New guidelines ready to standardise laws from next year

New guidelines for franchise businesses under the Trade Competition Act are scheduled to become effective in February.

The move aims to ensure good governance and standardise business practices, as well as prevent franchisers from taking advantage of smallscale franchisees.

Santichai Santawanpas, commissioner of the Office of Trade

Competition Commission (OTCC), said the guidelines for unfair trade practices in the franchise business were announced in the Royal Gazette on Friday and will come into force from Feb 4, 2020.

Thailand has no specific franchising laws, instead relying on separate laws to regulate the establishment and operation of a franchise or, more specifically, the operating system. Depending on the business type, a typical franchise in Thailand may fall under the purview of more than 10 separate acts and regulations.

The new guidelines bar trade practices that force franchisees to buy products unrelated to franchised goods or raw materials in excess of those actually needed, demand additional unreasonable conditions after the contract is signed and impose unreasonable prohibitions (on franchisees) to buy products or services from other manufacturers, distributors or service providers.

Under the new guidelines, franchisers are not allowed to impose conditions on franchisees that may lead to unfair trade practices. Franchisers are required to offer similar discounts or sales conditions to all franchisees equally.

Other improper conditions besides quality and standard controls are also banned.

“Most importantly, to ensure transparency and fairness, franchisers need to disclose key information such as remuneration and expense, business plans, trademark rights, contract renewals or revocations to franchisees before the contracts are signed,” Mr Santichai said.

If franchisers need to open their own branch in an area, they need to inform adjacent franchisees and give priority for opening new branches to the existing franchisees in the area.

Mr Santichai recommends that operators in the franchise business study the new guidelines to avoid falling afoul of Section 57 of the Trade Competition Act. Violations are subject to an administrative fine of up to 10% of annual revenue in the year of violation.

Boonprasert Pupan, president of Franchise and License Association Thailand, said the association agrees with the guidelines but wants regulators to add language to protect franchisers and strike a balance in benefits for the two parties.

Thailand has 531 brand franchises.