Thailand: new competition law guidelines to support SMEs

The Trade Competition Commission (TCC) of Thailand recently announced new antitrust guidelines in relation to the credit terms under which small to medium sized enterprises (SMEs) sell goods and services. These new guidelines will come into force on 16 December 2021.

The guidelines act as a protective mechanism to reduce inequality and increase fairness in trade for those SMEs not in a favourable bargaining position.

The TCC defines SMEs as:

1. Manufacturing businesses which have 200 employees or less or have an annual revenue of THB 500 million or less; and
2. Service or trading businesses which have 100 employees or less or have an annual revenue of THB 300 million or less.

Credit Terms

Credit terms refer to the written agreed timeframe in which buyers must make the relevant payment for goods and services provided by sellers.

Under the new guidelines, the TCC sets out what are considered fair and acceptable credit terms for payments to SMEs, based on the type of business activity, as follows:

• Trade, manufacturing, and services regarding agricultural products – the credit terms should not be more than 30 days.
• General trade, manufacturing, and services – the credit terms should not be more than 45 days.

Parties may agree on longer credit terms if there are business, marketing or economic justifications and contractual obligations related to the payment or credit terms.

Unfair Trade Practices

In addition to outlining maximum credit term periods, the TCC also provided examples of situations that could be considered unfair trade practices. According to the guidelines, the following acts may be deemed as unfair:

• An unjustified delay in making payment for products or services beyond the stipulated credit terms.
• Changing credit terms or contractual conditions without at least 60 days’ prior notice on justifiable grounds.
• Any behaviours by a party to an agreement with an SME that puts the SME at a disadvantage, such as setting special conditions related to credit terms that impose an undue burden on the SME.

Previously, SMEs were limited to bringing a breach of contract claim to the civil court in circumstances where purchasers of goods or services defaulted on their payments or used their superior bargaining power to extend credit terms.

The new provisions apply to pre-existing credit terms, meaning the guidelines apply retrospectively and existing agreements could be deemed unfair if they are contrary to the guidelines or disadvantageous to an SME. Both purchasers and seller SMEs should revisit any active or pending agreements to ensure that they comply with the guidelines by the 16 December (implementation date). Please do not hesitate to contact our team at contact@orbis alliance.com to help you in this regard.