The Trade Competition Commission (“TCC”) of Thailand recently issued new anti-trust guidelines on 24 May 2021, i.e., the TCC Notification re Guidelines for Considering Unfair Trade Practices Pertaining to Credit Terms in Cases where Sellers of Goods or Services are Small and Medium-sized Enterprises (the “Credit Term Guidelines”).
The Credit Term Guidelines were published in the Royal Gazette on 18 June 2021 and will become effective in mid-December 2021 after a lapse of the 180 days’ waiting period.
In a nutshell, the TCC considers that an appropriate credit term between Small and Medium-sized Enterprises (“SMEs”), as sellers, and other business operators, as buyers, should not be more than 45 days for trading, service, and manufacturing businesses in general, save for those relating to unprocessed agricultural produce or agricultural produce which is not sophisticatedly processed, in which case an appropriate credit term should not be more than 30 days.
The TCC does not outright ban or made illegal the use of a longer credit term. However, businesses which intend to engage in such practices after the Credit Term Guidelines become effective towards the end of this year must be able to justify their longer credit terms based on reasons acceptable by the TCC, failing which the businesses concerned could be considered engaging in an unfair trade practice against Section 57 of the Trade Competition Act 2017. A violation of Section 57 is subject to the maximum administrative fine of up to 10% of the offending business’ annual revenue of the year in which the violation takes place. The aforesaid possible penalty, which could be extremely severe, should be seriously taken into account in connection with the use of any longer credit term.
An interesting aspect of the Credit Term Guidelines is how the term SMEs is particularly defined. The TCC considers businesses of the following characteristics to be SMEs under the guidelines:
- Manufacturing businesses which have 200 employees or less or have an annual revenue of THB 500 or less; and
- Service or trading businesses which have 100 employees or less or have an annual revenue of THB 300 or less.
The above definition of SMEs is rather unusual. A giant business having more than THB 1 billion annual revenue would be considered an SME under the guidelines if it employs 100 employees or less. However, we will have to wait and see if the TCC would adjust the definition of SMEs in the future.
Apart from providing recommendations on maximum credit terms, the TCC also mentioned in the guidelines that the following acts could also be considered unfair trade practices, depending on the circumstances:
(1) Intentionally delaying a payment beyond the applicable credit period;
(2) Unilaterally changing a credit period or other terms of contract without notifying the other party at least 60 days in advance; and
(3) Etc.
Written by Wayu Suthisarnsuntorn (wayu@pisutandpartners.com)
First published on 14 July 2021. ©
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