As the new Trade Competition Act on anti-monopoly market, the sale of Tesco’s assets in Southeast Asia may face obstacles.
Tesco announced the consideration of selling its business and assets in Asia which include about 2,000 stores in Thailand and Malaysia last December, following the announcement, Thai three big groups; CP group, Central group and TCC group, have shown the interest in buying the English groceries and merchandise retailer.
However, the bidder might encounter regulation of Thailand’s new anti-competition rule, as the winner of this competition has a tendency of owning more than half of the sector in Thailand (more 50% of market share).
Thailand’s Office of Trade Competition Commission warned that as the scale of the deal, the bidder must apply for the permission from the fair trade commission. Whoever violates the law, will be fined not more than 0.5% of the merger transaction value.
The anti-competition regulations might not allow Tesco to achieve its expectation price.
Moreover, there is a concern of political influence on the competition, as Thailand is well-known for well-connected conglomerates.
Pornapa Luengwattanakit of Baker & McKenzie, who participated drafting the Thai anti-competition law, said that “But under the new Trade Competition Act, the trade competition commission is an independent body and not under control of any political regime. They are now quite active and closely monitoring this high-profile transaction,”
She added “Regardless of how big a company you are, we want to make sure that the small and medium-sized enterprises in Thailand do not get hurt.”
The new act has forbidden members on the board of a company from being political, business or governmental figures.
The BBC cited that according to the analysts “Tesco will have to consider who can pull off this deal if it wants to deliver value to its shareholders. But while the price it gets is important, it will need to first push this past the strict gaze of Thai regulators.”