One of Thailand’s largest merger & acquisition deals was inked last week. Tesco UK sold its superstore businesses in Thailand and Malaysia to CP Group at THB335 billion. The question is, how will the deal affect the rest of us in Thailand?
Let’s play monopoly
Chances are, you’re already a CP Group customer, whether you like it or not. Even with the Boycott CP Movement on Twitter, you’re only asked to skip 7-Eleven every Wednesday (#เว้นเซเว่นทุกWednesday). There’s no avoiding CP, which operates a little over 12,000 7-Eleven branches and 135 Makro stores, as it will soon add 2,000 more stores across different formats to its portfolio.
When a company gets so large, it possesses greater power to negotiate. It dictates the prices paid to suppliers, who may be desperate to place their products on 7-Eleven’s shelves. Furthermore, CP can dictate prices to consumers, and we would have to pay up, because there is a lack of choice or competition.
CP’s influence extends to the supply chain. Following this merger deal, it would vertically control the sourcing of meat, rice and grains through its other subsidiaries. With this deal, when you purchase half-a-kilo of ground beef at Lotus, every single baht in the purchase will most likely go to CP, except for labor costs here and there.
Are you down with the OTCC?
Chairman Sakon Varunyuwattana, the Office of Trade Competition Commission (OTCC), stated that his office has been following the CP-Tesco deal quite closely, and has already “mapped out several possible outcomes.” Established in 1999 and operated under the Ministry of Commerce, the OTCC has been known to be lackluster in intervening in, or even voicing its concerns over, high-profile deals that affect consumers.
Back in 2018, Grab announced its acquisition of Uber’s business in the entire Southeast Asian region. As a result, consumers in many of these countries, Thailand included, were left with Grab as the only ride-hailing service.
A few months later, Grab was hit with multiple fines for its “anti-competitive” or “abusive” behaviors. For example, in the Philippines, Grab was fined THB14.5 million for breaching the pricing commitment it made after the merger with Uber.
In Singapore, the Competition Commission levied a penalty totalling THB313 million to both Grab and Uber for “substantially lessening competition”. In Malaysia, Grab is currently facing a proposed fine of THB620 million for “restrictive clauses” imposed on its drivers, preventing them from promoting other service providers.
In Thailand, no action has been taken. Though some argue that to impose restrictions on Grab would be to recognize the ride-hailing service as a legitimate business, an issue that is still hotly contested in Thailand.
Following the Trade Competition Act 2017, the OTCC was “reestablished” as an independent state agency, and has started to flex its muscles. For example, it issued a “strong warning” to Thai AirAsia’s attempt to acquire a stake in Nok Air last year. It also reminded BDMS Group to ask for its approval before purchasing a stake in Bumrungrad Hospital, or face a fine of 0.5% of the total transaction value, if found guilty of creating market dominance.
So, who is on the Commission and will they continue to be daring? The Commission (บอร์ดแข่งขัน) consists of academics, economists, competition lawyers and experts specific to each case. But it remains to be seen whether or not these guys can truly overcome the power and influence of the nation’s top conglomerates, such as CP.
Which abbreviation are you rooting for?
Based on anti-competition laws, market dominance occurs when a merger results in a market share of over 50% and having a total revenue of more than one billion baht. Or, if the three largest operators in the market own 75% of the market share, any attempt to merge or purchase a stake between these three operators, must be approved by the OTCC.
However, CP’s big boss, Dhanin Chearavanont, was quick to note that one should not confuse the three different businesses: Makro is in wholesale, Tesco Lotus is in retail and 7-Eleven are convenient stores. In a 2015 interview, Dhanin insisted that 7-Eleven doesn’t power over suppliers. That it has only 1% market share when compared with over 800,000 mom-and-pop stores.
Regarding CP’s acquisition of Tesco, the OTCC may issue anything from approval subject, to specific conditions, to an outright block. Whatever the ruling may be, it will set not only a case precedent for our country, but also a strong message to Thailand’s top conglomerates that they cannot always get what they want.
But if CP get what they want, let see who can come up with a better rhyming hashtag than this: #ไม่โลตัสทุกพฤหัส (no Lotus every Thursday).