OTCC moves to regulate franchise business


The Office of Trade Competition Commission (OTCC) has issued guidelines on franchise business, aimed at reining in improper behaviour in the segment, said commission member Santichai Saratawanpad.

The resolution and guidelines on franchise business will come into effect on February 4, he added.
The main purpose, Santichai said, is to establish a good corporate governance system and clear codes of practice in establishing correct trade norms through systemic development, which will enhance the franchise business to international standard.
The guidelines identifies prohibited behaviour which may be in violation of Article 57 of the Competition Act B.E. 2560, as follows:

1. Defining conditions that limit franchise rights without valid reasons, such as franchisees having to buy products that are not related to the franchise or purchase raw materials in quantities that are higher than the actual demand.

2. Setting additional conditions after the contract without valid reasons such as allowing the franchisees to purchase products other than those specified

3. Prohibiting franchisees from purchasing products or services from manufacturers or other service providers without valid reasons

4. Prohibiting franchisees form selling discounted perishable goods without vaild reasons.

5. Defining different conditions between franchisees which may lead to unfair trade practices.

6. Defining inappropriate conditions other than maintaining the quality and standards of the contract

Furthermore, to ensure transparency and fairness, the franchisor must disclose important information to the franchisee before drawing up a contract, such as information about compensation and business expenses, franchise business plan, trademark rights, their amendments if any, as well as termination of the contract.