Thailand does not currently have any specific law on franchise businesses per se. However, relationships between franchisors and franchisees are generally governed by the Trade Competition Act 2017 which includes a catch-all provision prohibiting the use of “unfair trade practices”, a vague concept which has seen problematic enforcement since 1999 when Thailand’s first trade competition law became effective.

In October 2019, the Trade Competition Commission (“TCC”) issued for the first time in the past 20 years specific regulations setting forth practices in franchise businesses which are considered unfair trade practices under the law. There is not much of a surprise contained in the 2019 regulations. For example, the regulations require franchisors to fully disclose details of franchise fees, royalty fees, and other expenses to franchisees prior to signing a franchise agreement. The regulations also prohibit franchisors from imposing unfair conditions on franchisees, such as, forcing franchisees to purchase excessive goods or services from franchisors. More details about the original 2019 regulations can be found in a previous article on our website: https://aawut.com/new-regulation-on-unfair-practices-in-franchise-businesses/

However, a noteworthy provision in the original 2019 regulations was its clause 4 which stipulated that, in cases where a franchisor would like to open a new franchise store in any given area and the franchisor itself would like to operate that new store, the franchisor must give its existing franchisee in the vicinity the right of first refusal to operate the new store instead. The said requirement was subsequently expanded, with effect from 23 September 2020, to also include scenarios where new franchise stores would be operated by third-party franchisees, as opposed to the franchisor itself.

The 2020 amendments to the franchise regulations raised an important issue to many franchisors who have been contractually bound by an area development or franchise expansion agreement with its major franchisees whereby such franchisees are granted exclusive rights to open and operate new franchise stores in a certain designated area in Thailand. That is because the franchisor’s compliance with the franchise regulations as amended in 2020 (i.e., to always offer a franchisor in the vicinity to operate a new store) could constitute a breach of its existing agreement with other franchisees. On the other hand, had the franchisor fully complied with its contractual obligations but not the franchise regulations, it could potentially face severe penalties under the Trade Competition Act, which is a maximum fine of up to 10% of its annual revenue in the year that the purported violation took place.

Fortunately for such franchisors, clause 4 of the franchise regulations were once again recently amended by the TCC’s notification on guidelines for consideration of unfair trade practices in franchise businesses (no.3), which has become effective from 20 August 2021, to specifically carve out the aforesaid scenarios where the franchisor is contractually bound by an agreement to grant the right to operate new stores to a certain franchisee instead of the franchisee in the vicinity. In other words, franchisors would no longer be in a violation of the franchise regulations for not granting the right to operate a new store to an existing franchisee in the vicinity if the franchisor is contractually bound by an agreement to grant the same to another franchisee. Nevertheless, the TCC also noted in the latest franchise regulations amendments that such agreements must be justified by business, marketing or economic reasons. As such, franchisors who wish to rely on the latest amendments to the franchise regulations in respect of their expansion should be prepared to provide relevant reasons to the TCC if and when it is required.

Written by Wayu Suthisarnsuntorn (wayu@aawut.com)

First published on 8 October 2021. ©

Disclaimer: The information provided on this website is for general informational purposes only and does not constitute legal advice and is not intended to be relied on as such.

Aawut Law Firm has been appointed from the resolution of the Unit Owners of Ashton Asoke to advise and represent the Unit Owners of Ashton Asoke on the implications of the recent Central Administrative Court’s judgment to the revocation of building permit for luxury condominium “Ashton Asoke” that may impact and available options that the Co-owners may undertake to protect their rights over the properties.

On 30^th July 2021, the Central Administrative Court rendered the judgement to revoke the building permit for luxury condominium “Ashton Asoke” due to the contrary to the objectives of MRTA’s land expropriation under the Mass Rapid Transit Authority of Thailand Act B.E. 2543, which stipulates that this land must be used for mass transit business.

Pursuant to the Building Control Act B.E. 2522 (1979), the high-rise buildings with a total area of more than 30,000 square metres, the public roads shall have a roadway width of not less than 18 metres, one side of the land exceeding 12 metres that is adjacent to a public road shall have a roadway width of not less than 18 metres.

The Aawut Law Firm team was led by Aawut Somsak (Managing partner) and Yaowalak Suleesathira (Partner), supported by the dispute resolution team.

Photo: https://www.bangkokbiznews.com/business/957449

Mr Aawut Somsak, the managing partner has been admitted to the THAC Panels of Arbitrators, specifically as an arbitrator panellist for Corporate, International Trade, Information Technology, Shareholders, and Joint Venture Disputes, and the general commercial panel.

The THAC Panels of Arbitrators is a select group of elite and arbitrators and includes prominent attorneys, retired state and federal judges, academics, as well as highly-skilled business executives, legal experts, and dispute resolution professionals who are particularly qualified to resolve all business disputes.

The Thailand Arbitration Center (THAC) is an institution that provides alternative dispute resolution services, comprising of arbitration and mediation, for cross-border disputes. It is established by the Act of Arbitration Center B.E. 2550 (2007). The THAC was first founded and commenced its operation in 2015, intending to promote and strengthen the alternative dispute resolution system and services in Thailand.

It was reported on 3 July 2021 that the Thai Securities and Exchange Commission (“SEC”) filed a criminal charge against Binance, the world’s largest cryptocurrency exchange platform, for operating without a business license from the SEC under the Emergency Decree on Digital Asset Businesses of 2018 (“Crypto Law”), a crime punishable with an imprisonment term from two to five years and a fine between 200,000 and 500,000 Thai Baht, plus a daily fine of 10,000 Thai Baht.

However, the Thai Crypto Law does not have any extraterritorial application, meaning that it only applies to businesses in Thailand, and that is where the core legal problem arises.

Essentially, the Thai SEC is arguing that, by posting ads on Facebook targeting customers in Thailand and having its website written in the Thai language, Binance is somehow operating a cryptocurrency exchange platform in Thailand, and hence, must obtain prior approval from the SEC under the Crypto Law.

It is unclear to us whether or not Binance has any office, employee, agent, or asset in Thailand, but we assume that it does not. Without such typical physical presence in Thailand, it would not be easy for the SEC to legally establish that Binance, in fact, operates its business in Thailand against the Crypto Law.

It has long been understood among foreign businesses that they would not have to be licensed by Thai government agencies to operate in Thailand as long as they do not have any physical presence or any agent here, especially in tech and e-commerce industries where such presence is not necessary because all services are exclusively provided via the internet.

There is still a long, long way before we have a conclusion on whether or not Thai courts would agree to the SEC’s legal position. But if they do, that could drastically change the legal landscape for many foreign businesses operating outside Thailand but targeting customers in Thailand because, based on a similar argument, other Thai government agencies could start filing criminal charges against offshore companies providing services into Thailand, especially the Department of Business Development (“DBD”) which is responsible for enforcement of the ultra-protectionism and overarching law called the Foreign Business Act (“FBA”).

The FBA, by itself and through various interpretations of it by the DBD, is already a highly controversial law because it generally prohibits foreign businesses from operating most businesses in Thailand, subject to certain exceptions which are also complicated by the DBD’s interpretations. The final verdict of the case between the SEC and Binance under the Crypto Law may not affect only the cryptocurrency market in Thailand but other business sectors subject to the FBA as well.

Written by Wayu Suthisarnsuntorn (wayu@aawut.com)

First published on 22 July 2021. ©

Disclaimer: The information provided on this website is for general informational purposes only and does not constitute legal advice and is not intended to be relied on as such.

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:

1. Manufacturing businesses which have 200 employees or less or have an annual revenue of THB 500 or less; and
2. 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@aawut.com)

First published on 14 July 2021. ©

Disclaimer: The information provided on this website is for general informational purposes only and does not constitute legal advice and is not intended to be relied on as such.