Indonesia- Antitrust & Competition Guide 2016

Legal News & Analysis - Asia Pacific - Indonesia – Competition & Antitrust

21 April, 2016

 

General

 

What is the main piece of legislation of general application which regulates anti-competitive behavior? What are the main prohibitions in the legislation?

 

Law No 5 of 1999 on Prohibition of Monopolistic Practices or Unfair Business Competition (Anti-Monopoly Law). The Anti-Monopoly Law has three types of prohibitions: Prohibited Agreements, Prohibited Conduct, and Abuse of Dominant Position.

 

Which regulator is responsible for administering and enforcing competition laws?

 

The Business Competition Supervisory Commission (KPPU).

 

Other sector-specific regulators may enforce specific competition rules in their sectors. For example, the Financial Services Authority supervises activities of all banks and nancial institutions in Indonesia.

 

Are there any exclusions from the competition legislation of general application? Are there any sector-speci c competition laws or regulations?

 

Yes. The Anti-Monopoly Law provides for the following general exemptions (non-exhaustive): agreement or conduct to implement laws and regulations, agreement related to intellectual property rights and agency agreements (as long as they do not provide for resale price maintenance).

 

There are no specific sectors that are excluded from the Anti-Monopoly Law. 

 

Does the competition legislation apply extraterritorially to persons, behaviour or action outside the jurisdiction?

 

Yes. If the business actors have a presence in Indonesia (e.g., through subsidiaries, agents), they can be subject to the Anti-Monopoly Law under the single economic entity doctrine. In addition, all agreements between Indonesian business actors and foreign parties are subject to the Anti- Monopoly Law (even if the foreign parties do not have any presence in Indonesia).

 

What penalties and liabilities may be imposed for a breach of the competition law?

 

The KPPU is authorized to impose a range of administrative penalties, including the imposition of nes of between IDR1 billion and IDR25 billion, determination of damages to compensate parties for loss and orders to business actors to stop all actions which violate the Anti-Monopoly Law. The KPPU can also order the nulli cation of all agreements or mergers, consolidations and acquisitions which violate the Anti-Monopoly Law.

 

The courts may impose criminal penalties, including fines and imprisonment, and other orders including the revocation of a business actor’s business license, a ban on individuals holding management positions in companies for between two and ve years, and termination of certain activities that cause losses to other parties. 

 

Prohibition on anti-competitive agreements

 

What kinds of agreement or conduct is illegal under the prohibition?

 

The Anti-Monopoly Law covers both horizontal and vertical agreements, i.e., oligopoly, price-fixing, agreement on price discrimination, agreement on predatory pricing, resale price maintenance, market division, boycott, cartel, trust, oligopsony, vertical integration, exclusive dealings and agreement with foreign parties.

 

It does not specifically prohibit information exchange or price signaling but such conduct could be a violation of cartel or price- xing prohibition.

 

What types of agreements or conduct are illegal by object? And which are illegal only if they are signi cantly anti-competitive in effect?

 

Price-fixing, agreement on price discrimination, agreement on boycott and exclusive dealings are illegal by object.

 

Oligopoly, predatory pricing, resale price maintenance, market division, cartel, trust, oligopsony and vertical integration are illegal only if they harm competition.

 

Is there regulation of vertical agreements and if so, what type of vertical restraints or provisions in such agreements are typically examined?

 

Yes. The Anti-Monopoly Law prohibits minimum resale price maintenance and exclusive dealings (i.e. customer or territorial allocation, tying, single branding). 

 

Is resale price maintenance allowed? Are recommended resale prices or maximum resale prices permitted?

 

Minimum resale price maintenance is not allowed if it causes unfair business competition. Maximum or recommended resale price is permitted.

 

Are there any defences or relief from liability provided by the legislation?

 

Yes. The business actors can rely on the statutory exemption (as discussed above) or show the pro- competitive bene t of their agreements. Note that the latter defence does not apply if the agreement or conduct is illegal by object.

 

Is there a leniency regime? If there is, please describe the extent of and process in seeking leniency?

 

No.

 

Abuse of Dominance or Market Power

 

How is “dominance” or “market power” determined? Is there a market share test?

 

Dominance is de ned as having a market share of 50% or above. The Anti-Monopoly Law also provides qualitative de nitions of dominant position (has the biggest market share, the strongest financial position or access to supply or sales, or the capability to adjust supply or demand) but the KPPU does not use them.

 

What type of conduct constitutes abuse of dominance or abuse of market power?

 

Monopolization (e.g., charging excessive prices), monopsony, preventing other business actors entering into the market, refusing consumers from engaging with competing business actors, reducing the circulation of goods / services, engaging in discriminatory practices, predatory pricing, imposing restrictive trading terms, limiting market and technological developments, raising barriers to entry, interlocking directorship and cross-ownership.

 

Are there any defences or relief from liability or exclusions applicable for abusive conduct?

 

Yes. The business actors can rely on the statutory exemption (as discussed above) or show the pro- competitive benefit of their conduct.

 

Merger Control

 

Is there a merger control regime? What is considered a “merger”?

 

Yes. The Anti-Monopoly Law prohibits merger and consolidation of business entities and company’s share acquisitions that cause harm to competition. Establishing a new joint venture company and asset acquisitions are not considered mergers and accordingly, are not subject to merger control.

 

Is the merger notification a mandatory or voluntary process?

 

Post-closing notification is mandatory. Pre-closing notification is voluntary and does not eliminate the post-closing notification requirement.

 

When must the merger be noti ed to the regulator?

 

Post-closing noti cations must be made within 30 working days after the transaction is closed. Pre-closing notifiations can be made anytime provided there is a written document of the transaction.

 

What are the ling thresholds and are there any exemptions from notification requirements?

 

The notification thresholds are:

 

(a)  combined assets of the parties exceed IDR 2.5 trillion (or IDR 20 trillion if the parties are banks); or

(b)  combined sales of the parties exceed IDR 5 trillion.

 

If a transaction is entered between affiliated parties, the transaction is not subject to notification.

 

Please provide a brief description of the merger clearance process and the typical timeline for merger clearance.

 

KPPU will review the completeness of the noti cation document for two to six months (it takes longer if there are additional requests from KPPU). Once the document is declared as complete, KPPU will review the transaction within 90 working days for a post-closing noti cation, and 30 working days (Stage 1) plus 60 working days (Stage 2, if required) for a pre-closing noti cation.

 

What are the consequences of failing to notify the regulator when required?

 

The party that fails to le the notification, if required to do so, is subject to fines in the amount of IDR 1 billion per day of delay until the notification is led, up to a maximum of IDR 25 billion. 

 

For further information, please contact:
 
Wimbanu Widyatmoko, Partner, Hadiputranto Hadinoto & Partners
wimbanu.widyatmoko@bakernet.com