OECD kpcdb

1. Competition Law

 

The Law No. 5 Year 1999 concerning the Prohibition of Monopolistic Practices and Unfair Business Competition (The Competition Law or Law) came to effect on 5 March 2000 and is the main legislation legal instrument in Indonesia on competition policy.

 

The purposes of the Competition Law are the following: (1) to safeguard the interests of the public and to improve national economic efficiency in order to improve the public welfare; (2) to ensure the certainty of equal business opportunities for large, medium, and small scale businesses; and (3) to prevent monopolistic practices and unfair competition, (4) to achieve effectiveness and efficiency in doing business.

 

The Law prohibits any agreement or conduct that can cause monopolistic practices or unfair business competition. Alongside the three main prohibitions for: (1) anticompetitive horizontal agreements, (2) abuse of dominance and (3) anticompetitive mergers, Indonesia has included a number of additional prohibitions in its law. The Law contains a number of vertical prohibitions: Article 6 (price discrimination), Article 8 (resale price maintenance) and Article 15 (limited exclusive dealing). In addition, the Law contains specific prohibitions against certain ownership structures, outlawing trusts (Article 12), cross-directorships (Article 26) and majority cross-shareholdings (Article 27).

 

The legal system of Indonesia is based on civil law, customary law and Roman Dutch law.

 

General exclusion: The Law applies to all persons or entities that are established in Indonesia or do their business in Indonesia (Article 1(5)).It therefore applies also to state-owned enterprises (SOEs). 

 

Extra-territorial application: The Law does not have extra-territorial application, however, should the foreign enterprise be affiliated (hold a minority shareholding) with an enterprise in Indonesia or having a subsidiary (holding a majority shareholding) in Indonesia, then KPPU can enforce the Competition Law.

 

2. Business Competition Supervisory Commission (KPPU)

The Komisi Pengawas Persaingan Usaha; (“KPPU”) which was established in 2000 is an independent authority and is solely responsible for the enforcement of the Law.

 

Under the Law No. 20 Year 2008 on the Micro, Small, and Medium-sized Enterprises (MSMEs) and its implementing regulations, the KPPU is entrusted with a new assignment of supervising partnership agreements between MSMEs and large enterprises. Also, the KPPU is responsible for enforcing the terms of partnership agreements which include subcontracting, franchise and distribution agreements and joint ventures among others.

 

Organisational structure of the KPPU: The KPPU is headquartered in Jakarta and has 5 representative offices in major islands. The KPPU has 2 deputies, 1 secretary general, 6 directorates, 3 bureaus, 12 divisions, 2 chief of economists, 2 expert staffs, and 1 internal control unit. The total number of the KPPU staff is 355 as of 2016. The KPPU determines its own organisational structure. The budget of the KPPU in 2016 was IDR 140 billion. 

 

Previously, the KPPU obtained its budget only from the state treasury. Since 2016, the KPPU obtains its budget from two channels: from the state treasury, as decided by the House of Representatives every year, but now also a percentage of the total of fines collected by the KPPU every year. The latter is proposed by the KPPU and negotiated with the Ministry of Finance. The KPPU has autonomy as to how it uses its budget. It is audited annually by the Audit Board of Indonesia. The KPPU consists of a Chairperson, Vice Chairperson, and at least seven other members. Members of the KPPU are appointed and dismissed by the President upon the approval of the House of Representatives. The Chairman and Vice Chairman are elected by agreement of the Board members, or at least after a majority vote. The Board member’s mandates are renewable. 

 

The Law provides under Article 32 for certain minimum qualifications that must be held to be appointed, and under Article 33, it is stated that members of the KPPU can be dismissed. The dismissal is further regulated in KPPU’s Decision Number 22 Year 2009 on the Code of Ethics of KPPU’s Members. Any violation to the Code of Ethics must be proven in a Hearing by an ad hoc Respective Council. The Respective Council consists of 1 Chair and 4 Members; 3 members of the Respective Council are selected internally from KPPU members, while the 2 others are selected externally from the Secretariat of KPPU. Should the violation be proven, KPPU members can be sanctioned with dismissal by a Presidential Decree. 

 

According to Article 30 (3) of the Law, KPPU is accountable to the President. It shall provide periodical reports to the House of Representatives and the President. 

 

Other regulators with competition powers: There are no sector regulators that have competition powers.

 

Competition advocacy: The KPPU is involved in competition reviews of proposed and existing legislation at the national and sub-national level. This includes primary legislation and subordinate regulations, orders and licenses. The KPPU’s role is to identify aspects of proposed legislation that may restrict competition and argue for the removal or modification of such provisions in order to eliminate or, where this is not feasible, to minimise anti-competitive impacts. The KPPU issued policy recommendations during each year of the past decade in response to propose government legislation. Its competition assessment check-list is based on the OECD Competition Assessment Toolkit.

 

Also, the KPPU conducts market/sector studies in Indonesia. In general, the KPPU has been conducting four to five studies each year and covered strategic sectors such as banking, transportation, and health. If the market/sector study identifies an obstacle or a restriction to competition caused by an existing public policy, the KPPU can include an opinion/recommendation to the government to remove or reduce such obstacle or restriction in its studies.

 

International co operation: The KPPU has signed a Memorandum of Understanding (MoU) with the Korea Fair Trade Commission (KFTC) and with the Authority for Fair Competition and Consumer Protection of Mongolia (AFCCP). The Indonesia-Japan Economic Partnership Agreement (IJEPA) includes a competition-specific chapter. Both the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) and Indonesia –European Union Comprehensive Economic Partnership Agreement (IEUCEPA), which are still being negotiated, would include competition chapters. 

 

At multilateral level, competition policy is also a part of the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA), and of the on-going negotiation of Regional Comprehensive Economic Partnership Agreement (RCEP) between ASEAN and its six development partners.

 

3. Investigation

Initiation of investigation: The KPPU may conduct an investigation on its initiative or upon receipt of a complaint. 

 

After receiving a complaint, the KPPU conducts a preliminary examination within 30 days during which the KPPU determines whether a follow-up examination is required. The time frame for a follow-up examination is 60 days, which may be extended up to a further 30 days. The KPPU has to make a decision on whether an infringement has occurred within 30 days from the completion of the follow-up examination.

 

Powers of investigation: Under Article 36, the KPPU has the power to conduct investigations relating to agreements and conducts which may cause monopolistic practices and unfair business competition. It may summon business actors suspected of an infringement and bring witnesses, experts, government agencies and any person considered to have knowledge about the infringement. 

 

The KPPU has no powers to conduct search and seizure inspections.

 

Failure to comply with investigation: Under Article 48, business actors that refuse to be investigated, provide information or submit evidence or otherwise impede the investigation are subject to criminal fines between IDR 1 billion and IDR 5 billion or imprisonment (as replacement of fine) up to 3 months.

 

Procedural fairness: The KPPU provides the parties under investigation for an antitrust infringement with opportunities to consult with the KPPU with regard to significant legal, factual or procedural issues during the course of the investigation. To improve fairness and rigor in decision making, an important reform was introduced through the KPPU Regulation No. 1/2010 on Case Handling Procedures. Accordingly, parties have the right to be heard and present evidence before the imposition of any sanctions or remedies for having committed an antitrust infringement.

 

To strengthen procedural fairness, the KPPU provides procedural guidelines, including: Guideline on Case Handling Procedure, Guideline on Procedures for the Supervision of Partnership Implementation, and Guideline on Procedures for Partnership’s Case Handling.

 

Confidentiality: According to Article 39 (3), the KPPU is obligated to refrain from disclosing confidential information obtained from business actors.  

 

4. Remedies and sanctions

The KPPU investigates and adjudicates competition law matters under the Law. 

 

Remedies and administrative sanctions: Under Article 47, the KPPU may impose administrative sanctions on business actors violating the Law, such as the nullification of agreements, issue orders to stop the conduct, issue pecuniary penalties between IDR1 billion and IDR 25 billion and impose compensation for damages to compensate parties for losses caused by the conduct.

 

Criminal sanctions: Under Articles 48 and 49, criminal sanctions may be imposed as follows: a fine (up to IDR 100 billion) or imprisonment (up to 6 months instead of the fine). Additional criminal sanctions may include the revocation of business permits, prohibition of business actors from holding the position of director or commissioner for a period, and an order to cease certain activities or actions causing damage to other parties.

 

Criminal sanctions are imposed by the criminal courts in accordance with the criminal procedures; therefore the KPPU needs to hand over the case for investigation and prosecution by the Police and the Public Prosecutor’s office. 

 

According to Sections 43 (3) and 44 (1), once the KPPU’s decision with has been read in an open trial and notified to violators, the contravening parties must submit an execution report to the KPPU within 30 days. If the parties refuse to carry out the sanctions, the KPPU may hand over the decision to investigators, thereby indicating the possibility of criminal sanctions upon decision of the Court. 

 

5. Appeal

 

Under Article 44, business actors may appeal to the District Court within 14 days after receiving notification of the KPPU’s decision on infringement. According to Article 45, the time frame for the District Court to examine an appeal is 14 days from the receipt of the appeal. The District Court must make a decision within 30 days from the starting date the appeal was examined.

 

The decision of the District Court may be appealed before the Supreme Court within 14 days after the appeal decision was officially announced. The Supreme Court must render a decision within 30 days from the receipt of the appeal.

 

6. Private Enforcement

 

Private action for damages is not available under the Law. Private actions cannot be made through the courts, as this is not allowed by the Supreme Court Regulation No. 3/2005.

 

However, injured parties may make a claim for damages (and demonstrate those claims) with the KPPU, the KPPU only acting as “judge” and will not use its investigation powers.