Indonesia Antitrust and Competition Law Guide | Asia

The main antitrust law in Indonesia is Law No. 5 of 1999 on Prohibition of Monopolistic Practices and Unfair Competition (last amended by Government Regulation replacing Law No. 2 of 2022 on Job Creation which has been codified into law by Law No. 6 of 2023), commonly known as the Indonesian Antimonopoly Act (IAL).

Enacted in the aftermath of the 1998 Indonesian currency crisis, the IAL incorporates elements of German antitrust law and internationally recognised standards issued by the United Nations Conference on Trade and Development (UNCTAD).

The main provisions of the IAL include the prohibition of agreements and conduct that restrict competition, such as cartels, closed agreements, vertical integration and abuse of dominant position, as well as unfair trade practices and the regulation of mergers.

To supervise the antitrust law, the IAL is established by the Business Competition Supervision Board (Komisi Pengawas Persian UsahThe Indonesian Competition Commission (KPPU), a government agency directly responsible to the President of the Republic of Indonesia, is given broad powers to monitor business competition and enforce the law through investigations and the imposition of fines and other penalties on companies found guilty of anti-competitive conduct. Action.

The IAL was hastily enacted and has faced criticism for not adequately addressing Indonesia’s rapidly changing economic landscape and complex antitrust issues. To fill regulatory gaps, the KPPU has issued rules and guidelines from time to time, but their legal status in Indonesia’s legal system has been questioned by practitioners. Nonetheless, these rules and guidelines are generally accepted and companies use them as reference material in their daily work.

This article highlights some landmark cases adjudicated by the KPPU, It focuses on views and interpretations on closed agreements and cartels, particularly how the KPPU is addressing regulatory gaps in these cases. It also briefly discusses merger control rules under the IAL that adopt a post-merger approach, and highlights recent developments in the government’s plans to amend the IAL.

KPPU on landmark case

The contract has ended. Article 15 of the IAL prohibits exclusivity, tying agreements and other agreements that prevent other parties from entering into similar transactions. Vertical discount agreements.

In one notable case involving Indonesia’s largest cement manufacturer in 2006, the KPPU ruled against the cement manufacturer for setting up a consortium of distributors. Through this consortium, the cement manufacturer restricted its distributors from selling other manufacturers’ products, limiting sales to designated customers and geographies only.

The KPPU found that this conduct violated Article 15(1) of the IAL, which expressly prohibits companies from coercing or restricting purchasers from supplying or re-supplying goods to certain parties and/or locations.

The cement manufacturer appealed the decision to the Supreme Court of Indonesia, but the Supreme Court dismissed the appeal and upheld the KPPU’s decision that the cement manufacturer had breached the provisions of Article 15(1) of the IAL.

on the other hand,Although Article 15 of the IAL is considered to be an unlawful prohibition per se and does not require an analysis of the impact of closed agreements, which is also conspicuously absent from the KPPU’s analysis of the Cement case, many practitioners consider it important for an objective analysis for the KPPU to assess the impact of the agreement on the market (principle of reasonableness).

This perspective is particularly applicable in cases involving multiple distributors where exclusive distribution agreements may make commercial sense, for example to avoid intra-brand competition at distributor level. Some experts also Supporting this view, he added that exclusive distribution agreements provide sales certainty, reduce costs and ultimately lead to greater efficiency.

The KPPU is aware of these concerns and A shift towards adopting the principle of reasonableness approach by issuing the KPPU Guidelines on Non-Disclosure Agreements under KPPU Regulation No. 5 of 2011. The KPPU points out that the principle of reasonableness approach is more reasonable for adjudicating non-disclosure agreement cases under Article 15 of the IAL.

cartel. Article 11 of the IAL and its implementing regulations issued by the KPPUIt sets out general rules regarding cartels, including:

1. Price Fixation (IAL Article 5)
2. Market Allocation (IAL Article 9)
3. Collective boycott (Article 10 of the IAL).

Price fixing (also known as hard core cartels) and collective boycotts areBy itself rule“ principle.

In fact, cartels are one of the KPPU’s most “actively investigated cases,” with more than 20 cartel cases recorded in the KPPU’s database between 2003 and 2023.

Proving the existence of a cartel has always been difficult for the KPPU because the IAL’s strict requirements require it to rely solely on direct evidence. However, in a landmark case in 2017, the KPPU argued that communication between the parties through high-level employee meetings and concerted actions related to price paralleling should be considered solid evidence of price fixing.

Despite facing criticism, the KPPU stood its ground and found the companies guilty of price fixing based on circumstantial evidence. The KPPU’s ruling was upheld by the Supreme Court, marking one of the first cases in which the use of circumstantial evidence was allowed in an Indonesian court.

Following this, when dealing with competition cases, including cartel cases, the KPPU, through its regulations, continues to recognize the admissibility of circumstantial evidence, whether it be economic evidence (i.e. the use of economic hypotheses supported by quantitative and/or qualitative data processing methods) or communication evidence (i.e. meetings or communications, whether or not describing the content of the meetings or communications).

This has sparked a range of reactions from practitioners and academics who believe that relying on indirect evidence can lead to serious problems.
For example, a pattern of price parallelism in a market may arise naturally due to pure business competition rather than deliberate price-fixing agreements.

To avoid potential legal and financial issues, businesses should conduct their activities with caution and seek the advice of local counsel before engaging in any communications with other businesses, including association meetings or day-to-day interactions.

Merger Control

Unlike many other jurisdictions, Indonesia has mandatory post-merger notification requirements, which apply to offshore mergers and asset transfers (both tangible assets such as land and factories, and intangible assets such as intellectual property rights and consumer data).

Post-merger notification obligations only arise when certain conditions are cumulatively met, such as involving unrelated parties, a change of control occurring, exceeding certain thresholds of assets and/or turnover in Indonesia, or all parties to the transaction having assets and/or turnover in Indonesia.

The notification must be submitted to the KPPU within 30 business days of the effective date of the merger. Failure to meet this deadline may result in significant penalties.Therefore, it is important for companies to retain local counsel to effectively handle their post-merger notification obligations.

New Antitrust Bill

There is a new antitrust bill currently pending in Congress that would create a pre-merger filing regime to replace the existing IAL. While there is no set timeline for when the bill will go into effect, stakeholders should monitor for changes that may impact current transactions.

While the bill promises to strengthen pre-merger detection of anti-competitive conduct, concerns remain that it could slow down the merger process. This may affect the valuation of the target company.