Restraints of trade and dominance in Indonesia: overview

A Q&A guide to restraints of trade and dominance in Indonesia.

The Q&A gives a succinct overview of restraints of trade, monopolies and abuses of market power in Indonesia. In particular, it covers the regulatory authorities and the regulatory framework, the scope of rules, exemptions, exclusions, statutes of limitation, notification, investigations, penalties and enforcement, third party damages claims, EU law, joint ventures and proposals for reform.

For information on merger control, regulatory framework and regulatory authorities, relevant triggering events and thresholds in Indonesia, visit Merger control in Indonesia: overview.

This Q&A is part of the global guide to competition and cartel leniency. For a full list of jurisdictional Restraints of Trade and Dominance Q&As visit www.practicallaw.com/restraintsoftrade-guide. For a full list of jurisdictional Merger Control Q&As visit www.practicallaw.com/mergercontrol-guide.

For a full list of jurisdictional Cartel Leniency Q&As, which provide a succinct overview of leniency and immunity, the applicable procedure and the regulatory authorities in multiple jurisdictions, visit www.practicallaw.com/leniency-guide.

Contents

Restraints of trade

Scope of rules

1. Are restrictive agreements and practices regulated? If so, what are the substantive provisions and regulatory authority?

Regulatory framework

Law No. 5 of 1999 on the Prohibition against Monopolistic Practices and Unfair Business Competition (Competition Law) prohibits a number of restrictive agreements and practices, including:

  • Oligopoly.

  • Price fixing.

  • Price discrimination.

  • Resale price maintenance (RPM).

  • Division of territories.

  • Boycott.

  • Cartels.

  • Trusts.

  • Vertical integration.

  • Exclusive agreements (including tying agreements).

Only price fixing and boycotts are treated as prohibited per se, although strictly speaking the law provides that exclusive agreements under Article 15 of the Competition Law are prohibited per se. The other restrictions are rule of reason provisions.

There is no industry specific regulation, but some types of agreements are excluded from the scope of the Competition Law, including agreements related to intellectual property rights (IPRs), such as patents, trade marks and trade secrets. However, these exemptions are interpreted narrowly and a thorough review of the Competition Law must be conducted before relying on any of the exemptions.

The Competition Law is applied uniformly in Indonesia. There are no regulations or policies that provide for different restrictions in specific provinces or areas of Indonesia.

Agreements and practices can fall under criminal law or civil law. If civil law applies then the issue can be resolved amicably, but if criminal law applies then the issue cannot be resolved in this way. To date, the Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha) (KPPU) has never attempted to apply criminal penalties.

Regulatory authority

The authority overseeing prohibited agreements or activities is the Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha) (KPPU), which also conducts investigations.

See box, The regulatory authority.

 
2. Do the regulations only apply to formal agreements or can they apply to informal practices?

Law No. 5 of 1999 on the Prohibition against Monopolistic Practices and Unfair Business Competition applies to any problematic agreement (written or oral) and conduct. Agreements can be inferred from conduct and informal practices but the Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha) (KPPU) has encountered evidentiary problems with the courts on appeal where there is no written evidence of an agreement.

Exemptions

3. Are there any exemptions? If so, what are the criteria for individual exemption and any applicable block exemptions?

In addition to the exemption for IPRs-related agreements, an exemption is also available for agency agreements and franchises. However, these exemptions are interpreted rather narrowly and a comprehensive review of the regulations is needed before relying on any of them.

There are currently no block exemptions. Exemptions are only available on a case-by-case basis. The Business Competition Supervisory Commission's (Komisi Pengawas Persaingan Usaha) (KPPU) published guides to the various Articles of the law, in the form of Commission Regulations, which set out in more detail the types of arguments that the KPPU may entertain (for example, efficiencies).

Exclusions and statutes of limitation

4. Are there any exclusions? Are there statutes of limitation associated with restrictive agreements and practices?

Exclusions

Agreements or practices engaged in by small businesses and agreements or practices engaged in by co-operatives that are specifically aimed at serving its members are excluded. The full list of exclusions is available at Chapter IX (Articles 50 and 51, Law No. 5 of 1999 on the Prohibition against Monopolistic Practices and Unfair Business Competition).

Statutes of limitation

There are no applicable statutes of limitation.

Notification

5. What are the notification requirements for restrictive agreements and practices?

Notification

The law and regulations are silent on notification of restrictive agreements and conduct. This is not common practice and it does not appear that there are examples of notification.

Informal guidance/opinion

The law or regulations are silent on notification. However, the informal opinion of the Business Competition Supervisory Commission's (Komisi Pengawas Persaingan Usaha) (KPPU) can be obtained (on whether an agreement will be considered problematic under Law No. 5 of 1999 on the Prohibition against Monopolistic Practices and Unfair Business Competition) before entering into a binding agreement.

Responsibility for notification

Not applicable (see above, Notification).

Relevant authority

Not applicable (see above, Notification).

Filing fee

Not applicable (see above, Notification).

Investigations

6. Who can start an investigation into a restrictive agreement or practice?

Regulators

Under Law No. 5 of 1999 on the Prohibition against Monopolistic Practices and Unfair Business Competition, the Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha) (KPPU) can start an investigation based on its independent regular market monitoing efforts and findings or on information from third parties. In practice, this also covers requests for investigations from other government entities.

For completeness, during the investigation, a more in-depth market monitoring can be conducted, in conjuction with a survey to obtain the opinion and input of relevant competitors or a government entity.

Third parties

The KPPU can initiate an investigation on receipt of a complaint or report from a third party. The complaint or report must be a formal report submitted to the KPPU using the form available on the KPPU's website (www.kppu.go.id/id/hubungi-kami).

 
7. What rights (if any) does a complainant or other third party have to make representations, access documents or be heard during the course of an investigation?

No special interest must be shown to submit the initial report. However, a report from an injured party is likely to carry more weight.

Representations

The reporting party must attend the investigation at the Business Competition Supervisory Commission's (Komisi Pengawas Persaingan Usaha) (KPPU's) request. The investigation or interview is conducted in private (closed to the public).

Document access

The reporting party cannot access the documents unless requested by or with the KPPU's consent.

Be heard

During the investigation, the reporting party only has a right to be heard at the KPPU's request or on being summoned.

 
8. What are the stages of the investigation and timetable?

Under Regulation of the Indonesian Business Competition Supervisory Commission No. 1 of 2010 on the Procedure for Handling Cases, clarification of a report to obtain the administrative completeness of the report and Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha) (KPPU) jurisdictional assessment must be provided within ten working days. The investigation procedure following notification or a self-initiative is the same:

  • Summonsing and asking for the reporting party's, reported party's and other related parties' complete information.

  • Calling and asking for information from the rapporteurs, parties, businesses and other related parties.

  • Calling and asking witnesses for statements.

  • Requesting expert opinions.

  • Obtaining letters and documents.

  • Local examinations.

  • Analysing particulars, letters, documents and local test results.

The report on the investigation (LHP) must contain at least:

  • The identity of businesses suspected of committing the offence.

  • The provisions of the act allegedly violated and a minimum of two items of evidence.

Once completed, the LHP must be filed within 30 days and reported to the Commission meeting (Rapat Komisi or Rakom) for consent to continue to a preliminary examination in the Commission Council's Court. The preliminary examination must be conducted within 30 days of the transfer with the agenda (that is, the transfer and claim recitation of the violation allegation report (laporan dugaan pelanggaran) by the investigator and the reported party must be given an opportunity to provide a written response. An advanced examination must be conducted within 60 days to provide both parties (the investigator team and the reporting parties) with a chance to present expert witnesses and to obtain information from the government. The last step in the procedure is the Commission Council's deliberations to decide on the case, which must be concluded within 30 days.

Publicity and confidentiality

9. How much information is made publicly available concerning investigations into potentially restrictive agreements or practices? Is any information made automatically confidential and is confidentiality available on request?

Publicity

All information submitted during an investigation is kept confidential, except for the decision (and automatically, the information stated in the decision). Consequently, information is only published on the issuance of the decision of the Business Competition Supervisory Commission's (Komisi Pengawas Persaingan Usaha) (KPPU).

Automatic confidentiality

All information is automatically kept confidential, except for information related to a request for damages. Injured parties can submit requests for damages against the defendant, and the KPPU's decision also determines the amount of damages payable.

Confidentiality on request

This is not available in a request for damages.

 
10. What are the powers (if any) that the relevant regulator has to investigate potentially restrictive agreements or practices?

The Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha) (KPPU) can summon the parties. However, to be able to search for evidence, it must be accompanied by the police. The KPPU can also ask for the police force's assistance if a party ignores a properly served summons from KPPU.

Settlements

11. Can the parties reach settlements with regulators to bring an early resolution to an investigation? If so, what are the circumstances for doing so and the applicable procedure?

There is no settlement procedure. Disputes can only be resolved by a decision of the Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha) (KPPU). If the parties admit to misconduct, the examination or trial is expedited and subject to the parties' good faith, the fine or penalty imposed by the KPPU can be reduced.

 
12. Can the regulator accept remedies (commitments) from the parties to address competition concerns without reaching an infringement decision? If so, what are the circumstances for doing so and the applicable procedure?

Not applicable.

Penalties and enforcement

13. What are the regulator's enforcement powers in relation to a prohibited restrictive agreement or practice?

Orders

The Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha) (KPPU) can order the:

  • Termination of the problematic agreement (for example, price fixing or price discrimination).

  • Cessation of problematic behaviour (for example, abuse of a dominant position).

Fines

In addition to ordering the cancellation of an agreement and the cessation of anti-competitive behaviour, the KPPU can impose fines of between IDR1 billion up to IDR25 billion. If the fine is not paid, the KPPU can request an enforcement ruling (penetapan eksekusi) from the District Court.

Personal liability

Directors of an entity that has acted in violation of the law can be held personally liable. They can be sentenced to prison (but not fined). The term of imprisonment is limited to:

  • Five months (for certain violations including price fixing, resale price maintenance, closed agreements and price discrimintion).

  • Six months (for example, for an oligopoly, territory division, boycott, cartels and market control).

An additional disqualification from being a director or commissioner (that is, a supervisor of an Indonesian company) for two to five years can also be imposed.

Any party fulfilling one of the following requirements can be sentenced to up to three months' imprisonment or fined from IDR1 billion to IDR3 billion:

  • It does not submit requested evidence in an investigation or inspection.

  • It refuses to be questioned or to provide the required information.

  • It impedes the investigation.

Immunity/leniency

Law No. 5 of 1999 on the Prohibition against Monopolistic Practices and Unfair Business Competition does not recognise the leniency principle. There are some agreements that may be exempt (see Question 3).

Impact on agreements

An entire agreement can be declared void, but it is not uncommon for the KPPU to declare that only the problematic provision is void.

Third party damages claims and appeals

14. Can third parties claim damages for losses suffered as a result of a prohibited restrictive agreement or practice? If so, what special procedures or rules (if any) apply? Are collective/class actions possible?

Third party damages

A relevant third party can submit a request for damages, during either the examination or the trial at the Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha) (KPPU), or following the KPPU's decision. In the former case, the third party must volunteer to be examined as a witness first. In the latter, the request is submitted to the relevant District Court, using the KPPU's decision as the legal basis.

Special procedures/rules

See above, Third party damages. The time limit for bringing an action in the relevant District Court is 14 working days from the issuance of the KPPU decision.

Collective/class actions

A class action suit can also be filed, accompanied by evidence of the loss suffered, following the issuance of the KPPU's decision.

 
15. Is there a right of appeal against any decision of the regulator? If so, which decisions, to which body and within which time limits? Are rights of appeal available to third parties, or only to the parties to the agreement or practice?

Rights of appeal and procedure

Within 14 days of the issuance of the decision of the Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha) (KPPU), the parties can submit an appeal to the District Court with jurisdiction over the applicant's domicile. Within 14 days of the issuance of the District Court decision, the relevant parties can submit an appeal to the Supreme Court.

Third party rights of appeal

Third parties have no rights of appeal.

 

Monopolies and abuses of market power

Scope of rules

16. Are monopolies and abuses of market power regulated under administrative and/or criminal law? If so, what are the substantive provisions and regulatory authority?

Regulatory framework

The prohibitions against monopolistic practices and abuse of market power are found in Articles 17 and 25 to 28 of Law No. 5 of 1999 on the Prohibition against Monopolistic Practices and Unfair Business Competition. In this context, the most relevant provision is Article 25 (abuse of dominant position). There is no industry-specific regime. Violations of the above Articles are subject to both administrative and criminal sanctions.

Regulatory authority

The Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha) (KPPU) is the regulatory authority.

 
17. How is dominance/market power determined?

A particular business is considered dominant if it controls at least a 50% share of the relevant market. Two or three businesses collectively will be determined to be dominant if they control at least a 75% share of the relevant market. There are other legal definitions of dominance which apply more generally:

  • A dominant player is one that does not have significant competitors in the relevant market in respect of its market share.

  • A dominant player is an entrepreneur that holds the strongest position in a market in respect of its:

    • financial ability;

    • ability to access supplies or sales; or

    • ability to shape demand or supply for certain goods or services.

 
18. Are there any broad categories of behaviour that may constitute abusive conduct?

The abuse of a dominant position means imposing trading terms that:

  • Prevent consumers from obtaining competitive goods and/or services (in price or quality).

  • Limit market and technological development.

  • Hamper potential competitors' entry into the relevant market.

Exemptions and exclusions

19. Are there any exemptions or exclusions?

There are no exemptions or exclusions.

Notification

20. Is it necessary (or, if not necessary, possible/advisable) to notify the conduct to obtain clearance or (formal or informal) guidance from the regulator? If so, what is the applicable procedure?

Law No. 5 of 1999 on the Prohibition against Monopolistic Practices and Unfair Business Competition does not provide for a notification procedure, other than for merger control.

Investigations

21. What (if any) procedural differences are there between investigations into monopolies and abuses of market power and investigations into restrictive agreements and practices?

There are no differences. See Questions 6 to 9 and 11 to 12.

 
22. What are the regulator's powers of investigation?

Penalties and enforcement

23. What are the penalties for abuse of market power and what orders can the regulator make?
 
24. Can third parties claim damages for losses suffered as a result of abuse of market power? If so, what special procedures or rules (if any) apply? Are collective/class actions possible?
 

EU law

25. Are there any differences between the powers of the national regulatory authority(ies) and courts in relation to cases dealt with under Article 101 and/or Article 102 of the TFEU, and those dealt with only under national law?

Not applicable.

 

Joint ventures

26. How are joint ventures analysed under competition law?

There is no formal legal definition of a joint venture (JV). However, one of the guidelines on merger control of the Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha) (KPPU) defines JVs as a form of JV undertaken by two or more companies. JVs can be exempted from a price fixing prohibition if the price determination is related to the price of the products to be sold by the joint venture.

 

Inter-agency co-operation

27. Does the regulatory authority in your jurisdiction co-operate with regulatory authorities in other jurisdictions in relation to infringements of competition law? If so, what is the legal basis for and extent of co-operation (in particular, in relation to the exchange of information)?

The Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha) (KPPU) and the Korean Fair Trade Commission (KFTC) agreed to elevate their co-operation by signing a co-operation arrangement to promote co-operation in competition law and policy in both countries. The co-operation was signed at Gwacheon on 8 November 2013. The co-operation focuses on four aspects:

  • Updating or notifying law enforcement trends.

  • Regular dialogues.

  • Exchanging information through direct communication.

  • Technical assistance.

This implements the Leaders' Joint Statement signed by both presidents in October 2013 in Indonesia.

The Commission also works closely with competition authorities in some other countries, including the:

  • Japan Fair Trade Commission (JFTC).

  • US Federal Trade Commission (FTC).

  • German Cartel Office (Bundeskartellamt).

However, their co-operation has not been formalised in a formal agreement yet. The co-operation focuses mainly on the development of human resources, such as overseas training and educational discussions on drafting regulation guidelines.

 

Recent cases

28. What are the recent developments or notable recent cases concerning abuse of market power?

Pfizer Business Group was found by the Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha) (KPPU) to be in violation of its dominant position (Article 25 (1a), Law No. 5 of 1999 on the Prohibition against Monopolistic Practices and Unfair Business Competition) in the anti-hypertension medicine market with the amlodipine besylate active substance from 2005 to 2007. The KPPU found that the relevant behaviour occurred through the Health Care Compliance Programme (HCCP) under which doctors prescribed anti-hypertension medicine with the amlodipine besylate active substance to their patients. The KPPU decided that PT Pfizer Indonesia (part of the Pfizer Business Group) had a share of more than 50% of the relevant market during that period. Its opinion was that PT Pfizer Indonesia through the HCCP programme "required" doctors to prescribe Norvask medicine to their patients and, as a return, PT Pfizer Indonesia provided sponsorship of doctors. Although the HCCP programme gave patients a discount, the price of Norvask was still excessively high. For this violation of its dominant position, PT Pfizer Indonesia was fined IDR25 billion and ordered to:

  • Lower the price by 65%.

  • Lower the promotion fee by 60%.

  • Limit the sponsorship of doctors.

  • Not involve doctors in the HCCP programme.

 

Proposals for reform

29. Are there any proposals for reform concerning restrictive agreements and market dominance?

Generally, there are no proposals for reform concerning the prohibition against restrictive agreements and market dominance. However, the fine that can be imposed for a violation under the draft amendments to Law No. 5 of 1999 on the Prohibition against Monopolistic Practices and Unfair Business Competition can be significantly higher (up to IDR500 billion). Under the draft amendments, an appeal can only be submitted if at least 50% of the fine has been paid by the defendant.

 

Online resources

Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha) (KPPU)

W www.kppu.go.id/id; www.kppu.go.id/eng (English version)

Description. This website is maintained by the KPPU. The information is official, although some of it may be out-of-date. The English version is for guidance only.



The regulatory authority

Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha) (KPPU)

T +62 21 3503325
F +62 21 3507008
E infokom@kppu.go.id
W www.kppu.go.id

Outline structure. Please see www.kppu.go.id/id/tentang-kppu/struktur-organisasi.

Responsibilities. The KPPU is an independent authority established to supervise the implementation of Law No.5 of 1999 concerning the Prohibition of Monopolistic Practices and Unfair Business Competition. The KPPU's duties include drafting implementing regulations, conducting examinations of any party alleged to have violated Law No. 5, issuing binding decisions, and imposing legal sanction(s) on any violator of the law.

Procedure for obtaining documents. The KPPU can be contacted by e-mail to obtain any documents that are not available on its website (international@kppu.go.id).



Contributor profiles

Lia Alizia, Partner

Makarim & Taira S.

T +62 21 2521 272/520 0001
F +62 21 2522 750-51/252 1830
E Lia.Alizia@makarim.com
W www.makarim.com

Professional qualifications. Indonesia, Advocate

Areas of practice. Corporate and commercial law and litigation; foreign investment, restructuring companies; mergers and acquisitions; labour law; competition law; compliance issues; intellectual property rights.

Non-professional qualifications. SH, Jayabaya University, Jakarta, Indonesia, Faculty of Law, 1999

Recent transactions

  • Provided advices regarding general competition laws (for example, a multinational company in the consumer goods industry).

  • Provided advices to and assisted multinational companies in relation to merger notification to the KPPU.

Languages. English, Indonesian (native)

Professional associations/memberships.

  • Member of the Indonesian Advocates Association (PERADI).

  • Committee of the International Relations Department of the Indonesian Advocates Association.

  • Member of LAWASIA (The Law Association for Asia and the Pacific).

  • Registered Intellectual Property Rights Consultant in Indonesia, 2006.

  • Registered Sworn Translator for English – Indonesian language under Decree of Governor of DKI, 2006.

Publications.

  • Competition and Cartel Leniency Global Guides 2015/16, Practical Law Global Guides, Thomson Reuters, August 2015 (co-contributor).

  • Global Legal Insights to Litigation & Dispute Resolution 4th Edition – Indonesia chapter, published by Global Legal Group in April 2015 (co-contributor).

Jonathan Tjenggoro, Associate

Makarim & Taira S.

T +62 21 2521 272/520 0001
F +62 21 2522 750-51/252 1830
E Jonathan.Tjenggoro@makarim.com
W www.makarim.com

Professional qualifications. Indonesia, Advocate

Areas of practice. Competition; corporate and commercial; foreign investment; telecommunications.

Non-professional qualifications. LLM, National University of Singapore, Singapore, 2010; SH, University of Indonesia, Jakarta, Indonesia, 2008

Recent transactions

  • Assisted Otsuka and Mitsui with the drafting and submission of post-transaction notification to the KPPU of the acquisition of shares in Claris Otsuka Limited.

  • Assisted AerCap with the drafting and submission of post-transaction notification to the KPPU of the acquisition of shares in International Lease Finance Corporation.

  • Assisted a multinational corporation to obtain various private KPPU opinions, in respect of the acquisition of shares in:

    • a port engineering and port management company;

    • an Indonesian company running a steel-related business; and

    • a European energy company.

Languages. English, Indonesian (native)

Professional associations/memberships. Member of the Indonesian Advocates Association (PERADI).

Publications.

  • Competition and Cartel Leniency Global Guides 2015/16, Practical Law Global Guides, Thomson Reuters, August 2015 (co-contributor).

  • World Communication Regulation Report Volume 10 No. 4 on Amendments to Indonesia's Operating Telecom Networks Regulation and Their Impact, published by Bloomberg BNA in April 2015 (co-contributor).

Anang Triyono, Technical Adviser

Makarim & Taira S.

T +62 21 2521 272/520 0001
F +62 21 2522 750-51/252 1830
E Anang.Triyono@makarim.com
W www.makarim.com

Professional qualifications. ME (Master of Economics), University of Indonesia, Jakarta, Indonesia, 2010; SE (Bachelor of Economics), Mahasaraswati University, Denpasar, Indonesia, 1999; BSt (Bachelor of Statistics), Academy of Statistics BPS, Jakarta, Indonesia, 1997

Areas of practice. Anti-trust and business competition.

Recent transactions

  • Deputy Director of Data and Information Services, Government Official Information and Documentation Management KPPU, 2014-2015.

  • Senior Investigator and Head of Data and Information KPPU, 2014-2015.

  • Senior Investigator and Head of KPPU Balikpapan Office, 2009-2014.

Languages. English, Indonesian (native)

Publications. Competition and Cartel Leniency Global Guides 2015/16, Practical Law Global Guides, Thomson Reuters, August 2015 (co-contributor).


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