A merger that could essentially wipe out mom-and-pop stores in Thailand has sparked a public outcry leading to legal action.
Consumer groups led by the Foundation for Consumers on March 15 filed a lawsuit against the Office of Trade Competition Commission (OTCC). The case calls on the Administrative Court to cancel OTCC’s decision to allow agribusiness giant Charoen Pokphand Group’s acquisition of UK retailer Tesco’s operations in Thailand.
This call is also backed by a veteran economist.
OTCC, Thailand’s anti-trust authority, voted 4:3 last November to allow CP Retail Development Co to acquire Tesco Stores Thailand Ltd in a US$10.6-billion (Bt328 billion) deal.
Before this acquisition, CP Group already had 12,225 7-Eleven convenience stores under its belt in Thailand as well as a chain of Siam Makro wholesale stores.
Tesco Asia, meanwhile, oversees 200 Tesco-Lotus hypermarkets and some 1,600 Tesco-Lotus Express convenience stores in Thailand, as well as 74 in Malaysia.
‘Monopolising the market’
Consumer groups argue that after the acquisition, CP’s share of the wholesale and retail market will rise to 83.97 per cent, resulting in a market monopoly that erodes fair competition and hurts consumers’ rights for free choice.
CP is already dominating the agribusiness and food sector as it produces both downstream and upstream products, the groups said.
Conditional approval
Though most commissioners acknowledged that the two retailers who run 7-Eleven stores and Tesco hypermarts are dominating the Thai retail sector, they claimed this presence is not strong enough to be considered a monopoly.
Hence, they decided to give the acquisition a green light, but with seven conditions.
The two key conditions are that the retail giants are not allowed to acquire another retail business for three years, and the proportion of small-business or community products on store shelves is increased by 10 per cent annually for five years. Tesco is also not allowed to change the contracts it has with existing suppliers for two years.
Consumer groups, however, want more. They say that if the court decides not to throw out the OTCC ruling, then CP and Tesco should be required to sell part of their retail businesses. CP should also be prohibited from opening new retail outlets for the next 10 years.
The groups are also seeking a court injunction on the acquisition until a final verdict is issued.
What chance do consumers have?
Nipon Paopongsakorn, distinguished fellow at Thailand Development Research Institute, said reversing OTCC’s decision may not be a practical solution because it would adversely affect many parties.
“But it is perfectly reasonable to have CP sell part of its [retail] business,” he said.
The economist agrees that this acquisition translates to a monopoly, especially in rural areas where CP holds a 100 per cent market share as all convenience stores upcountry are CP-owned.
“Consumers will have no other choice but to buy goods from just one giant group,” he said.
OTCC’s accountability
Nipon also backed consumer groups’ query on a possible conflict of interest among members of the sub-committee that studied the acquisition and reported their findings to the commissioners.
They are demanding that the commission name members of the sub-committee to ensure transparency. Nipon also pointed out that the OTCC is not really an independent agency because it has to hand in its funding proposal to the Commerce Ministry every year.
Response from the commissioner
Sakon Varunyuwatana, chairperson of the Trade Competition Commission, said the agency was waiting to hear from the court.
“We don’t know if the court will take the case or not, but we are responsible for enforcing the seven conditions attached to the acquisition approval,” he said.
Sakon is among the three commissioners who voted against the acquisition.
By Thai PBS World’s Business Desk
