New trade competition law lacks teeth
The long-awaited Trade Competition Act (TCA) or antitrust law came into force this month, with some mechanisms many believe will help close loopholes that made the 1999 version weak and ineffective. The law, dubbed the “economic constitution”, seeks to prohibit cartel and collusive conduct between competitors that may result in market monopolisation.
There are many changes in the revised act, which took effect on Oct 5, but I would like to highlight two key points.
The 2017 act establishes a seven-member Competition Commission which, with more extensive power, is tasked with upholding market competition. The new commission under the act is different from the incumbent commissioners, who were mostly senior government officials from key ministries being named for the job by position. Led by the minister of commerce, the commission had no administrative tools, nor manpower. This explains why there was not a single antitrust case filed in court.
Under the 2017 TCA, the Office of Trade Competition Commission (OTCC) will be formed as an independent body, with its own budget, and staff, to support the work of the seven-member Competition Commission, who are to work as fulltime professionals.
The commissioners, who will have a four-year renewable term, must not be members of business associations, private employees or government officials and must possess experience in the field of consumer protection. They will be appointed by a panel comprising permanent secretaries from key ministries, namely Finance, Agriculture and Agricultural Cooperatives, Commerce, Justice and Industry along with the secretary-general of the National Economic and Social Development Board (NESDB), the secretary-general of the Consumer Protection Board, the chairman of the Chamber of Commerce and the president of the Federation of Thai Industries.
The fact that the panel which names the commissioners are mostly bureaucrats and people from large industry, there is little chance of members of civic groups or public sector having a chance to play a role in the commission. If that is the case, there is a possibility the commission will be the connection between the state and large conglomerates. The requirement for the commissioners of the OTCC to possess experience in the area of consumer protection may be difficult to meet.
Secondly, we should look into the exemption of state enterprise as stated in the 2017 law. In Thailand, there are 56 state enterprises with total assets of 11.9 trillion baht employing 42,000 people. The Thai state enterprises contribute substantially to the country’s GDP, employment and market capitalisation. They have competed harshly with private firms in several industries, albeit not on an equal footing given a blanket exemption from antitrust scrutiny as stipulated under the 1999 act regardless of the fact that they may operate for profits/ commercial purposes.
However, the 2017 TCA attempts to address the issue by providing a new regime, and redefines the scope of the exemption which somehow remains unclear. Activities that are in line with national security and public interests or public utilities may still be exempted from antitrust scrutiny. Moreover, the law provides the regulatory exemption for “industries with specific laws regulating competition”.
In my opinion, the above-mentioned exemptions may undermine competition and the level playing field for the private firms once they have to compete with state enterprises. How do we define public interest or public utility for such profit-oriented state enterprises such as Krungthai Bank, the Electricity Generating Authority of Thailand and PTT Plc?
Moreover, it should be noted that the revised act does not introduce any specific criteria for the assessment of the market power of companies on platform markets, for example: direct and indirect network effects; parallel use of multiple services and switching costs for users; economies of scale in the context of network effects; access to competitively sensitive data; and innovation-driven competitive pressure. Such features are important to the digital economy and start-ups but the law seems not to provide precise rules on this matter. I hope this will be demonstrated later on in the subordinate regulations.
The 2017 TCA fails to put in place a leniency programme which is common in many countries like the US, EU, Australia, Canada, Japan, South Korea, Malaysia and Singapore. A leniency programme is an efficient tool for cartel deterrence in a way that it offers firms involved in a cartel either total immunity from fines or a reduction of fines if they self-report and hand over evidence to the competition authorities. The programme benefits the concerned authorities, allowing them not only to pierce the cloak of secrecy in which cartels operate but also to obtain insider evidence of cartel infringement.
The leniency policy can deter cartel formation as well as destabilise the operation of existing cartels as it sows the seeds of distrust and suspicion among cartel members.
With regards to private enforcement mechanism, the 2017 law still recognises the rights of any person who suffers loss or damage from antitrust behaviour to file a complaint with the Intellectual Property and International Trade Court (IPIT Court).
For civil proceedings, the risk of double recovery is outweighed by the public interest in ensuring that anti-competitive behaviour is deterred and that those who suffer losses are adequately compensated. However, the revised TCA does not provide any new mechanisms to facilitate private right of action, for instance, punitive damages and the extension of the limitation period. In many jurisdictions, for efficient enforcement of the law, it provides for double damages or treble damages and has a limitation period of up to three years. Our law is one year only.
The revised TCA is far from perfect given that it still lacks provisions that will improve law enforcement. But if the people are aware of the problem, we may call for further amendments to address the problem. In addition, I hope we can get wellqualified people, those who are keen on the role of competition in the market economy, to perform in the competition commission.
Last but not least, the competition law should ensure the competition process, thus guaranteeing a level playing field for SMEs and start-ups, helping them to compete with business giants. Obstacles or barriers must be eradicated so they can enter the market.