the benefit of maintaining public order, public benefit, or utility procurement);
Farmers’ groups or cooperatives or societies recognized by law which have the objective of undertaking business for the benefit of the farming occupation; and
Business sectors where competition is regulated by industry-specific legislation.
In addition, for business sectors where competition is regulated by industry-specific legislation and industry-specific regulators, such industry-specific legislation will apply instead of the TCA. Currently, the following industries have specific industry legislation relating to competition: broadcasting and televisions, telecommunications and energy.
Definition of Mergers
The definition of a ‘merger’ under the TCA means any of the following:
The merger of a manufacturer with another manufacturer; a distributor with another distributor; a manufacturer with a distributor; or a service provider with another service provider, which will result in one of the businesses being maintained and the other extinguished, or a new business being formed (statutory mergers or amalgamations);
The purchase of all or part of the assets of another business ‘for the purpose of controlling business administration policy, administration or management’ (asset acquisitions); and
The purchase of all or part of the shares of another business ‘for the purpose of controlling business administration policy, administration or management’ (share acquisitions).
The TCCT prescribes that a share or asset acquisition is for ‘the purpose of controlling business management policy, administration or management’ if:
In the case of asset acquisition: the value of the assets acquired from the other business operator exceeds 50 per cent of the total value of assets used in the ordinary course of business of the selling business operator.
In the case of share acquisition:
i. A listed public company: securities constituting at least 25 per cent of the total
voting rights (at close of any day) of the acquired entity are acquired.
ii. A private and non-listed public company: shares constituting more than 50
percent of the total voting rights (at close of any day) of the acquired entity are
Acquisitions by affiliated persons
In the case of a share acquisition by a natural person, any acquisition of securities or shares by his/her spouse shall be deemed as securities or shares acquired by the acquirer.
In the case of a share acquisition by a juristic person, any acquisition of securities or shares by other juristic person(s) or natural person(s) who hold more than 30 per cent of voting rights of the acquirer and is also a ‘Single Economic Entity’ of the acquirer shall be deemed as securities or shares acquired by the acquirer.
An acquisition of assets or shares which does not satisfy the above criteria will not constitute a merger under the TCA.
Definition of Business Operators
A 'business operator' is defined as a 'distributor, producer for distribution, orderer or importer into Thailand for distribution, purchaser for the production or resale of goods, or service provider in the course of business' in Section 5 of the TCA.
Because the TCA aims to regulate transactions that affect Thailand, the TCCT interprets a merger by a business operator to be subject to the TCA if such business operator(s) engage in business activities or commerce in Thailand. As a result, legal entities incorporated outside Thailand will be subject to the TCA if they have a 'business presence' in Thailand, i.e. they conduct business in Thailand through a branch office, a representative office, or a subsidiary in Thailand that is a 'Single Economic Entity' with the legal entity in question.
For the purpose of verifying the business presence of a business operator(s) conducting a merger, in case of amalgamation, both merging parties must be a company incorporated under the laws of Thailand. For an acquisition of assets or acquisition of shares, the acquirer and the target must have a business presence in Thailand.
In addition, mergers between a business operator and its affiliates that are a 'Single Economic Entity' under the TCA are exempted from the merger control requirement. “Single Economic Entity” is defined as two or more business operators which have a relationship in policy or directive power, where:
‘Relationship in Policy’ means a relationship between two or more business operators that have their own set of guidelines, policies, or procedures on business administration, direction or business management under the control of the same business operator with the directive power;
‘Directive Power’ means the power to have control under any of the following situations:
i. Holding shares with voting rights in a business operator of more than 50 per
cent of the total voting rights in such business operator;
ii. Having the power to control the majority of votes in a meeting of shareholders
of a business operator, either directly or indirectly;
iii. Having the power to control the appointment or removal of at least half of all
directors or more of a business operator, either directly or indirectly; or
iv. Having the directive power under (i) and (ii) at every hierarchical level, starting
from the directive power under (i) or (ii) of the business operator that is at the
ultimate level of command.
Greenfield joint venture
At present, there are no separate rules for joint ventures, and the TCCT's interpretation is that the formation of a new joint venture company does not meet the definition of a "merger" under the TCA and is thus exempt from the TCA. However, if the formation of a joint venture company involves an amalgamation, asset or share acquisition that constitutes a 'merger,' the TCA will apply.
Jurisdictional thresholds for merger control
Pre-merger filing thresholds
The threshold for pre-merger filing is a merger which may result in the creation of either:
‘A monopoly’, defined as a situation where there is only one business operator in any market possessing absolute power to determine of price and supply of products or service freely; and such business operator has a sales turnover of at least 1 billion baht; or
‘A business operator with dominant market power’, defined as (i) any business operator having a market share of 50 percent or more and having a sales turnover of at least 1 billion baht, in the previous year; or (ii) any of the top three business operators which together have an aggregate market share of 75 per cent or more in the previous year (excluding any business operator having a market share in the previous year of lower than 10 per cent or having a sales turnover in the previous year of lower than 1 billion baht).
Post-merger notification thresholds
The threshold for post-merger notification is a merger which could result in a "substantial reduction of competition in a market" in which the sales turnover of any one business operator, or of all relevant business operators undertaking a merger in any market, amounts to 1 billion baht or more and which does not result in a ‘monopoly’ or result in a ‘business operator with dominant market power’.
There are no circumstances where the pre-merger filing or post-merger notification, as the case may be, is required if the relevant thresholds are not met.
Based on the TCCT’s interpretation, foreign-to-foreign transactions may be subject to the TCA if the relevant business operators have a business presence in Thailand.
Notification and clearance timetable
The relevant business operator(s) must submit a pre-merger filing before the closing date, i.e. the effective date of the amalgamation, asset acquisition or share acquisition, and the merger cannot be consummated until the approval from the TCCT has been obtained. If a business operator is required to submit a pre-merger filing and fails to do so, the business operator may be subject to:
Administrative sanctions: a fine of not exceeding 0.5 per cent of the total value of the transaction may be imposed by the TCCT; and/or
Civil penalties: any person who incurs loss or damage from the violation of pre-merger filing requirements by a business operator may claim civil damages against the business operator.
In addition, the TCCT may order the relevant business operator(s) to suspend, cease, or vary the merger transaction which was conducted in violation of the pre-merger filing requirements. In case where the business operator fails to comply with such order, it may be subject to an additional administrative fine of not exceeding 6 million baht and a daily fine of not exceeding 300,000 baht throughout the period of violation.
The relevant business operator must submit the post-merger notification within seven days of the closing date, i.e., the effective date of the amalgamation, asset acquisition or share acquisition. If a business operator is required to submit a post-merger notification and fails to do so, the business operator may be subject to an administrative sanction of a fine of not exceeding 200,000 baht and a daily fine of not exceeding 10,000 baht throughout the period of the violation.
There is no enforcement practice for non-compliance with a pre-merger filing or post-merger notification within the stipulated deadline, as merger control has only recently been implemented in Thailand.
The parties who are responsible for filing
Amalgamation: the entities which will amalgamate shall be jointly responsible for submission of the pre-merger filing.
Asset acquisition: the acquirer of assets shall be responsible for submission of the pre-merger filing.
Share acquisition: the acquirer of the shares shall be responsible for submission of the pre-merger filing.
The filing fee is 250,000 baht per transaction.
Amalgamation: the newly created entity shall be responsible for submission of the post-merger notification.
Asset acquisition: the acquirer of assets shall be responsible for submission of the post-merger notification.
Share acquisition: the acquirer of shares shall be responsible for submission of the post-merger notification.
There is no fee for submission of the post-merger notification.
The waiting periods
There is no concept of waiting periods under the TCA where the parties can close merger transaction upon the lapse of the specified period. In the event that a pre-merger filing is required, the merger transaction may not be consummated until the approval from the TCCT has been obtained. The TCA stipulates that the TCCT must complete consideration of a pre-merger filing within 90 days of submission. If the TCCT cannot reasonably make a decision within such 90-day period, the TCCT may extend the consideration period for an additional 15 days. In granting approval, the TCCT may set a specific time period or other conditions with which the business operator(s) must comply.
In the event that a pre-merger filing is required, there are currently no mechanisms in place which would allow for closing prior to approval by the TCCT.
In addition to the TCA, an acquisition of shares of a company listed on the Stock Exchange of Thailand will be subject to the Securities and Exchange Act BE 2535 (1992), as amended, in particular, with respect to the public disclosure and tender offers.
The preparation of a filing
The TCCT has prescribed a list of documents and information it requires for consideration of a pre-merger filing and post-closing notification follows:
Application form (prescribed by the TCCT) requiring, inter alia, general information on the relevant business operators and their businesses;
Merger plan and implementation timeline;
Details of the merging parties and the target company which shall, at minimum, consist of the shareholding structure, voting rights, sales turnover and market share;
Studies and analysis in respect of the merger transaction which shall, at minimum, consist of: (i) analysis of shareholding structure, controlling power of merging parties for the purpose of ascertaining the relationship in policy or directive power before and after the merger, (ii) analysis of the market for products or services relevant to the merging business operators for the purpose of ascertaining the effect as a result of the merger which shall at a minimum consist of a) market structure before and after the merger transaction, b) scope of market, c) market share of each of the merging parties before and after the merger transaction, d) sales turnover of each of the merging parties before and after the merger transaction, e) effect of the merger transaction in respect of the following items (aa) market concentration, (bb) market entry and expansion, taking into consideration the relevant factors such as laws and regulations of the government, logistic costs, access to patent rights of existing technologies, or access to raw materials or other resources necessary for production, etc. (cc) non-coordinated effects, meaning the effect as a result of each of the merged entity’s profit gained by increasing prices or a reduction in the quality of the products attributable to a reduction of competition, (dd) coordinated effects, meaning the effect as a result of the business operators’ tendency to jointly increase price after the merger transaction, (ee) effect on the economy or consumers as a whole, (ff) other effects on competition in a market (if any), f) efficiencies in a market after the merger transaction; and
Studies and analysis in respect of valid business-related necessity and benefits in the promotion of business, damage to the economy, and consumers’ benefits as a whole.
Notification form (prescribed by the TCCT) requiring, inter alia, general information on the relevant business operators and their businesses;
Copy of documents submitted to the Ministry of Commerce, in case of amalgamation;
Copy of documents submitted to the Securities and Exchange Commission (if applicable);
Copy of definitive documents evidencing the share or asset acquisition, e.g. share purchase agreement and appraisal reports;
Copy of the minutes of the executive committee’s meeting or shareholders’ meeting in which the merger transaction is approved of each of the merging parties or documents evidencing each of the merging parties’ intention to enter into the merger transaction;
Other details in respect of the merger transaction;
Copy of the minutes of the annual general meeting and audited financial statements for the preceding year of each of the merging parties for the previous three years;
Copy of the list of shareholders of each of the merging parties before and after the merger transaction; and
Power of attorney (if any).
Businesses that provide false or misleading information to the TCCT on purpose may face criminal charges under the Criminal Code for providing false information to government officials. Furthermore, if the TCCT becomes aware of such false or misleading information, it has the authority to revoke the approval for pre-merger filing. Furthermore, any person whose right or interest is jeopardized by the TCCT's approval may file a case with the Administrative Court seeking revocation of such approval.
All information and documents submitted to the TCCT must be in hard copy in Thai language (or translated into Thai).
Currently, no official pre-consultations are required before submission of an application for a pre-merger filing and the TCA does not specify a process for pre-consultations. However, business operators may request an unofficial meeting with the TCCT to discuss the applicable merger control processes and the TCCT’s initial views and assessment. However, the TCCT may not provide a definitive assessment and the opinion of the TCCT is not binding and subject to change by the TCC.
Generally, the relevant business operators must prepare and submit all of the required information (outlined above) to the TCCT. After acceptance of the pre-merger filing, the TCC shall undertake the following steps:
The Secretary-General proposes the application for approval of the merger to the Chairman of the TCCT within seven days from the date of receipt of the application for approval for further consideration by the TCCT;
The TCCT may require additional information from a business operator(s) conducting a merger by issuing a letter requesting information or inviting the applicant to offer clarification; and
The TCCT may serve notices of invitation to relevant business operators or third parties to offer opinions and information in support of the consideration.
Statutory timetable for clearance
The TCCT must complete its consideration of a pre-merger filing within 90 days of submission. When a decision cannot reasonably be made within 90 days, the TCCT may extend the period of consideration by up to 15 additional days.
There is no provision in the TCA that allows the pre-merger approval process to be expedited and in practice the TCCT historically have extended the period of consideration to its maximum of 105 days.
Substantive test for clearance
The substantive test for clearance is that the merger:
is reasonably necessary for the business;
is beneficial to business promotion;
poses no serious harm to the Thai economy; and
has no material effect on the due interest of consumers in general.
There is currently no precedent on special circumstances or other exceptions. Also, there are no separate rules for joint ventures.
There is no precedent or case study to guide the TCCT's application or consideration of theories of harm. However, in addition to the substantive test, it is expected that the TCCT will consider factors such as the potential for coordinated effects, non-coordinated effects, barriers to market entry, expansion, and foreclosure to newcomers. However, it is expected that economic efficiency will be a key factor in determining whether a merger meets the substantive test.
Remedies and ancillary restraints
Power to prohibit the transaction
If a business operator fails to comply with the TCA, including relevant subordinate legislation or TCCT orders, the TCCT has the authority to suspend, terminate, rectify, or vary the merger in addition to imposing administrative fines. Furthermore, when approving a merger, the TCCT may impose a time limit or any other condition for compliance.
Possibility to remedy competition issues
It is possible to address competition issues, for example, through divestment undertakings or behavioral remedies, and the TCCT may specify the time period or any condition for compliance when granting merger approval.
Regarding the acquisition of Tesco Lotus, a British hypermarket chain in Thailand, by Charoen Pokphand Group ("CP") in 2020, for instance, the TCCT granted merger approval with certain terms and conditions to CP as the majority of commissioners determined that the transaction may have some market effects, but did not result in CP becoming a monopoly. The TCCT has consequently imposed the following terms and conditions on the acquirers: CP Retail Development Co., Ltd., Tesco Stores (Thailand) Ltd., and their respective parent companies: CP All Public Company Limited and Ek-Chai Distribution System Co., Ltd.
The parties to the transaction are prohibited from (1) acquiring other modern trade retail businesses in a similar sector for three years, excluding those in e-commerce, and (2) disclosing marketing-related information to product distributors, manufacturers, or suppliers of raw materials. The information shall be classified as a trade secret;
The parties to the acquisition must publish a business code of conduct, which they must uphold, as well as comply with the Trade Competition Act BE 2560's regulations;
Ek-Chai Distribution System Co., Ltd. must comply with the terms of the contract or agreement it has with product distributors or manufacturers for a period of two years, unless product distributors or manufacturers agree to change the terms of the contract or agreement; and
The parent companies must (1) increase the sales of SME products, including agricultural products, community products, and OTOP in 7-Eleven and Tesco Lotus stores by at least 10 percent; (2) provide credit terms of 30 days for agricultural products, community products, and OTOP, and 45 days for other sorts of items, for a period of five years; and (3) provide a quarterly report on their business operations to the TCCT for a period of three years.
Involvement of other parties or authorities
Customers and Competitors
When considering a pre-merger filing, the TCCT has the authority to invite anyone to provide facts, explanations, advice, or opinions. As a result, customers and competitors may be asked to provide information as needed.
Furthermore, any person who suffers harm as a result of a violation of the TCA may seek restitution from the offender. As a result, any person (including customers and competitors) who suffers harm as a result of such a violation has the right to file a complaint.
Furthermore, the TCA expressly authorizes the Consumer Protection Board or an organization or foundation recognized by the Consumer Protection Board to bring compensation actions on behalf of consumers or members of such organization or foundation, as the case may be. The actions must be filed with the appropriate court within one year of the date the injured party first became aware of or should have become aware of the violation.
Protection of commercial information
The TCA does not require that the process be made public.
Section 76 of the TCA states that "any person who discloses restricted or confidential information concerning the business or operation of a business operator can be subject to imprisonment of not more than one year, or a fine of not more than 100,000 baht, or both, if the information was acquired or known as a result of compliance with the TCA." However, persons are exempt from the disclosure provision if they disclose information in the course of performing a government service or for the purpose of an investigation or trial. Furthermore, if the disclosed information is considered a trade secret under the Trade Secrets Act BE 2544 (2001), the offender may face a penalty under the Trade Secrets Act, as well as compensation for the injured party's misconduct and injury.
Cooperation with antitrust authorities in other jurisdictions
Thailand has signed economic partnership agreements with a number of countries, and these agreements call for cooperation on antitrust issues. Thailand is also a member of the International Competition Network (ICN), which is concerned with mergers and other competition issues. However, the ICN does not facilitate cooperation in enforcement; rather, it establishes best practices for competition rule enforcement.
The opportunities for appeal or judicial review
Concerning the merger control provisions, business operators may appeal two types of TCCT orders: (i) orders to suspend, cease, rectify, or vary a merger that has not received approval under Section 60 of the TCA; and (ii) orders to grant (with conditions) or deny approval of a merger under Section 52 of the TCA. A business operator may file a case with the Administrative Court if he or she disagrees with a TCCT decision or order. Any appeal of an Administrative Court decision may be submitted to the Supreme Administrative Court, and the Supreme Administrative Court's decision is final.
Time frame for appeal or judicial review
The business operator must file an appeal to the Administrative Court of the First Instance within 60 days following receipt of the TCCT’s decision.
Enforcement practice and future developments
The TCCT has recently formed its internal inspection section in order to investigate and scrutinize any merger transaction that falls under the purview of the TCA. If a business operator engages in a merger transaction that is subject to pre-merger filing or post-merger notice under the TCA, but fails to comply with such laws, the TCCT shall impose fines at the rate established by the TCA. In addition, if a business operator fails to provide post-merger notification, the TCCT may order the suspension, cessation, or modification of the merger transaction. According to our knowledge, at least two companies (and their directors) have been fined by the TCCT for failing to provide the required post-closing notification. There have been no instances of the TCCT imposing a charge for failing to obtain pre-closing approval.
Proposals to change the legislation
By the end of 2018, the TCCT had issued several subordinate regulations under the TCA to enforce the provisions regarding prohibited behaviors that may be harmful to competition, including the rules, procedure, and application process for merger control. Since the implementation of the merger control regime, the TCCT's interpretation of certain criteria and requirements for pre-merger filing and post-merger notification has remained unclear, causing difficulties in practice. The TCCT has not issued any written guidelines or directions regarding the merger control clearance process. During a public event, the TCCT clarified that proposed amendments to the current subordinate regulations are being considered. The TCCT has yet to issue any official legislative proposals.
In November 2022, the TCCT has conducted an internal consultation with Chulalongkorn University as a researcher to explore any potential issuance of guidelines regarding the merger control clearance process and amendment to the subordinate regulations of merger control with an aim to open for public hearing in the near future. In light of recent developments, Chulalongkorn University has proposed to the TCCT for the amendment/guideline as follows:
The formation of a new joint venture company may fall under the TCA as it should also be controlled and supervised on structural and behavioral aspects by the TCCT and the JVCO may require filing post-JVCO establishment notification to the TCCT if the relevant thresholds are met (whereby such thresholds are not yet verified);
The enforcement of guidelines for consideration of relationships between business operators in matters other than shareholding ratio in terms of Relationship in Policy e.g., to consider veto right of the relevant party and the consolidated accounts;
The consideration of post-merger notification thresholds from the sales turnover of any one business operator, or of all relevant business operators undertaking a merger in any market, which is currently amounts to 1 billion baht or more to be ‘1.2 billion baht’; and
The implementation of pre-consultation process prior to a pre-merger application or a post-merger notification submission.
Author: Panuwat Chalongkuamdee (Founding Partner), Natira Siripun (Partner), and Thunyaporn Pattarapipatkul (Associate).
You may view Panuwat's profile here.
You may view Natira's profile here.
You may view Thunyaporn's profile here.