Formichella & Sritawat
www.fosrlaw.com
October 2024
The B2C commerce sector in Thailand has experienced phenomenal growth over the past decade, primarily due to the adoption of new digital platforms. The sales volume statistics for Thailand’s e-commerce market in 2023 stand at US$26.5 billion, with a projected market value of US$32 billion in 2025, as per the E-Commerce Association—Thailand. This growth trend indicates a promising future for Thailand’s e-commerce (E-commerce) market.
Internet access has created opportunities for SMEs to enter new markets at a considerably lower cost than establishing a typical commercial presence. For large enterprises, E-commerce has become a key tool in expanding market share by providing the ability to connect with individual customers while enhancing competitiveness and driving innovation. With the rapid expansion of the Internet and the development of E-commerce goods and services, entrepreneurs can now communicate directly with Internet users/consumers with purchasing power. They can access E-commerce websites anytime and from everywhere. E-commerce businesses now offer ever-more sophisticated products and almost every kind of service. As with any commercial endeavor, regulations follow based on many variables, including fraud claims or violations of consumer laws.
The Thai government has been increasingly vigilant about the impact of E-commerce on consumers and the economy. For example, there are reports that the Thai government now demands foreign E-commerce operators to register offices in Thailand primarily for consumer protection, safety standards, inspecting online financial transactions, and trade competition issues.
Indeed, the Office of the Consumer Protection Board (“OCPB”) in Thailand, a key regulatory body, reported that in the first quarter of 2024, over 2,000 complaints were filed by consumers against E-commerce operators. The OCPB is issuing regulations to protect consumers further, and the Federation of Thai Industries is calling for further regulation of foreign E-commerce platforms.
Through various laws and regulations, the Thai government provides robust protection to consumers and businesses engaged in e-commerce. These include the Electronic Transactions Act, the Computer Crimes Act, and the Thai Criminal Code, which safeguard against economic crime and fraud. Additionally, consumer protection laws such as the Direct Sales & Direct Marketing Act aim to protect consumers directly, ensuring a secure e-commerce environment.
The Thai government also affords legal protections to service providers as well.
While we discuss foreign participation in Thai E-commerce in this article, we delve into more detailed government oversight of E-commerce that the reader may find useful.
As to Thai companies that may have majority foreign ownership, it is widely known that the Foreign Business Act of Thailand (“FBA”) generally prohibits foreign majority ownership of registered Thai corporations. However, there are exceptions, such as the Board of Investment. In the case of E-Commerce licensing, Annex 3 of the FBA includes “Retail Trade” and “Wholesale Trade” (for convenience, we refer to both types of businesses as “Trade”) as prohibited to foreigners without a Foreign Business License (“FBL”). However, there are exemptions to this rule, which we will discuss in detail.
To be exempt from an FBL requirement, a foreign-owned Trade business operator must have a minimum capitalization of THB100M. In the case of physical retail outlets, the minimum capitalization covers up to five locations. For e-commerce, the minimum capitalization covers one platform.
However, as indicated above, the exception granted via THB100M capitalization from the FBL requirement has its conditions and nuance. The reason is that further examination of the nature of the business also needs to be examined for exemption. For example, the Thai authorities would question whether a company operates an e-commerce platform (i) to sell its goods for direct consumption, (ii) to sell goods to buyers for resale or production, or (iii) to provide platform services for third-party sellers. In the case of (iii) above, an exemption is not available even with the minimum THB100M capitalization, and an FBL is required if non-Thai shareholding exceeds 49.9% of a company’s total shares.
The information provided here is for discussion and informational purposes only. It is crucial to note that nothing in this article should be or can be relied on as legal advice. Given the potential legal complexities, it is always advisable to seek professional legal counsel.
For any questions, you may contact Formichella & Sritawat at [email protected]
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