2020 05 March

Thailand Legal Update: TCC Decision on Non-Renewal of Franchises

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On 5 February 2020, the Trade Competition Commission (“TCC”) issued an order against Nissan Motor Thailand (“Nissan”) based on its determination of an infringement of the unfair trading practices provisions of the Trade Competition Act (“TCA”).

From public reports, certain Nissan dealers had complained to the TCC late last year that their dealerships were not being renewed with no reason provided for the decision.  The dealers were given at least 3 months prior notice of the terminations.  The notified dealers had all apparently satisfied Nissan’s performance criteria that were also applied to dealers who were not being terminated.

After investigating, the Office of the TCC determined that Nissan’s reasons for terminating the dealerships were insufficient and that the non-renewals violated Section 57 of the TCA which, among other things, prohibits any conduct which results in damaging another business by unfairly obstructing its operations.

On this basis, the TCC exercised its authority under Section 60 of the TCA which allows the TCC to issue an order where it has sufficient evidence that an infringement of certain sections has occurred or will occur.   In such circumstances, Section 60 provides that the TCC may issue an order in writing to instruct the relevant business to suspend, stop, or correct or change such conduct.   In this case, the TCC ordered Nissan to rescind the termination of the dealerships.

A representative of the OTCC was quoted as stating that Nissan’s decision to not renew those dealerships was “unfair and discriminatory”.

Nissan may provide further evidence to the OTCC or appeal to an administrative court within 60 days from the date of the order’s receipt.  If Nissan violates the order it may be subject to an administrative fine of not more than THB 6 million and not more than THB 300,000/day for a continuing violation.

Without reviewing the terms of the dealership agreements or the evidence by which the TCC came to its conclusion, it is difficult to ascertain the criteria by which the TCC determined that the terminations were unfair.   We are therefore not aware of what was determined to be “unfair and discriminatory” about the terminations.   As a caution, we recommend that clients who wish to terminate, including non-renewal of, dealership contracts, document the reasons for such termination and consider their reasonableness from an objective basis in order to defend against any potential allegation of unfairness to the TCC.

If you have any questions with respect to this update or any other issue in relation to the New TCA and its implications for your business, please feel free to contact Kraisorn Rueangkul, Partner, (kraisorn@dfdl.com) or David Fruitman, Regional Competition Counsel, (david.fruitman@dfdl.com).

The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.


Contacts


Kraisorn Rueangkul
Partner
Kraisorn@dfdl.com

David Fruitman
David Fruitman
Regional Competition Counsel
david.fruitman@dfdl.com

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