Direct Selling under the Foreign Business Act

Direct sales or direct marketing generally refers to the the selling or marketing of goods and services by independent sales agent to consumers directly at their home or workplace. In Thailand, the Direct Sales and Marketing Act of B.E. 2545 (2002) defines the terms as follows:

• “Direct sales” refers to the marketing of goods or services made directly to the consumer at his or her home or workplace or the home or workplace of other or any other place which not an ordinary place of business, through the direct sales representative or uni-level or multi-level independent distributors but not including transactions specified in ministerial regulations.
• “Direct marketing” refers to the marketing of goods or services in a manner of communicating information for the sales of goods or services directly to the consumer at a distance and expecting such consumer to respond and purchase the goods or services from the direct marketing operator.

An interesting legal issue is whether direct sales and direct marketing is restricted to foreign investment under the Foreign Business Act of 1999. In December 2006, the Department of Business Development (DBD) issued an advisory opinion addressing the following two issues:

• Whether foreigners were allowed to engage in direct sales and direct marketing according to the terms of the Foreign Business Act?
• Whether foreigners who operated a business with a minimum capitalization of 100 million baht allowed to engage in direct sales and direct marketing according to the terms of the Foreign Business Act?

According to the DBD, direct sales is considered “retail” under Section (14) of List Three of the Foreign Business Act as well as a “service” business under Section (21) of List Three of the Act, both of which are restricted from foreigners. As for direct marketing, it is considered a service business under Section (21) of List Three. Therefore, with regards to both types of businesses, foreigners would have to apply for permission from the Director-General of the Department of Business Development. The application will be considered by the Foreign Business Committee according to the terms of Section 5 of the Foreign Business Act. Generally, this means the possible benefits and drawbacks to the Thai economy and society of allowing a foreigner to operate such a business must be considered. However, according to the wording of Section (14), the restriction regarding retail businesses only apply to those with a minimum capital less than 100 million baht. In that case, foreigners who shall actually use a minimum capital of at least 100 million baht to operate their business can engage in direct sales without applying for permission as described above.

Foreign business restrictions in Thailand are complex. Foreign investors are advised to consult with competent legal counsel before beginning business operations in Thailand.

 

Category: Administrative Law, Business in Thailand