Section 51 of the Trade Competition Act of 2017 sets out the general legal framework for merger control in Thailand. Multiple notifications of the Trade Competition Commission (TCC) have been issued pursuant to Section 51, to provide further details and clarification of the legal requirements.
Certain sectors are subject to different merger control regimes, such as financial institutions, insurance, telecommunications and broadcasting.
The TCC is generally responsible for enforcement of the merger control regime under the Trade Competition Act. Other agencies – such as the Bank of Thailand, the Office of the Insurance Commission and the National Broadcasting and Telecommunication Commission – are responsible for enforcement of the merger control regimes under other specific laws.
Merger control regulators generally have the authority to issue sub-regulations, approve proposed mergers, impose conditions on approved mergers, impose penalties on non-compliant businesses and so on.
The Trade Competition Act defines a ‘merger’ as:
- a combination of businesses which results in one remaining business (whether A + B = A or A + B = C);
- the acquisition of assets of a business, whether in whole or in part, in order to control the business; or
- the acquisition of shares in a business, whether in whole or in part, in order to control the business.
However, not all mergers are subject to the merger control regime under the Trade Competition Act, but only mergers which:
- result in a combined annual revenue of THB 1 billion or more; and
- may cause a party to become a dominant market player or may result in either a monopoly or a significant reduction of competition in any particular market.
Merger control regimes under other business-specific laws may have a broader scope and may not be subject to the above tests. For example, financial institutions which are planning to merge must always obtain prior approval from the Bank of Thailand, regardless of their combined annual revenue and the impact of the proposed merger on the market.
The acquisition of assets or shares in a business in order to take control of the business (ie, an action which constitutes a merger under the Trade Competition Act) is defined as follows:
- the acquisition of more than 50% of the assets which are used in the ordinary course of business of another business;
- the acquisition of shares, warrants or other convertible securities of a business that is subject to the Securities and Exchange Law, which results in the acquirer holding 25% or more of the voting rights in the business; or
- the acquisition of voting shares in another business which results in the acquirer holding more than 50% of the voting rights in the business.
There is an exception to the merger control regime under the Trade Competition Act where the merger in question is an internal reorganisation of businesses which are connected through policies or control. In this context, ‘control’ is defined as:
- the holding of voting shares representing more than 50% of the total voting rights in another business;
- the ability to directly or indirectly control a majority of the voting rights at the shareholders’ meeting of another business; or
- the ability to directly or indirectly control the appointment or removal of at least 50% of the directors of another business.
Yes, if the minority interests acquired are voting shares, warrants or other convertible securities of public companies. If the acquirer of such securities would gain at least 25% of the voting rights in a public company as the result of the acquisition, it may be subject to the merger control regime.
Joint ventures are not specifically regulated under the current merger control regime. Nevertheless, the creation of a joint venture might fall within the definition of a ‘merger’ pursuant to the Trade Competition Act, depending on the circumstances, in which case the general rules will apply.
A merger of parent companies outside Thailand may be subject to the merger control regime under the Trade Competition Act if:
- it may result in a monopoly or substantial reduction of competition in a particular market in Thailand; and
- the combined annual revenue in Thailand post-merger reaches the THB 1 billion threshold.
A combined annual revenue of THB 1 billion, inclusive of annual revenues of other businesses which are connected through policies or control. However, it is still unclear as to how such revenue should legally be calculated, due to a lack of guidelines from the Trade Competition Commission.
Mergers which constitute internal reorganisations of businesses connected through policies or control.
Mandatory, with an exception for internal reorganisations of businesses connected through policies or control.
Mergers which could substantially reduce competition in a particular market must be notified to the Trade Competition Commission (TCC) within seven days of the date of the merger in question. By contrast, mergers which may result in a monopoly or the creation of a dominant market position in a particular market require advance approval from the TCC.
As with most other government agencies in Thailand, it is possible for the parties to informally discuss a planned transaction with the Office of the TCC in advance of a formal notification or formal request for approval, as the case may be. As a matter of practice, however, such informal discussions are usually carried out on an anonymous basis, with limited disclosure of information and through external legal counsel. That is because of concerns about the untimely leakage of confidential information relating to the transaction.
Although there is a provision in the Trade Competition Act which specifically imposes criminal liabilities (including a maximum one-year term of imprisonment) on public officials who unduly release to others sensitive information about transactions to which they have had access in the performance of their official duties, it is prudent to assume that it would be practically difficult (if not impossible) to maintain the confidentiality of the information once it has been discussed with third parties such as public officials.
In cases where the merger in question may substantially reduce competition (and a notification must thus be submitted to the TCC within seven days of the merger date), the party responsible for filing the notification is the remaining entity or new entity which is created as a result of the merger or the party which acquires shares or assets from another party.
In cases where the merger in question may result in a monopoly or the creation of a dominant market position (and advance approval of the TCC is thus required), all merging parties are jointly responsible for filing the request for approval.
There is no filing fee for mergers which may substantially reduce competition. By contrast, there is a filing fee of THB 250,000 for mergers which may result in a monopoly or the creation of a dominant market position.
For mergers which may substantially reduce competition and which thus require post-merger notification, information such as the following must be provided:
- a completed application form (about seven pages);
- copies of the documents which were submitted to the Thai Ministry of Commerce (in case of an amalgamation of businesses);
- copies of the documents which were submitted to the Office of the Securities and Exchange Commission (if applicable);
- copies of the documents relating to the sale of shares or assets (eg, sale and purchase agreement, valuation report);
- minutes of the board or shareholders’ meetings of relevant parties which approved the merger in question;
- details of the merger;
- minutes of the annual shareholders’ meetings, together with audited financial statements of relevant parties for the last three years prior to the merger;
- lists of shareholders of relevant parties, both pre and post-merger; and
- a power of attorney for filing the notification.
For mergers which may result in a monopoly or the creation of a dominant market position, which require advance approval from the TCC, information such as the following must be provided:
- a completed application form (about 20 pages);
- the proposed merger plan and timeframe;
- details of relevant parties, which must include, at a minimum, their respective shareholding structure, voting rights, annual revenues and market share; and
- a detailed study and analysis report on the proposed merger, including business necessities, impact on the economy and impact on consumers in general.
For mergers which may substantially reduce competition, notification must be submitted within seven days of the date of the merger.
For mergers which may result in a monopoly or the creation of a dominant market position, a request for approval must be submitted before the merger actually takes place.
For mergers which may substantially reduce competition, no.
For mergers which may result in a monopoly or the creation of a dominant market position, yes.
For mergers which may substantially reduce competition, no.
For mergers which may result in a monopoly or the creation of a dominant market position, yes.
No.
Upon receipt of an application (a request for approval), all required supporting documents and the filing fee from the applicant, the Office of the Trade Competition Commission (TCC) will forward the documents to the TCC within seven days.
The TCC has a general timeframe of 90 days to complete its review and approve or reject the proposed merger. Additional information and documents may be requested from the applicant and other parties by the TCC.
If necessary, the TCC’s review timeframe may be extended for an additional period of not more than 15 days.
The Office of the TCC will inform the applicant within seven days from the date of the TCC’s decision.
No.
No.
It is expressly stated in the Trade Competition Act that the TCC shall exchange information and cooperate with its counterparts in other jurisdictions. However, the extent of such cooperation in reality is still unclear, as the merger control regime is still very new in Thailand.
The TCC may request additional information and documents from the applicant and other parties as it sees fit.
Yes.
Conceptually yes, but this largely depends on the actual circumstances.
The three main points that the TCC will take into account are as follows:
- business necessities;
- impact on the economy; and
- impact on consumers in general.
No.
It is still unclear whether non-competition related issues will also be considered (as the merger control regime in Thailand is still very new), but the answer is possibly yes.
No.
Not applicable.
Not applicable.
Yes, all decisions of the Trade Competition Commission (TCC) can be appealed (on a full-review basis) to the Central Administrative Court and, subsequently, to the Supreme Administrative Court.
Conceptually, third parties that are directly affected by the TCC’s decisions may challenge such decisions before the Central Administrative Court and, subsequently, before the Supreme Administrative Court. For example, if the TCC approves a proposed merger despite apparent adverse effects on competition in the relevant market, it is conceptually possible that another player in the market may bring a case against the TCC before the Central Administrative Court.
For mergers which may substantially reduce competition (for which notification must be submitted within seven days of the date of the merger), a maximum fine of THB 200,000 plus a maximum daily fine of THB 10,000 may be imposed on the relevant parties.
For mergers which may result in a monopoly or the creation of a dominant market position (for which advance approval is required), a maximum fine of 0.5% of the value of the merger transaction may be imposed on the relevant parties.
As the merger control regime is still very new in Thailand, we have no information on the frequency of sanctions imposed by the authority.
For mergers which may result in a monopoly or the creation of a dominant market position (for which advance approval is required), a maximum fine of 0.5% of the value of the merger transaction may be imposed on the relevant parties if they close the transaction before approval is granted.
As the merger control regime in Thailand is still very new, it is unclear how compliance with merger approval conditions will be monitored. In the worst-case scenario of non-compliance with such conditions, the Trade Competition Commission may revoke the approval that it previously granted and order the relevant parties to unwind the merger – although there are still a lot of questions about how this would actually work in practice.
The current Trade Competition Act was enacted and became effective in late 2017, replacing the old law of 1999 which had no effective merger control provisions. Most of the sub-regulations on the merger control regime were recently issued in December 2018. As such, this matter is still very new in Thailand and it will take some time before any trends emerge in this regard.
Unfortunately, we have no tips to offer at this stage, as the merger control regime is still largely an uncharted legal landscape in Thailand.
