Preventing monopolies

After 18 years as a toothless tiger, Thailand’s newly revamped Office of the Trade Competition Commission (OTCC) is facing two big challenges to its mission of preventing market monopolies. The challenges come in the form of high-profile takeover bids — Charoen Pokphand Group’s Tesco buyout and Bangkok Dusit Medical Services Plc’s (BDMS) tender offer for all the shares of Bumrungrad Hospital Plc.

Since the country’s first Trade Competition Act took effect in 1999, the OTCC has failed to take businesses to task over complaints made against them.

Hampered by the toothless law, it has achieved little or nothing.

The new Trade Competition Act of 2017, however, granted the agency a much higher budget to operate, along with greater independence and enforcement capabilities. The law finally gave the OTCC watchdog some teeth.

Its scrutiny and evaluation of the two takeover bids is a vital test of that new “bite”, which the OTCC can use to protect consumers and smaller businesses from fears of monopoly.

CP’s US$10 billion acquisition of Tesco’s businesses in Thailand and Malaysia was announced on Monday. It triggered concern over potential market dominance because CP — which already owns 7-Eleven stores and the Makro cash-and-carry business — will now take over 86.9% of Tesco’s stores in Thailand.

This will give it even greater bargaining power in the retail supply chain.

Observers warn that this will place small suppliers and farmers at a disadvantage, given that the conglomerate controls production of poultry, shrimp and other agricultural produce while also owning a cash and carry business.

CP is now free to produce similar products under its own brand or nominee brands to compete with suppliers, and place them in its existing and new outlets, they said.

The task of judging whether this merger will result in a monopoly or market dominance is now in the hands of the OTCC, which will take about 90 days to consider whether to approve, conditionally approve or object to the deal.

The argument will likely revolve around the definition of “the market”. Analysts point out that CP may claim its 7-Elevens are in the retail market while Tesco stores are considered hypermarkets, so the two serve different consumer groups.

Another high-profile bid worrying consumers is BDMS’s voluntary tender offer for all the shares of BH.

The offer was announced late last month and BDMS’s shareholders will decide whether to approve the transaction on April 10.

Analysts say that if the deal goes through, BDMS will become a monopoly hospital business in Thailand with the largest market share.

Given their potential impacts on both consumers and small-and medium-sized enterprises (SMEs), both bids must be evaluated by the anti-monopoly watchdog with utmost transparency and clarity. Its decisions, along with all evidence and information used for evaluating the mergers, must be made available in detail to the public.

The public will be watching the OTCC closely over the next 90 days, because market dominance in any industry usually results in rising prices and fewer choices for consumers, while making it harder for SMEs to survive and prosper.