Over 100 jurisdictions have adopted merger control rules around the world which apply generally to mergers, joint ventures, takeovers and acquisitions.  Each country has its own set of jurisdictional thresholds to determine whether a transaction must be notified in, and approved by, that country. Since its enactment of a merger control regime 1999, Thailand has yet failed to adopt any particular merger control thresholds, which means that this regime is not yet enforced in practice. This is, however, about to change.

Overview

In 1999, Thailand enacted its competition law with the Trade Competition Act 1999 (the Act) which, inter alia, imposes a mandatory approval requirement for mergers that meet the prescribed thresholds. However, such thresholds have not been prescribed to date. Pursuant to the Act, on 6 June 2013 the Trade Competition Commission (the TCC) approved a draft implementing rule for specific merger thresholds to be applicable in Thailand (the Draft Merger Thresholds). The aim is for these rules (see details below) together with competition regimes in other ASEAN countries to be adopted by 2015, and they are expected to have several crucial implications for companies doing business in Thailand:

1. If a transaction meets the Draft Merger Thresholds, parties will not be able to close the transaction before approval is obtained from the TCC.
2. Parties to a transaction will be expected to collect a relatively large amount of market data in order to prepare and submit their merger filing, together with supporting documents, as is the case in many other jurisdictions. This is an onerous task that takes time and will require significant input from the parties.
3. The TCC will rely on such merger filing and supporting documents to assess whether the transaction is likely to have an anti-competitive effect in the “relevant markets” in Thailand. Pursuant to the Act, the merger filing process, including any appeal, should take approximately 3 – 6 months (see details below). It is however unclear how long the process will take in practice. In many other jurisdictions, such investigation is generally split into 2 phases: (i) a preliminary period, which generally takes approximately 1 month; and (ii) an in-depth investigation for more complicated cases, which can last 4 months or more.
4. It is crucial to note that a transaction caught by the Thai merger control regime may also need to be approved by other merger control authorities, which may further impact the timeline and closing of a deal.
5. The TCC, similar to merger control authorities in other countries, has the authority to (i) approve the transaction without conditions; (ii) grant clearance subject to certain remedies, such as commitments or undertakings by the parties to divest part of the merged business; or in rare cases (iii) prohibit the deal.

Details of the Draft Merger Thresholds and the clearance process are set out below.

The Draft Merger Thresholds in Thailand

Pursuant to the Draft Merger Thresholds, the following transactions will be required to obtain prior approval from the TCC:

1. Businesses having at least a 30% market share before or after the merger and revenue/turnover in the previous financial year of at least THB 2 billion (or USD 62 million) in the relevant product or service market; or
2. An acquisition or receipt, whether in one or more instances, of at least 25% of shares with voting rights in the case of a public company, or of at least 50% of shares with voting rights in the case of a limited company, and each party to the transaction or both collectively having at least a 30% market share, and revenue/turnover in the previous year of at least THB 2 billion (or USD 62 million) in the relevant product or service market.

It is important to note the following.

Types of transactions: as is the case in other jurisdictions, all types of transactions appear to be caught by these thresholds – including mergers, joint ventures, takeovers and acquisitions.  In the case of “acquisitions”, the Draft Merger Thresholds specify that an acquisition of merely 25% of the shares of a listed company in a public M&A transaction would require a filing, whereas private M&A transactions would not need to be filed unless at least 50% of the shares of a limited company are to be acquired.  Therefore, certain acquisitions of minority shareholdings of listed companies, even without the transfer of control, will need to be approved under the Act in Thailand if those transactions meet the thresholds.  Unless an amendment to section 26 of the Act is introduced to add a test of substantiality (as proposed in the Public Hearing (see below)) so as to exclude from the scope of the merger control regime any transaction with no significant impact on competition, filings of public transactions may be required in Thailand even where an acquirer does not acquire any control rights over a public company. It must be noted that, although neither the Act nor the Draft Merger Thresholds expressly indicate that joint ventures (JVs) fall within the scope of the merger control regime, we are of the view that JVs will likely be included in such scope, as section 26 of the Act provides that the definition of “merger” includes “a purchase of the whole or part of assets or share of another business with a view to controlling business administration policies, administration and management.”

Both cumulative and non-cumulative thresholds: the wording in the current Draft Merger Thresholds is ambiguous and it is not clear if the thresholds are cumulative or not.  However, our preliminary interpretation is that the 30% market share and THB 2 billion revenue/turnover threshold applies to each party to the transaction (i.e. non-cumulative) before the merger and applies cumulatively to all parties to the transaction after the merger.  This means that transactions will need to be notified and approved in Thailand if parties meet the relevant thresholds (see below) individually before the merger or in a combined manner after the merger.

Revenue/turnover: the officials at the Office of the TCC have clarified separately that the reference to “revenue/turnover” concerns revenue/turnover arising from relevant product or service markets within Thailand only, so in practice, companies with little revenue/turnover in Thailand are unlikely to have to obtain approval for transactions in Thailand.

Market share threshold: as a starting point, we note that in a public hearing held by the Office of the TCC on 28 October 2014 (the Public Hearing), the Thai competition authority suggested they may consider removing the market share requirement from the Draft Merger Thresholds to make enforcement more efficient, as it is difficult to determine the relevant markets and they are hesitant, as it is the case in other jurisdictions, to leave discretion to parties as to whether their transaction meets the relevant merger control thresholds for notification.  It was also suggested in the Public Hearing that the Draft Merger Thresholds may also consider the size of the transaction, as it is the case in the USA, although no exact numbers were provided. Assuming that the market share threshold is maintained, we would expect companies with a low market share in any possible relevant market in Thailand to be unlikely to have to file their transactions in Thailand, which is welcome. On a more negative note, the Draft Merger Thresholds also indicate that the transaction which is not an “acquisition” (i.e., in case of a merger) may need to be approved if any of the businesses involved in a transaction had more than a 30% share of the relevant market prior to the transaction even if the transaction does not lead to any additional market share in the relevant market. Again, this is subject to the fact that the TCC are considering removing market share from the Draft Merger Threshold requirements.

Overall level of thresholds: the level of the thresholds, whether on the basis of market share or revenue, are on a par with thresholds applicable elsewhere around the world. It should also be noted that the obligation to file a transaction does not necessarily mean that it will be prohibited or approved with remedies only. These thresholds are only meant to determine whether a merger filing is required and therefore, whether the TCC will need to review and approve the transaction before closing; they do not presuppose the outcome of its substantive review.

Other specific thresholds: sub-committees of the TCC have been appointed to consider the adoption of specific merger control thresholds for certain industries which are governed by specific legislation, e.g., banking, telecommunications, energy and insurance, as is the case in other jurisdictions.

Thai Clearance Process

Under the Act, the TCC has up to 90 (calendar) days to review a merger filing, with the possibility to extend for a further 15-day period.  It is unclear yet if the TCC will need to take this entire period for all transactions or whether it will try to shorten its assessment period for those transactions raising minimal competition concerns.  Following this period, the TCC must issue a written order granting its permission for the transaction or its rejection if, in its view, the transaction poses serious harm to the relevant market and consumers.  It must be noted that, in this respect, the Act is silent as to the legal test that will be applied to determine this; until this legal test is enacted, parties will need to rely on international precedents to assess the risks associated with their transaction. If the transaction is rejected, the parties may appeal against the order of the TCC to the Appellate Committee within 30 days from the date of the order and the Appellate Committee shall decide on the appeal within 90 days. Such decision is final and binding on the parties. Further details on the process (i.e. the forms, rules and procedure in relation to the clearance process) have not yet been prescribed and published.

The Way Forward

Before entering into a transaction, it should be ensured that the parties have conducted a merger filing assessment, filed submissions and obtained clearance in notifiable jurisdictions.