The Political Economy Of Competition Law: The Case Of Thailand

Deunden Nikomborirak **

I. INTRODUCTION

To many competition experts, the failure to include competition policy in the Doha Round of the World Trade Organization ("WTO") Trade Negotiation at the Cancun Ministerial Meeting in September 2003 marked the end of the only hope of establishing a global competition policy regime. Yet more and more countries are adopting national competition laws with or without a comprehensive agreement on competition policy from the WTO. The International Competition Network, an international body devoted exclusively to competition law enforcement, now boasts members consisting of ninety-three competition authorities from eighty-two countries. Of these, over twenty became members in 2004.¹ While some countries enacted competition laws to fulfill commitments made in bilateral free trade agreements, others did so voluntarily, often with the assistance of bilateral donors or international organizations such as the United Nations Conference on Trade and Development ("UNCTAD") and the World Bank.

The Association of Southeast Asian Nations ("ASEAN")² exemplifies this phenomenon quite well. By 1998, not one member of ASEAN had developed its own competition law. Today, Thailand, Indonesia, Singacore, and Vietnam all have full-fledged national competition laws in place.³ To date, with the exception of Thailand, the enactment of competition laws in ASEAN countries resulted from international commitments rather than from domestic policy. Indonesia passed its law in 1999 to comply with certain conditions set by the International Monetary Fund ("IMF") imposed after the 1996 Asian financial crisis.⁴ Singapore passed its law in early 2005 to fulfill its obligations under the U.S.­Singapore bilateral free trade agreement.⁵ Vietnam enacted its law in June 2005 to fulfill WTO accession commitments.⁶ The question is whether having a national competition law helps promote a more competitive market environment.

Thailand's experience illustrates that having a competition law may prove futile if enforcement cannot withstand political hurdles. Discriminatory and arbitrary implementation of the law may also serve to distort rather than promote effective competition in the market. Hopefully, lessons learned from Thailand can help identify prerequisites for successful competition law enforcement in countries considering adopting such a law.

This paper will address the political economy of competition law in Thailand. Section II will provide a historical perspective of Thai Competition Law. Section III will show what went wrong with the law's implementation since its promulgation in 1999. Section IV will assess the implications of the lack of competition law enforcement on business conduct and the establishment of a competition regime in Thailand. Section V will summarize major lessons learned in the Thai case that may be relevant to other developing countries considering adopting such a law or facing difficulties in its implementation. Finally, Section VI will draw conclusions on how a country can ensure successful enforcement of a competition law in the absence of a political will.

II. THE THAI COMPETITION LAW IN A NUTSHELL
Thailand has had a quasi-competition law since 1979, known as the Price Control and Anti-Monopoly Act.⁷ At its inception, the law's objective was to protect consumers from inflationary pressures and from widespread collusive practices among businesses that had led to excessive pricing. The provisions concerning anti-competitive practices were incomplete, as they did not cover mergers and many important vertical restrictive practices. Implementing a price control mechanism was easy, but the Department of Internal Trade, a part of the Ministry of Commerce, hardly enforced the anti-monopoly provisions. This limited enforcement situation existed because the law required that the Department of Internal Trade officially declare a business accused of anti-competitive practices a "controlled business" before the law could be enforced. During the two decades that the law was in effect, the competition authority only declared one such business, an ice manufacturing company, a "controlled business" because there were no clear rules or guidelines for officially classifying such anti-competitive businesses as "controlled businesses."

In 1999, two years after the Asian economic crisis, the Parliament passed the national competition law. As mentioned earlier, the promulgation of the national competition law in Thailand was voluntary. It was not part of the IMF conditions, as in Indonesia, or part of a bilateral free trade commitment, as in Singapore, or a WTO accession commitment, as in Vietnam. Hence, the law received minimal technical assistance from international organizations such as the World Bank or UNCTAD. According to Suthee Supanit, a law professor at Thammasat University in Bangkok who was part of the drafting committee, the adoption of the New Constitution in October 1997 enabled the ratification of the Trade Competition Act.⁸ Article 50 of the New Constitution ensures citizens the right to engage in free and fair competition, while Article 87 stipulates that the State shall pursue a free economic system through market forces, ensure and supervise fair competition, prevent direct and indirect monopolies and refrain from engaging in businesses in competition with the private sector. The promulgation of the competition law was seen as a necessary tool to fulfill the mandate established by the New Constitution to advocate for free and fair competition.⁹

Footnotes

Thailand Development Research Institute.
1. Ulf Boge, President of the Bundeskartellamt, Speech at Opening Ceremony of the Fifth United Nations Conference to Review All Aspects of the Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices (Nov. 14­18, 2005), http://www.unctadxi.org/Sections/AntalyaConference/does/Conference Presentations/tdrbpayt05039 en.pdf.
2. ASEAN is comprised of Brunei, Cambodia, Indonesia, Lao People's Democratic Republic, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
3. Since 1979 Thailand has had a quasi-competition law but with limited substantive provisions on restrictive practices.
4. Conditionality provisions do not appear in Thailand's Letters of Intent. Letters from Bank of Thailand to the International Monetary Fund, http://www.imf.org/ external/country/tha/?type=23.
5. Free Trade Agreement, U.S.-Sing., May 6, 2003, Pub. L. 108-78, http://www.ustr.gov/assets/Trade_AgreementsBilateral/Singapore_FTA/Final_Texts/asset u pload_file708_4036.pdf. Chapter 12 of the Agreement addresses anti-competitive business conduct, designated monopolies and government enterprises.
6. The promulgation of the competition law was part of Vietnam's action plan on law building submitted to the WTO that included the legislation and amendments of thirty-six laws and ordinances. Vietnamese Ministry of Foreign Affairs, Vietnam in the Process of Accession to the World Trade Organization, http://www.mofa.gov.vn/en/tt_baochi/ nr041126171753/ns050223102713 (last visited Feb. 10, 2006) (details regarding Vietnam's accession commitments).
7. Price Fixing and Anti-Monopoly Act, Thailand, Apr. 22, 1979 (1979), http://rO.unctad.org/en/subsites/cpolicy/Laws/thailand.htm.
8. Thailand Report from Sutee Supanit to the Fair Trade Commission of Japan (2002) (on file with the Fair Trade Commission of Japan), available at http://www.jftc.go.jp/eacpf/02/ thailand_r.pdf.
9. Constitution of the Kingdom of Thailand, Thailand (1997), available at http://www.krisdika.go.th (in English).