Thailand Law Journal 2011 Fall Issue 2 Volume 14

(2) Unreasonably fixing compulsory conditions, directly or indirectly, requiring other business operators who are his or her customers to restrict services, production, purchase or distribution of goods, or restrict opportunities in purchasing or selling goods, receiving or providing services or obtaining credits from other business operators

There are several example practices that are considered violations of section 25 (2), i.e. resale price maintenance, price discrimination, exclusive dealing, and tying arrangement.

A tying arrangement is defined as "an agreement by a party to sell one product (tying product) but only on the condition that the buyer also purchases a different product (tied product), or at least agrees he or she will not purchase the product from any other supplier"²⁴. This is one of the trade strategies in promoting the tied product which usually is a new product or an unpopular one while the tying product is often top rated or a best seller.

One significant case in the Thai competition law regime involving a tying claim is the case where Boon Rawd Brewery Company Limited, the first brewery in Thailand and currently the owner of "Singha", "Leo", "Thai Beer" and "B-ing" trademarks²⁵, filed a complaint with the government (which is later forwarded to the Trade Competition Commission) against Suramaharasdr Public company Limited, alleging that the company used an unfair trade strategy by tying Chang beer with the company's previously sold spirits.²⁶ Such tactic, it was claimed, put dealers of Suramaharasdr in a difficult position. Agents must buy both spirits and Chang beer together and then later force their customer stores to buy both products together too. This would not be a problem if both spirits and Chang beer were in high demand. However, customers were more willing to buy the spirits but proved not to be such big fans of Chang beer. It was impossible for stores to not buy spirits since they would lose consumers to other competitors and they also could not turn to other spirit providers since at that time white spirits was a monopoly market. Ultimately, the stores had to raise the price of the spirits and lower the price of Chang beer to be able to sell it to attract consumers. They could then use the profits from selling the spirits to make up for the loss from the revenue gained from selling Chang beer. The Trade Competition Commission found unanimously that the tying arrangement by Suramaharasdr was abusive conduct by a company that possessed the advantage of its market position. However, the Commission could not fully analyze whether Suramaharasdr had violated section 25 (2) or not since at that time, Notification of Trade Competition Commission on the Criteria for Business Operator with Market Domination was not in place yet. The Commission could not determine whether Suramaharasdr was a business operator with market domination or not. The Commission gave the final outcome that such trade practices constituted a prohibited practice according to section 25 (2), and thus should be put to an end. The Department of Internal Trade Affairs was also assigned to keep a close eye on the sprits and beer industry.

In American law, there is the development of unique per se rules for tying arrangements.²⁷

For the US antitrust law regime there are two rules in determining the legality of any business practice. The first rule is called the per se rule. With this rule, other economic justifications such as whether the practice really harms competition or there is indeed an economic justification, do not need to be considered, and the act in question is considered illegal right away. Horizontal price fixing-colluding on price among competitors, is viewed as a per se. The second rule is called the "rule of reason". With this rule, if any questionable practices happens, it will not be considered a violation of the Sherman Act right away if the alleged can prove that there is no market impact or there is business efficiency resulting from the action, and therefore such action is legal. Nowadays, the rule of reason is the default rule of most of the business practices questioned under the Sherman Act.

In a successful case of the tying arrangement claim there must be proof of market power in the tying product market and demonstration of substantial foreclosure in the tied product market. The business justification i.e. efficiency is missing in the tying analysis.

In economics, market power is the ability of a firm to alter the market price of a good or service without losing its customers to competitors. A firm usually has market power by virtue of controlling a large portion of the market. However, market size alone is not the only indicator of market power. Some of the behaviors that firms with market power are accused of engaging in include predatory pricing, product tying, and creation of overcapacity or other barriers to entry.²⁸

In United States v. Microsoft Corp.²⁹, Microsoft allegedly tied Internet Explorer (the "tied" product) with its Windows operating system (the "tying" product) through a tying arrangement. Microsoft argued that Windows and IE browsers are not "separate products". The issue here is that whether the tying product and the tied product is/are separate products or not. Success on a tying claim typically requires proof of two separate products or services. The court mentioned Jefferson Parish, 466 U.S. 2, involving a tying arrangement of surgical care and anesthesiological services. A consumer demand test was upheld in that case which revealed some thoughts that, first, the mere fact that two items are complement one another (one is not useless without the other) does not make them a single "product" for the purpose of tying law. Second, there must be sufficient demand for the purchase of the tied product separate from the tying product to identify a distinct product market. However, the court agreed with Microsoft argument that using the demand test "would chill innovation to the detriment of consumers by preventing companies from integrating into their products new functionality previously provided by standalone products-and hence, by definition, subject to separate consumer demand".³⁰ The court deliberated that in some cases, such as the software market, the market is unique and the court lacks experience in this particular type of market, thus the per se rule would not be a proper test for the legality of the trade practice. The rule of reason, especially an inquiry into the actual effects of Microsoft's actions in the tied product market would be more appropriate.

(3) Suspending, reducing or restricting services, production, purchase, distribution, deliveries or importation without justifiable reasons, or destroying or causing damage to goods in order to reduce the quantity to be lower than the market demand;

The purpose of this regulation is to keep an eye on the player(s) with significant market power and ensuring that they do not misuse their influence on producing the volume of goods or the availability of any service in the market to be lower than it should be. This might cause the change in goods or service price in a way that benefits just the operator with market domination but is harmful to consumer's welfare-consumers' demand is not met and consumers have to pay a higher price for such goods or services. Of course, this will only be considered an illegal trades practice if there is no justifiable reason behind the action. Therefore, for example, an operator with market domination can reduce any service in any particular area of trade if consumer demand has clearly decreased. Such practice is deemed reasonable according to the rule of demand and supply.

One example concerning the trade practice under section 25 (3) is the case where Abbot Laboratories Limited withdrew requests for the new drug registration as a counter measure to the Public Health Ministry's policy on compulsory licensing on the patented drug.³¹ Certain consumer organization argued that such an approach is the limits the of consumer's choice in purchasing imported drugs. On December 27th, 2007, the Trade Competition Commission ruled that the action was not a matter that violated section 25 (3) on two accounts. The first one is that Abbot is not a business operator with market domination: the company did not have a market share in the previous year of over 50% and at least 1,000 million baht in turnover. Second, Abbot has not yet been given approval for new drug registration, thus the company has not yet put any of its products on the market. So it is impossible to say whether the withdrawal of the request for new drug registration would affect the amount of drugs in the market and limit the consumer's choice in the imported drug market.

(4) Intervening in the operation of the business of other persons without justifiable reasons.

One trade practice that is banned by section 25 (4) is predatory pricing. Predatory pricing is the business practice of cutting the price to drive competitors out or to bar new entrepreneurs from coming into the marketplace, then charging supra-competitive prices. This strategy will only be credible if the recuperation-charging a high price is possible. Usually, predatory pricing will only happen quickly over a short period of time.

For the US court, since the antitrust law's core purpose is to protect consumers' welfare, the Court requires plaintiffs to prove the likelihood that the pricing practices will affect not only rivals but also competition in the market as a whole.³² One example of alleged predatory pricing is when Microsoft released their web-browser Internet Explorer for free. As a result the market leader and primary competitor, Netscape, was forced to release Netscape Navigator for free in order to stay in the market. Internet Explorer's free inclusion in Windows led to it quickly becoming the web browser used by most computer users.³³

4. Conclusion

The US economy and business world has been long developed and, as such, is very complex and dynamic. The trade strategies and business concepts are exceptionally interesting. As is the US antitrust law regime. The basic concepts of Thai competition law are similar to US antitrust law and therefore a study, especially of the precedents and the thinking that has revolved around the Sherman Act, of the core US antitrust law could make a vast contribution to the competition law system in Thailand. This can help us to greater comprehend the intent of the law from the start and how to apply the law effectively. We can learn from business practices that might result in anti-competitive effects and how the court reasons in such cases or what is the rationale behind the court ruling, ultimately to improve the way the judges and the trade competition commission exercise their discretion from various perspectives.