Unfair Trade Practice Guidelines for Online Food Delivery Business

Background

Food ordering via an online delivery platform (“Online Platform”) has become common during the Covid-19 epidemic in Thailand due to restrictions on dining out imposed by lockdown measures. However, small restaurants using the Online Platform have struggled to operate, and some are unable to open their businesses as usual because the Online Platform service providers (“Service Providers”) have collected high service commissions or gross profit (“GP”), at the rate up to 30-35 per cent from the restaurants. Due to numerous complaints from restaurant owners regarding the high surge in GP rate, an online meeting was held by the Office of Trade Competition Commission (the “Office”) in May 2021 with the intention to seek cooperation from the Service Providers with regard to reduction of the GP rate and for the avoidance of unfair trade practices.

Key Takeaways

In light of the above, the Office issued a Notification of the Trade Competition Commission concerning Guidelines for Considering Unfair Trade Practices between Online Food Delivery Service Providers and Restaurant Operators (the “Notification”), which took effect as of 23 December 2020. The Notification was enacted in order to provide guidelines for the consideration of unfair trade practices carried out by the Service Providers that resulted in damaging the restaurant operators’ business pursuant to Section 57 of the Trade Competition Act (the “Act”). The key content of the Notification is summarised as follows:

The guidelines on unfair trade practices which could result in damaging the business of the restaurant operators under Clause 4 of the Notification include:

• Unfair collection of expenses, remuneration or other benefits from the restaurant operators:
  • (a) Collecting commission fees or GP without reasonable grounds or on a discriminatory basis (e.g. unjustified or discriminatory increase in GP, and using different GP rates on the restaurant operators that sell similar food without reasonable grounds);
  • (b) Collecting advertising fees without reasonable grounds (e.g. collecting advertising fees for a sales promotion of a restaurant operator but such restaurant operator does not receive benefits as mutually agreed without reasonable grounds);
  • (c) Collecting sales promotion fees without reasonable grounds; or
  • (d) Collecting expenses, remuneration or other benefits that have never been collected before without reasonable grounds.
• Unfair stipulation of trading conditions restricting or preventing the restaurant operators from operation of their businesses (e.g. imposing exclusive dealing conditions on the restaurant operators by prohibiting them from using any other Online Platform without reasonable grounds).
• Unfair exploitation of superior bargaining power or market power (e.g. intervening or restricting the freedom in price determination of restaurant operators without reasonable grounds; specifying the rate parity clause on the restaurant operators without reasonable grounds; cancelling the restaurant operators from selling channel without reasonable grounds;  and amending the terms and conditions under the contract or the contract period without reasonable grounds).
• Other unfair trade practices (e.g. stipulating special conditions which may cause damage, or limit or restrict the restaurant operators).

Anti-trust enforcement has become more active during the past few years. Consequently, the Service Providers should ensure that their business operation, market conduct and commercial terms under relevant contracts with the restaurant operators are properly checked and adjusted to be in line with the principle of the Notification. In addition, the restaurant operators using the Online Platform should also be aware of this Notification in order to protect their commercial interests.

Any of the Service Providers violating the Notification may be subject to an administrative fine of not more than 10 per cent of its turnover in the year of the offence. In the case where it is an offence committed in the first year of  business operation, the offender shall be subject to an administrative fine of not more than Baht 1,000,000.

This is intended merely to provide a regulatory overview. It is not intended to be comprehensive, nor to provide legal advice. Should you have any questions on this or on other areas of law, please do not hesitate to contact:

Jirapong Sriwat
Partner

Akraphak Phaisitporrnpol
Attorney-at-Law