Newsletter on Indonesian competition law and policy

www.kppu.go.id

vol. 08/2010

Law EnforcementThe Publication of Decision on theAlleged Cartel Pricing and Cartel inCement Industry in Indonesia

Competition AdvocacyThe Promulgation of GovernmentRegulation (PP) No.57 Year 2010:Merger and Acquisition

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Table ofContents

Law EnforcementThe Publication of Decision onTender for Construction ofPendidikan Hospital, HasanuddinUniversity of Makassar

The Publication of Decision on theAlleged Cartel Pricing and Cartel inCement Industry in Indonesia

The Publication of Decision ofTender for Area Clearing Packageand Preconstruction Phase III ofMuara Bungo Airport, BungoDistrict, Jambi Province

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Competition AdvocacyThe Promulgation of GovernmentRegulation (PP) No.57 Year 2010:Merger and Acquisition

Workshop for All-East Java Judges,held in Surabaya, East Java

Draft Guidelines for Article 27 ofLaw No.5 Year 1999

Cartel May Raise Prices

The Problems in the Procurement ofGoods and Services May Distort theFair Competition Values

The Local Government Has theAuthority to Manage Retail Sector inits Relevant Area

The KPPU Requested that BusinessActors Shall Hold Free Consultation

Competition Policy in RetailIndustry in Indonesia

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vol 09/2010 3

LawEnforcement

The Publicationof Decision onTender forConstruction ofPendidikanHospital,HasanuddinUniversity ofMakassar

The Commission for the Supervision ofBusiness Competition (KPPU) has finishedundertaking investigation and confirmed thedecision on Case Number: 02/KPPU-L/2010,namely Alleged Violation against Article 22 ofLaw No.5 Year 1999 regarding Prohibition ofMonopolistic Practices and Unfair BusinessCompetition related to the Tender forConstruction of Pendidikan Hospital (RumahSakit Pendidikan) Phase II, HasanuddinUniversity of Makassar.

In compliance with the investigation results, thebusiness actors alleged to have committedviolations and made to be the Reported Partieswere PT Pembangunan Perumahan (Persero)(the Reported Party I) dan the Committee forConstruction Service Procurement, HasanuddinUniversity - Makassar (the Reported Party I).

Pursuant to the Advanced Report ofExaminat ion Resul ts (Laporan Hasi lPemeriksaan Lanjutan / LHPL), the defenses ofthe Reported Parties and the analyses alreadymade, and keeping in mind that Article 43paragraph (3) and Article 47 of Law No. 5 Year1999 as already described above, theCommission Assembly decided: Stating that theReported Party I and the Reported Party II wereproven legally and convincingly to have violatedagainst Article 22 of Law No.5 Year 1999regarding Prohibition of Monopolistic Practicesand Unfair Business Competition; Penalize theReported Party I to pay a fine amounting toRp.5,000,000,000.00 (five billion rupiah);Penalize the Reported Party I to pay a fineamounting to Rp.2,000,000,000.00 (two billionrupiah).

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vol 09/20104

LawEnforcement

The Publication of Decision on the AllegedCartel Pricing and Cartel in CementIndustry in Indonesia

The Commission for the Supervision ofBusiness Competition (KPPU) has finishedundertaking investigation and confirmed thedecision on Case Number: 01/KPPU-I/2010,namely Alleged Violation against Article 22 ofLaw No.5 Year 1999 regarding Prohibition ofMonopolistic Practices and Unfair BusinessCompetition related to the Alleged Cartel Pricingand Cartel undertaken by PT IndocementTunggal Prakarsa Tbk (the Reported Party I), PTHolcim Indonesia Tbk (the Reported Party II), PTSemen Padang Baturaja (Persero) Tbk (theReported Party III), PT Semen Gresik (Persero)

Tbk (the Reported Party IV), PT Lafarge CementIndonesia (the Reported Party V), PT SemenTonasa (the Reported Party VI), PT SemenPadang (the Reported Party VII), dan PT SemenBosowa Maros (the Reported Party VIII)

Based on the evidence and facts obtained fromthe Assembly Meeting, the CommissionAssembly decided to declare that all theReported Parties were not proven legally andconvincingly to have violatedArticle 5 andArticle11 of Law No.5 Year 1999

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vol 09/2010 5

The Publication of Decision of Tender forArea Clearing Package and

Preconstruction Phase III of Muara BungoAirport, Bungo District, Jambi Province

The Commission for the Supervision ofBusiness Competition (KPPU) has finishedundertaking investigation and confirmed thedecision on Case Number: 10/KPPU-L/2010,namely Alleged Violation against Article 22 ofLaw No.5 Year 1999 regarding Prohibition ofMonopolistic Practices and Unfair BusinessCompetition related to the Tender for AreaClearing Package and Preconstruction - PhaseIII of Muara Bungo Airport, Bungo District, JambiProvince - Fund Source of State Budget forFiscal Year 2008.

In compliance with the investigation results, thebusiness actors alleged to have committedviolations and made to be the Reported Partieswere PT Bungo Pantai Bersaudara (theReported Party I), PT Paesa PasindoEngineering (the Reported Party II), PT RiyahPermata Anugrah (the Reported Party I), PTBintang Selatan Agung (the Reported Party IV),the Committee for goods and Services - WorkUnit of Muara Bungo Airport – State Budget forFiscal Year 2008 (the Reported Party V).

Based on the abovementioned facts and all

decisions, and considering Article 43 paragraph(3) of Law No.5 of 1999, the CommissionAssembly decided to state that the the ReportedParty I, the Reported Party II, the ReportedParty III, and the Reported Party IV were provenlegally and convincingly to have violated Article22 of Law No.5 of 1999 concerning Prohibition ofMonopolistic Practices and Unfair BusinessCompetition, while the Reported Party V was notproven to have violated Article 22 of Law No.5 of1999 concerning Prohibition of MonopolisticPractices and Unfair Business Competition;Penalizing the Reported Party I, the ReportedParty II, the Reported Party III, and theReported Party IV to pay fines amounting toRp.1,500,000,000 (the Reported Party I),Rp.100,000,000 (the Reported Party II),Rp.100,000,000 (the Reported Party III), andRp.100.000.000 (the Reported Party IV) thatshall be paid to the State Treasury (Kas Negara)as a penalty revenue for violation in the field ofbusiness competition, Task Unit of theCommission for Business CompetitionSupervision through a state-owned bank with anacceptance code 423755 (Penalty Revenue forViolation in the Field of Business Competition).

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LawEnforcement

vol 09/20106

CompetitionAdvocacy

The Promulgation of Government Regulation(PP) No.57 Year 2010: Merger and Acquisition

notification and consultation procedures. Theassessment on merger and acquisition wascarried out by the KPPU based on severalaspects, namely market concentration, marketentry barriers, potential anti-competitivebehavior, efficiency and bankruptcy. The limitvalue that shall be reported to the KPPU is thatthe company, as the result of merger andacquisition, has got combined assets exceedingRp.2,5 trillion, a combined turnover exceedingRp.5 trillion, and, specifically for banks, it isapplicable only if the combined assets exceed avalue of Rp.20 trillion.

The KPPU hopes that the birth of a strong legalprotection through the Government Regulation(PP) shall be capable of synergizing the legalefforts for competition law enforcement,particularly regarding merger and acquisition. Inaddition, the KPPU also encourages thebusiness actors to consult their merger plans sothat the impacts of the merger may be analyzedfrom the beginning.

On 20th July 2010, the Government finallyissued the Government Regulation (PP) No.57Year 2010 concerning the Merger or Fusion ofBusiness Corporations and Takeover ofCorporate Shares that may result inMonopolistic Practices and Unfair BusinessCompetition. The Promulgation of theGovernment Regulation (PP) on Merger andAcquisition was positively accepted by theKPPU after a 10-year waiting period. ThisGovernment Regulation (PP) has completed theimplementation of Articles 28 and 29 of LawNo.5 Year 1999. The elaborations on thecontents of such a Government Regulation wereforwarded by the KPPU in the journalist forum atthe KPPU building on 6thAugust 2010.

The outline of the contents of the GovernmentRegulation (PP) No. 57 Year 2010 is concernedwith 4 (four) things, namely the ways of how amerger and an acquisition are assessed thatlead to monopolistic practices and unfairbusiness competition, notification value limit,

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vol 09/2010 7

Workshop for All-East Java Judges,held in Surabaya, East Java

The Commission for the Business CompetitionSupervision/KPPU conducted a Workshop forAll-East Java Judges, held in Surabaya - EastJava on 4th – 5th August 2010. The event wasattended by 49 judges of All-East Java DistrictCourts and held at JW Marriott Hotel - Surabaya.The event lasted for 2 (two) days. In the first day,the materials submitted by the Junior Chairman

of Special Civil Law of Supreme Court,Mohammad Shaleh with a theme on LegalActions of Objection to KPPU’s Decision andthe KPPU’s Vice Chairman AM Tri Anggrainidelivered a theme on Business Competition Law.

In the second day, the materials presented wererelated to economics in business competitionpresented by Andi Fahmi Lubis, a Lecturer ofEconomics, University of Indonesia (UI). AndiFahmi presented the materials on Demand andSupply Theories, Structures, Behaviors, andImpacts.

Collective socialization with judges has becomean agenda for the KPPU’s activities which is heldtwice each year. This year the event will be heldin Surabaya and Medan at the end of the year.This activity aims at providing an understandingto the District Court judges on businesscompetition law and procedures for legal actionsof objections to the KPPU’s Decision.

Draft Guidelines for Article 27 of Law No.5 Year 1999

As mandated in Article 35 (f) of Law No. 5 Year1999 concerning Prohibition of MonopolisticPractices and Unfair Competition, theCommission for the Supervision of BusinessCompetition (the KPPU) has a task to prepare aguideline and/or publication related to the

implementation of Law No. 5 Year 1999. Such aguideline was prepared in order that the KPPUshall carry out its supervisory function over theappropriate implementation of Law No. 5 Year1999.

Related to the task, this guideline describes theownership of majority shares or theestablishment of several companies prohibitedby Law No. 5 Year 1999 in order to create fairbusiness conditions. With such a consideration,the KPPU prepared a Guide l ine toUnderstanding of Prohibited Stock OwnershipunderArticle 27 of Law No. 5 Year 1999.

In connection with the development of verydynamic business activities, it is also possiblethat the Guideline will keep being improved.

CompetitionAdvocacy

kompetisia vol 09/20108

Cartel May Raise Prices

The KPPU has promulgated the KPPU’sRegulation (Perkom) No.4/ 2010 on Guidelinesfor the Implementation of Article 11 of Law No.5Year 1999 concerning Prohibi t ion ofMonopolistic Practices and Unfair BusinessCompetition that regulates Cartel.

The KPPU’s Regulation (Perkom) imposed on9th April 2010 details a number of things, suchas the meaning of a cartel, kinds of cartel, thepurposes of a cartel, cartel characteristics of acartel, effectiveness of a cartel, negative effectsa cartel, indications of a cartel, and sanctions ofa cartel violation. The meaning of a cartel is acollaboration of competing firms to coordinatetheir activities so as to obtain profits abovereasonable limits.

This guidance explains the general principlesand basic standards that will be used by the

KPPU in conducting examination and analysisof a cartel. Based on the provisions, thesanctions of violation against Article 11 of LawNo.5/1999 may be in terms of administrativeactions as required in Articles 47, 48, and 49 ofLaw No.5/1999 and Leniency program.

The implementation of the Competition Law isvery different from that of other laws.Considering that it is difficult to reveal a cartel,the enforcement of the Competition Law usesvarious methods to reveal the existence of acartel.An agent or body that seeks to enforce theCompetition Law makes any efforts to find theinternal weaknesses of the cartel itself. One ofthe efforts is using an agency of theories throughtwo strategies, namely getting a recognitionfrom the companies that are members of thecartel and gaining a recognition from a companythat is a member of the cartel.

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CompetitionAdvocacy

vol 09/2010 9

The Problems in theProcurement of Goods andServices May Distort theFair Competition Values

The problems in the procurement of goods andservices may distort the fair competition values.It is required that the involved stakeholders shallunderstand the Business Competition Law,either directly or indirectly, in the process ofgoods and services procurement. Therefore, the

KPPU endeavored to provide understandingthrough the National Seminar on "BusinessCompetition Law and Issues of Goods andServices Procurement" held on 4th - 6th Augustat Hermes Hotel, BandaAceh.The seminar discussed the problems that oftenarise out of the processes of goods and servicesprocurement, including pressures from variousparties, thus ignoring the fair businesscompetition values. The procurement processthat ignores the fair business competition valuesoften leads to a bid rigging. A conspiracy occurseither vertically or horizontally, or, in a combinedmanner, vertically and horizontally.The seminar is expected to provide a preliminaryunderstanding on the Competition Law and theproblems of goods and services procurement.The seminar on business competition is anadvocacy effort in the prevention of violations offair business competition values.

The Local Government Has the Authority to Manage Retail Sectorin its Relevant Area

On Thursday, 5th August 2010, the KPPUreceived a visit from the Yogyakarta House ofRepresentatives (DPRD Yogyakarta). The

intention of the visit was for the sake of hearingsrelated to issues on retail industry, especially inYogyakarta Municipality.

The arrival of the members of the YogyakartaHouse of Representatives (DPRD Yogyakarta)is part of their efforts to conduct consultationswith the KPPU on some retail issues theycurrently face within in the scope of YogyakartaMunicipality. The problems in the retail industryhave encouraged them to draw up a regulationthat comprehensively governs the presence ofmodern retails in the midst of more and moredecreasing traditional market conditions. Themembers of the Yogyakarta House ofRepresentatives (DPRD Yogyakarta) requestedinputs as well as supports for their efforts indrawing up the regulation.

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CompetitionAdvocacy

vol 09/201010

The Commission for the Supervision ofBusiness Competition (the KPPU) issued aKPPU Regulation No.1 Year 2009 on Pre-notification of Merger, Fusion and Acquisition(Pra-notifikasi Penggabungan, Peleburan danPengambilalihan). However, such a KPPURegulation (Perkom) has not been consideredto be established when there is no clear legalprotection provided by the Government.

Currently, the KPPU needs to appreciate thegovernment for the issuance of legal protectionfor the application of Articles 28 and 29 (onMergers and Acquisitions) of Law No. 5/ 1999.The application of theseArticles turns to be moreestablished since on 20 July 2010, the Presidentof the Republic of Indonesia signed theGovernment Regulation (PP) No. 57 Year 2010regarding the Merger or Fusion of BusinessCorporations and Takeover of Corporate Sharesthat may result in Monopolistic Practices andUnfair Business Competition. The promulgationof the Government Regulation (PP) regardingthe Merger or Fusion of Business Corporationsand Takeover of Corporate Shares was

The KPPU Requested that Business ActorsShall Hold Free Consultation

accepted positively by the KPPU after a 10-yearwaiting period.

The outlines of the Government Regulation (PP)regarding the Merger or Fusion of BusinessCorporations and Takeover of Corporate Sharescontain the methods for evaluation of mergersand acquisitions, limits of notification values,and procedures of notification and consultation.The evaluation of mergers and acquisitionsundertaken by the KPPU was based on anumber o f aspec ts , namely marke tconcentration, market entry barriers, potentialanti-competitive behaviors, efficiency andbankruptcy. The limit value that shall be reportedto the KPPU is that the company, as the result ofmerger and acquisition, has got combinedassets exceeding Rp.2,5 trillion, a combinedturnover exceeding Rp.5 trill ion, and,specifically for banks, it is applicable only if thecombined assets exceed a value of Rp.20trillion.

The issuance of this Government Regulation(PP) has shown up a lot of benefits, even if thisstill has many shortcomings. These problemswere followed up by the KPPU by furtherexplaining the Government Regulation (PP).The follow-up action was in the form of issuanceof the KPPU’s Regulation (Perkom) No.10 Year2010 concerning Notice Form (FormulirPemberitahuan) and Perkom No.11 Year 2010concerning regarding Consultation Form(Formulir Konsultasi). Both of the KPPU’sRegulations (Perkom) were promulgated on 20August 2010. Currently, the KPPU plans toimmediately publish Guidelines for theProcedures for Assessment of Mergers andAcquisitions (Pedoman Mengenai Tata CaraPenilaian Merger danAkuisisi).

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CompetitionAdvocacy

vol 09/2010 11

Competition Policy in Retail Industryin Indonesia

The socialization of the business competitionlaw has been implemented on 29th July 2010 inBali with a theme "Competition Policy in RetailIndustry in Indonesia."

In this socialization, the conditions and problemsin the retail industry in Indonesia and the KPPU’sroles in dealing with these problems werepresented.

B road ly speak ing , twoproblems exist in the retailindustry in Indonesia, namelymodern retailers versustraditional retailers, andsuppliers versus modernretailers. The root of suchproblems lies in the presenceof market power from modernretailers.

T h e p r o b l e m s i n t h ecompetition of traditionalretai lers versus modernretailers are those moreassociated with imbalancerather than those of unfairbusiness competition asstipulated in Law No.5 Year1999. Meanwhi le, theproblems of suppliers versusm o d e r n r e t a i l e r s a r eassociated with the increasingamounts of trading terms,making the margins enjoyedby the suppliers to beincreasingly less. At the sametime, the consumers actuallydo not enjoy the efficiency ofs u p p l i e r s d u e p a r t l ytransferred into profits forretailers.

In relation to the retail issues, the KPPU handledthe issues related to imbalanced competitionbetween modern and traditional markets, andissues between modern retailers and suppliers.Such handling was performed in two forms,namely through the enforcement of competitionlaw (Indomaret case and Carrefour case) andAdvice and Considerations to the Government.

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CompetitionAdvocacy

Competition is about price, supply, selection and service. It benefits consumers bykeeping prices low, avaibility, quality and choice of goods and services high.

KPPU-RICommission for the Supervision of Business CompetitionRepublic of IndonesiaKPPU Building, Jl. Ir. H. Juanda No. 36, Central Jakarta 10120

Phone. 021-350 7015, 350 7016, 350 7043 Fax. 021-350 7008

email: infokom@kppu.go.id

Surabaya

Medan

Balikpapan

Bumi Mandiri Building, Jl. Basuki Rahmat No. 129-137Surabaya 60271 - East JavaPhone. 031-545 4146, Fax. 031-545 4146email: kpd_surabaya@kppu.go.id

Ir. H. Juanda No. 9AMedan - North SumateraPhone. 061-455 8133, Fax. 061-414 803email: kpd_medan@kppu.go.id

BRI Building 8th Floor, Jl. Sudirman No. 37Balikpapan 76112 - East KalimantanPhone. 0542-730 373, Fax. 0542-415 939email: kpd_balikpapan@kppu.go.id

Jl.

Makassar

Batam

Menara Makassar 1st Floor, Jl. Nusantara No. 1Makassar - South SulawesiPhone. 0411-310 733, Fax. 0411-310 733email: kpd_makassar@kppu.go.id

Graha Pena Building 3rd A FloorJl. Raya Batam Center, Teluk Tering, NongsaBatam 29461 - Kepulauan RiauPhone. 0778-469 337, Fax. 0778-469 433email: kpd_batam@kppu.go.id

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