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Indonesia Legal Business Guidelines

Competition Law in Indonesia

Indonesia issued Law No. 5/1999 in order to actualize democracy in the economic sector and to promote a healthy, effective and efficient business climate, which can in turn boost economic growth and market economy to function properly. The objective of Law No. 5/1999 is as follows: 

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  • to maintain public interest and improve the efficiency of the national economy as one of the means to improve public welfare;

  • to create a conducive business climate through healthy business competition, thus securing equal business opportunity for large/medium/small scale entrepreneurs;

  • to prevent monopolistic practices and/or unfair business competition by the business actors; and

  • to create effectiveness and efficiency in business activity, Indonesia issued Law No. 5/1999.

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Monopolistic practice is centralization of economic power by one or more business actors causing the control of production and/or marketing of certain goods and/or services, resulting in an unfair business competition and can cause damage to the public interests.  In addition, unfair business competition is the competition among business actors in conducting their production activities and/or in marketing goods and/or services, conducted in a manner which is unfair or contradictory to the law or hampering business competition.   For those reasons, Law No. 5/1999 prohibits certain agreement, act and abuse of position which may result in monopolistic practices and/or unfair business competition.

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Prohibitions related to Monopolistic Practices and Unfair Business Competition

 

Law No. 5/1999 specifies 3 (three) types of prohibitions, namely (i) prohibited agreements; (ii) prohibited activities; and (iii) dominant position. For ease of reading, the following is an overview of different forms of each type of such prohibitions that will be elaborated further below.

Indonesia Legal Business Guidelines - Antitrust

Prohibitions related to Monopolistic Practices and Unfair Business Competition

Source: Law No. 5/1999 and KPPU Reg. No. 3/2009.

Prohibited Agreements

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Several agreements are prohibited by Law No. 5/1999 from being entered into by business actors. The agreement itself is defined as an action of one or more business actors for binding themselves to one or more other business actors under any name, either in writing or verbally.  In particular, the prohibited agreements are as follows:

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  • Oligopoly

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In an oligopoly market, each business actor has considerable power to influence market prices and the behavior of each business actor influences the behavior of other business actors in the market.  The mutual interdependence among its small number of business actors distinguished oligopoly market from other market structures. 

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Concerning the oligopoly market, Article 4 (1) Law No. 5/1999 stipulates that business actors are prohibited to enter into an agreement with other business actors to jointly control the production dan/or marketing of goods and services, which may result in the occurrence of monopolistic practices and or unfair business competition. 

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Business actors may be suspected or deemed to be jointly involved in the control of the production and/or marketing of goods and/or services, if 2 (two) or 3 (three) business actors or a group of business actors control over 75 % (seventy-five percent) of the market segment of a certain type of goods or services. 
 

  • Price Fixing

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Under Law No. 5/1999, prohibited agreements related to price fixing consist of: (i) price fixing agreement; (ii) price discrimination agreement; (iii) predatory pricing; and (iv) resale price maintenance.

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1. Price Fixing Agreement

 

The price fixing agreement is one of the strategies carried out by business actors to generate the highest possible profit.  If every business actor in the relevant market implements the price fixing, consumers may be left with few options other than accepting the goods and prices offered by the business actor who has entered into a price fixing agreement. 

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In regard to the above, Article 5 (1) Law No. 5/1999 stipulates that business actors are prohibited to enter into an agreement with their business competitors to fix the price of certain goods and/or services payable by consumers or customers on the same relevant market. However, such prohibition does not apply to: 
 

  • agreement in the context of a joint venture; or

  • agreement based on the prevailing laws and regulations.

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Furthermore, KPPU specifies 9 (nine) price fixing forms that are included in the price fixing agreement, namely: 

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  • agreement to increase or decrease prices; 

  • agreement to use a standard formula as the basis for price calculations;

  • agreement to maintain a fixed ratio between the prices competed with a particular product; 

  • agreement to eliminate discounts or make discounts uniform;

  • agreement on terms of providing credit to consumers;

  • agreement to eliminate products offered at low prices in the market, thereby limiting supply and keeping prices high; 

  • approval of compliance with announced prices; 

  • agreement to not sell if the agreed price is not met; and

  • agreement to use uniform prices as a starting point for negotiations.

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2. Price Discrimination Agreement

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A price discrimination agreement is defined as an agreement made by business actors with other business actors in which the same product is sold to each consumer at different prices.  Accordingly, Article 6 Law No. 5/1999 stipulates that business actors are prohibited to enter into an agreement, which results in one buyer having to pay a different price than the prices paid by other buyers for the same goods and/or services.

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3. Predatory Pricing

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Predatory pricing is a form of strategy carried out by business actors in selling products at prices below production costs (average cost or marginal cost).  Predator connotes deliberately undermining competition or competitors through fixing prices below short-run profit maximizing prices or fixing prices below costs in the hope that they will be covered in the future through the monopoly profits they will receive. 

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Concerning predatory pricing, Article 7 Law No. 5/1999 prohibits business actors to enter into an agreement with other business actors to set prices below market prices (predatory pricing), which may result in unfair business competition.

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Predatory pricing is prohibited not because it sets prices that are too low, but because business actors will attempt to reduce production and raise the price in the future.  Therefore, prohibited predatory pricing may not occur if the business actors who use predatory pricing do not reduce production or raise the prices. 
 

4. Resale Price Maintenance/Vertical Price Fixing

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According to Article 8 Law No. 5/1999, business actors are prohibited to enter into an agreement with other business actors, which contains condition that the recipient goods and/or services will not sell or resupply goods and/or services received by them, at a price lower than the contracted price, that may result in unfair business competition.  In particular, types of resale price maintenance are specified as follows: 

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  • maximum resale price;

  • specified resale price; and

  • minimum resale price.

  • Division of Territory

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One way for business actors to avoid competition is to enter into agreements with their competitors to divide marketing areas or market allocations.  In principle, such agreements may result in consumer exploitation, where the consumers do not have sufficient choices in terms of both goods and prices. 

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According to Article 9 of Law No. 5/1999, it is regulated that business actors are prohibited to enter into an agreement with their business competitors, which aims to divide marketing territory or market allocation towards goods and/or services, that may result in monopolistic practices and/or unfair business competition. 

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Division of territory recognized by its characteristic, which can be distinguished vertical and horizontal division of territory. Further, division of territory is prohibited because business actors eliminate or reduce competition by dividing the market territory or market allocation. Specifically, dividing market territory or market allocation means (i) dividing territory to receive or supply goods, services, or goods and services; (ii) determining parties who may receive or supply goods, services, or goods and services. As for market territory, it could refer to the territory of the state of the Republic of Indonesia, or parts of the territory of the state of the Republic of Indonesia, such as regency, province, or other regional territories. 
 

  • Group Boycott or Horizontal Refusal to Deal

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A boycott agreement is a type of business practiced by business actors to keep other business actors out of the same market or to keep other business actors who have the potential to become competitors from entering the same market, so the market can be maintained solely in the business actors' interests involved in the boycott agreement.  

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Article 10 (1) Law No. 5/1999 stipulates that business actors are prohibited to enter into an agreement with their competing business actors, which could prevent other business actors from engaging in the same business, either for domestic or overseas market purposes.

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In addition, Article 10 (2) Law No. 5/1999 regulates that business actors are prohibited to enter into an agreement with their competing business actors for refusing to sell any goods and/or services from other business actors, which:

 

  1. may be resulted in loss or predicted to cause a loss to other business actors; or

  2. limits other business actors in selling or buying any goods and/or services from the relevant market.

 

  • Cartel


Cartel practice is one of the strategies implemented among business actors to be able to influence prices by regulating the amount of their production.  In general, the following are several characteristics of a cartel: 

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  1. there is a conspiracy between several business actors;

  2. conducting the price fixing;

  3. carrying out consumers allocation or production territory in order for price fixing to be effective;

  4. there are differences in interests between business actors, for example due to differences in costs.

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Concerning cartels, Article 11 Law No. 5/1999 stipulates that business actors are prohibited to enter into an agreement with their competing business actors, which intended to influence the prices by arranging production and or marketing of certain goods and/or services, that may result in monopolistic practices and/or unfair business competition. 

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KPPU Reg No. 4/2010 further regulates that a cartel is occurred when a group of companies in a particular industry that are supposed to compete with each other agree to coordinate their activities by regulating production, territorial divisions, tender collusion and other anti-competitive activities, in order to raise prices and gain advantage over competitive prices.  Moreover, cartel will harm the economy as the cartel member business actors will agree to carry out activities that have an impact on price control, such as limiting the amount of production, which will lead to allocative inefficiencies. 
 

  • Trust

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In order to be able to control the production or marketing of products on the market, business actors form combined companies or larger companies (trust), while maintaining and maintaining the survival of each company or its member companies. 

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Article 12 Law No. 5/1999 regulates that business actors are prohibited to enter into an agreement with other business actors to cooperate by establishing a joint company or a larger company, while also keeping and maintaining the continuity of each company or its members, with the aim of controlling the production and/or marketing of goods and/or services, that may result in monopolistic practices and or unfair business competition.
 

  • Oligopsony

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In terms of antitrust practice, the producer or seller is the victim in oligopsony practices,
whereas consumers or competitors are usually the victims of antitrust practice.  In oligopsony, consumers enter into agreements with other consumers to jointly control the purchase or receipt of supplies, and thus control the prices of goods or services in the relevant market. 

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Article 13 (1) Law No. 5/1999 prohibits business actors to enter into an agreement with other business actors with the aim of jointly controlling the purchase or acquisition of supplies in order to control prices of goods and/or services in the relevant market, which may result in monopolistic practices and/or unfair business competition. 

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Specifically, the business actors shall be reasonably suspected or deemed to be jointly control the purchase or acceptance of supplies if 2 (two) or 3 (three) business actors or a group of business actors’ control over 75% (seventy-five per cent) of the market segment of a certain type of goods or services. 

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  • Vertical Integration

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One of the ways taken by business actors to increase the scale of the company is by integrating with other companies at different levels.  On the other hand, vertical integration can sometimes have a negative impact on competition among business actors, such as: 

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  1. reduce competition between sellers at the upstream level;

  2. facilitate collusion among business actors;

  3. facilitate price discrimination; and

  4. increase barriers to entry for business actors.

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Given the negative impacts of a vertical integration, Law No. 5/1999 includes vertical integration as one of the prohibited agreements.  According to Article 14 Law No. 5/1999, business actors are prohibited to enter into an agreement with other business actors with the intention of controlling the production of some goods included in the chain of certain goods and/or services, in which each series of production is the result of production process or further processing, either in one direct series or indirect series, that may result in unfair business competition and/or be harmful to society. 

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Vertical integration refers to the control of a production process series of specific goods from upstream to downstream or a continuous process for specific services by specific business actors.  Even though vertical integration can result in low-cost goods and services, it can also lead to unfair business competition, which is harmful to economic cells in society. 

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Further provisions regarding vertical integration are regulated under KPPU Reg No. 5/2010. Accordingly, vertically integrated business activity relations are reflected in the production scheme, which describes the relationship from top to bottom, also known as upstream to downstream.  Backward or upstream vertical integration refers to business activities that integrate several activities that lead to the supply of raw materials from the main product.  On the other hand, downstream vertical integration business activities refer to integrated several activities that lead to the provision of the final product.    
 

  • Exclusive Agreement

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Exclusive dealing is an agreement made by parties in a different level of production process or distribution network of a good or service.  In particular, exclusive dealing comprises of:​

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1. Exclusive Distribution Agreement

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Exclusive distribution agreement means the business actors enter into an agreement with other business actors, which requires the recipient party can only re-supply or not re-supply the product to certain parties or places. In other words, the distributor is forced by the manufacturing business actors to only supply the product to certain parties or places.  

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Concerning the above, Article 15 (1) Law No. 5/1999 prohibits business actors to enter into an exclusive distribution agreement with other business actors, which stipulates that the party receiving the goods and/or services will only re-supply or not re-supply the goods and/or services to certain parties and or at a certain place. Supplying shall include the procurement of supplies, either in the form of goods or services for the purpose of trading, lease, lease purchase and leasing activities. 


KPPU Reg No. 5/2011 further explains that the main factor in fulfilling the criteria of agreement that will be classified as exclusive agreement is the restrictions on freedom to provide supplies according to the criteria of business actors/certain parties and the certain places imposed by the upstream business actors toward the downstream business actors. 
 

2. Tying Agreement

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A tying agreement occurs when a business actor enters into an agreement with other business actors at a different level that requires the sale or rental of goods or services to be carried out only if the buyer or lessee also buys or rents other goods.  The practice of tying agreements is prohibited because tying agreement practitioners do not want other business actors to have the same opportunity to compete fairly with them, particularly in tied products, and tying agreement practitioners have also eliminated consumers' rights to choose the products to be purchased independently. 

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Article 15 (2) Law No. 5/1999 regulates that business actors are prohibited to enter into an agreement with other parties, which stipulates that the party receiving certain goods and/or services must be willing to buy other goods and or services of the supplying business actor.  

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Specifically, business actors acting as suppliers in the upstream are not allowed to impose obligations on other business actors acting as supply recipients and/or distributors to purchase other products and/or services that differ in character from their main product.  The difference in characteristics between the main product and other products as measured by the level of complement or substitution is a key factor of the tying practice. 
 

3. Vertical Agreement on Discount

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According to Article 15 (3) Law No. 5/1999, business actors are prohibited to enter into an agreement regarding prices or certain price discounts for goods and/or services, which contains requirements that the business actor receiving goods and/or services from the supplying business actor:

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  • must be willing to buy other goods and/or services from the supplying business actor; or

  • will never buy the same or similar goods and/or services from other business actors which are competitors of the supplying business actor.

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In other words, if a business actor wishes to obtain a discounted price for a particular product purchased from another business actor, the business actor must be willing to buy other products from the said business actor or not purchase the same or similar product from another competing business actor. 

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The obligation to purchase other products in order to obtain a discount has similar consequences to the tying agreement, namely the elimination of business actors' rights to freely choose the products they want to buy and forcing business actors to purchase products that are not actually needed by these business actors.  Specifically, business actors (as suppliers) are prohibited from charging certain prices and/or setting discount rates and/or discounted prices for goods and/or services with the main condition that the business actors receiving supplies (distributors at the downstream level) must purchase goods and/or services that are completely unrelated to the main product purchased from the supplier.  Furthermore, business actors as suppliers are prohibited from fixing prices and/or setting discount rates and/or price discounts to business actors receiving supplies (distributors at the downstream level), with the prohibition to purchase similar products from competitors of supplying business actors as the main condition. 

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4. Agreements With Foreign Parties


According to Article 16 Law No. 5/1999, business actors are prohibited to enter into an agreement with foreign parties that contains provisions that may result in monopolistic practices and or unfair business competition. 

Prohibited Activities

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There are 4 (four) types of prohibited activities under the Indonesian competition law, namely monopoly, monopsony, market dominance, and collusive tendering. The relevant market is defined as a market within the same geographical marketing range where the business actors conduct their business for the same product and/or service including its substitute. 

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  • Monopoly

 

Prohibited monopoly refers to practices by one or more business actors in controlling a product and/or a market and/or a service which may cause harm in a form monopolistic behavior through unfair business competition among the companies within the relevant market.  Business actors may be suspected or considered to conduct monopoly practices by controlling a market if they fulfill one of the following conditions: 

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  1. the concerned control is conducted against a product and/or service which does not have substitute;

  2. hindering the other competitors’ accesses to compete for the same product and/or service; or

  3. controlling beyond 50% of the market share of a product and/or service.  

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The competitors as referred in point (ii) above are defined as other business actors which have significant capability to compete within the relevant market.  Further, as explained in the guidelines of Article 17 which can be found in KPPU Reg. No. 11/2011, the core elements in determining the existence of monopoly are: 

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  1. the relevant business actors;

  2. the existence of control;

  3. the definition of a “product”;

  4. the definition of a “service”;

  5. the existence of monopolistic practice; and

  6. the existence of unfair business competition.

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  • Monopsony

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Prohibited monopsony refers to market condition in which there is only one buyer of a product and/or service which may cause in monopolistic or unfair competition behavior.  In particular, a business actor can be suspected or considered as a controlling/single buyer when it meets beyond 50% (fifty percent) of the market share for a particular type of goods or services.

 

  • Market Dominance

 

There are 4 (four) prohibited scenarios of activities, either conducted separately or in series of activities, that can be done by one or more business actors which may result in monopolistic practice and/or unfair business competition, namely: 

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  1. refusing and/or hindering the other business actor(s) to conduct the same business activity within the concerned market;

  2. hindering consumer(s) and their regular customer(s) to not engage in business with the other competitors;

  3. limiting the circulation and/or sale of a product and/or service within the concerned market; or 

  4. conducting discriminative behavior against certain business actor(s). 

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Discriminatory behavior refers to actions or treatment in various different forms committed by one business actor against a particular business actor.  Further, the act of refusal and/or hindering as referred in point (i) cannot be done based on unreasonable or non-economic grounds, including but not limited to grounds on differences in ethnicity, racial, social status.  

Subsequently, Article 20 Law No. 5/1999 prohibits business actors to conduct goods and/or services supply by: (i) selling at loss; or (ii) setting extremely low prices, with the intention to eliminating the business of its competitors within the relevant market, which may result in monopolistic practices and/or unfair business competitions.

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In addition, Article 21 Law No. 5/1999 regulates that business actors are prohibited to 
determine the cost of production and other services which are parts of the components to define the price of a product and/or service, which may result in monopolistic practices and/or unfair business competitions.
 

  • Collusive Tendering

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To avoid unfair business competition, the law also regulates prohibited practices in tendering activities, which are specified as follows:

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  1. Business actors are prohibited to collude with other business actors and/or relevant parties related with other business actors to regulate and/or determine the selected tender which may result in unfair business competition.  Collusive action as mentioned in point (i) above refers to tender which means an offer to submit certain number of prices to procure a job in providing goods or services.  Moreover, the act of tender can be done through public tender, closed tender, public auction, limited auction, direct determination, and direct appointment.  The collusion in tender can be done with other business actors in horizontal, vertical, and the combination of both business streams.   

  2. Business actors are prohibited to collude with other business actors and/or relevant parties related with other business actor to gain information concerning the activities of their business competitors that categorized as company classified information, which may result in unfair business competition. 

  3. Business actors are prohibited to collude with other business actors and/or relevant parties related with other business actor in order to hinder production and/or the marketing process of a product and/or service with the intention to reduce the number of supplies, the quality, and the punctuality of a product and/or service to be available in the relevant market.  
     

Dominant Position

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As stipulated in Article 1 (4) Law No. 5/1999, dominant position is a situation which a business actor has no substantial competitor in the relevant market in relation to the controlled market segment, or a business actor has the strongest position among its competitors in the relevant market in relation to financial capacity, access capacity to supply or sales, and the capability to adjust supply or demand of certain goods or services. Hence, business actors are prohibited from using dominant position either directly or indirectly to: 

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  • stipulate the conditions of trading with the intention of preventing and or hindering consumers from obtaining competitive goods and/or services, both in terms of price and quality; or

  • limit markets and technology development; or

  • hinder other potential business actors from entering the relevant market. 

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Moreover, business actors shall be deemed to have a dominant position in the following events: (i) if 1 (one) business actor or a group of business actors controls over 50% (fifty percent) of the market segment of a certain type of goods or services; or (ii) if 2 (two) or 3 (three) business actors or a group of business actors control over 75% (seventy-five percent) of the market segment of a certain type of goods or services.  The conditions that can lead business actors to hold a dominant position are further explained below:

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  • Multiple Positions

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A person who concurrently holds a position as a member of BoD or as a member of BoC of a company is prohibited from simultaneously holding a position as a member of BoD or as a member of BoC in other companies, if the other companies: 

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  1. are in the same relevant market;

  2. have a strong linkage in the sector and/or type of business activities, which refer to the companies that support each other or are directly related in the production, marketing, or production and marketing process;  or

  3. are jointly capable of controlling the market share of certain goods and/or services, which may result in monopolistic practices and/or unfair business competition.

 

Specifically, prohibited multiple positions include multiple positions between holding companies, one holding company with subsidiaries of other members or subsidiaries of various holding companies. 

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The condition of the multiple positions will result in a special or particular relationship between companies involved in concurrent positions as a member of BoD or member of BoC, which generally take the form of financial linkages and joint ownership of shares.  The said company can be in the form of a company that is in the same relevant market (horizontal) or a company in a different market (vertical). 

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  • Shares Ownership

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Business actors are prohibited to hold the majority of shares in several companies that are comparable and conduct business in the same industry on the same relevant market, or establish several companies that conduct business in the same industry on the same relevant market, if such ownership results in: 

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  1. 1 (one) business actor or a group of business actors to control over 50% (fifty percent) of the market share of a certain type of goods or services;

  2. 2 (two) or 3 (three) business actors or a group of business actors to control over 75% (seventy-five percent) of the market share of a certain type of goods or services.

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The impact of the activities of majority share ownership or the establishment of several companies in the same relevant market is the occurrence of control which causes the creation of a dominant position which is the main element of the prohibition of majority share ownership and establishment of several companies that have the same business activities. 


Related to the prohibition above, to find out whether a majority share ownership by a business actor is prohibited by Law No. 5/1999, it is necessary to consider the following points:  

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  1. business actors own majority shares in 2 (two) or more companies;

  2. by considering the regulation under the company's AoA, the majority share ownership provides greater authority by exercising control over the company;

  3. the 2 (two) or more companies are similar;

  4. the 2 (two) or more companies carry out business activities in the same relevant market; and

  5. the business actors’ ownership in 2 (two) or more of such companies resulting in a single business actor or a group of business actors controlling a market share of 50% (fifty percent) for a good/service or controlling a market share of 75% (seventy-five percent) for a good/service.

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Furthermore, to find out whether the establishment of several companies by a business actor is prohibited by Law no. 5/1999, it is necessary to consider the following points: 

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  1. business actors establish several companies;

  2. some of these companies have the same business activities;

  3. some of these companies are in the same relevant market; and

  4. the establishment of several companies resulted in one actor business or a group of business actors dominating the market share 50% (fifty percent) of a good/service or dominating the market share 75% (seventy-five percent) for a good/service.

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  • Mergers, Consolidations and Acquisitions

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According to Law No. 5/1999, business actors are prohibited to:

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  1. conduct mergers or consolidations of business entities, which may result in monopolistic practices and/or unfair business competition.  

  2. conduct acquisition of shares in other companies, if such action may result in monopolistic practices and or unfair business competition.  

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In regard to the above, the business actor is required to submit a notification to the KPPU regarding any mergers, consolidations, or acquisition of shares and/or assets that meet the following conditions of mandatory notification: 

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  1. asset value in the amount of Rp2.500.000.000.000,- (two trillion and five hundred billion rupiah); and/or

  2. sales value in the amount of Rp5.000.000.000.000,- (five trillion rupiah).

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Specifically for business actors in banking sector, the obligation to submit written notification prevails if the asset value exceeded Rp20.000.000.000.000,- (twenty trillion rupiah). 

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The act of merger, consolidation, or acquisition must be notified in writings to KPPU no later than 30 (thirty) days from the date of such actions become effective. The provision of effective date is as follows:

 

  1. the date of the MoLHR's approval of the amendment to the AoA in the event that the merger is conducted by a limited liability company;

  2. the ratification date from MoLHR on the company’s deed of incorporation in the event of consolidation;

  3. the date of notification received by the MoLHR of the amendment to the AoA in the event that the share acquisition is conducted by a limited liability company;

  4. the date of the asset sale and purchase agreement and/or asset transfer document in the event that the assets acquisition is conducted by a limited liability company;

  5. the date the information disclosure letter on the implementation of the transaction is submitted to the OJK in the event that the merger, consolidation, or acquisition of shares and/or assets is conducted by a publicly listed company against a publicly-listed company;

  6. the last date of payment of shares and/or other equity securities in the exercise of pre-emptive rights in the event that a merger, consolidation, or acquisition of shares and/or assets is conducted by a private company to a publicly listed company;

  7. the date of signing of the agreement by the parties in the event that the merger or consolidation is conducted by a business actor that is not in the form of a limited liability company; or

  8. the date of signing of the agreement, the date of closing of the transaction by the parties, or the date of government approval of the parties in the event that the merger, consolidation, or acquisition of shares and/or assets takes place outside the territory of the Republic of Indonesia.

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In submitting written notification to KPPU, the business actor is obligated to pay a notification filing fee amounting to 0.004% (zero point zero zero four percent) times asset value or sales based on a certain amount, provided that the total notification filing fee shall not exceed Rp125.000.000,- (one hundred twenty five million rupiah). 
 

Indonesia Competition Commission (KPPU)

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KPPU or Indonesian Competition Commission is an independent and non-structural institution that is free from the influence and power of the government and other parties.  KPPU was formed by virtue of Presidential Decree No. 75/1999 to oversee the enforcement of Law No. 5/1999 concerning prohibitions on monopolistic practices and/or unfair business competition.  Additionally, since 2008, KPPU by virtue of Law No. 20/2008 has been assigned with additional task, namely to supervise business partnership between MSME and large-sized enterprises. 

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In terms of enforcement of Law No. 5/1999, KPPU has the following duties:

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  • conduct assessment over agreements which may result in monopoly practice and/or any unfair business competition as stipulated in Article 4 until Article 16 Law No. 5/1999;

  • conduct assessment over business activities and/or business actors’ behaviors which may result in monopoly practice and/or any unfair business competition as stipulated in Article 17 until Article 24 Law No. 5/1999;

  • conduct assessment on whether any misuse of dominant position takes place which may result in monopoly practice and/or any unfair business competition as stipulated in Article 25 until Article 28 Law No. 5/1999;

  • conduct assessment in accordance with the authority of KPPU as given by virtue of Article 36 of Law No. 5/1999, namely:

    1. receiving report on suspicion of a business act and/or an act by business actor which may result in monopoly practice and/or unfair business competition;

    2. conducting research on the suspicion over a business act and/or an act by business actor which may result in monopoly practice and/or unfair business competition;

    3. conducting investigation and/or inspection over a business act and/or an act by business actor which may result in monopoly practice and/or unfair business competition;

    4. concluding the investigation and/or inspection result on whether any monopoly practice and/or unfair business competition takes place;

    5. summoning business actor who is under the suspicion of violating Law No. 5/1999;

    6. summoning and presenting witness, expert witness and every person who are considered to be aware of such violation;

    7. requesting assistance of investigator to summon business actor, witness, expert witness, and every person as mentioned in point (v) and (vi) above, when being reluctant to present by KPPU’s summon;

    8. requesting explanation from government institutions in relation to investigation and/or inspection over business actor who violates the prevailing laws;

    9. obtaining, researching and/or assessing letters, documents, or proves for the purpose of investigation and /or inspection;

    10. deciding and stipulating whether there is any loss accrued by the other business actors and/or the public;

    11. notifying KPPU’s decision to business actor which is under the suspicion of monopoly practice and/or unfair business competition;

    12. giving sanctions in the form of administrative measures to business actors who have violated the prevailing laws.

  • provide suggestions and considerations in relation to government policies on monopoly practices and/or unfair business competition;

  • create guidelines and /or publications in relation to Law No. 5/1999;

  • provide periodical report on KPPU’s work results to DPR.

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To conduct its duties, KPPU has the authorities in addition to the authorities specified in letter (d) above, which are: 

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  • asses the agreements, business activities, and misuse of dominant positions;

  • take measures in accordance with its authorities; and

  • conduct administrative functions. 

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In relation to overseeing duty to partnership activities, KPPU is mandated by GR No. 7/2021, in which the provisions in conducting oversight shall be in accordance with the prevailing regulations of KPPU.  

Sanctions and Fines for Violations of Prohibitions related to Monopolistic Practices and Unfair Business Competition  

 

In the Competition Law enforcement, one of the KPPU's authorities is to impose sanctions in the form of administrative actions on business actors who violate the provisions of Law No. 5/1999.  Administrative measure in this case can be in the form of:  

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  • determination of the nullification of the agreement;

  • an order to business actors to terminate vertical integration;

  • an order to business actors to terminate activities proven to give rise to monopolistic practices, cause unfair business competition, and/or harm the community; 

  • an order to business actors to terminate the abuse of dominant position;

  • determination of the nullification of the merger or consolidation of business entities and the acquisition of shares;

  • determination of compensation payments; and/or

  • imposition of fines of at least Rp1.000.000.000,- (one billion rupiah), by taking into account the provisions on the amount of fines as regulated under GR No. 44/2021.

 

Furthermore, Article 12 (1) GR No. 44/2021 stipulates that administrative measures in the form of fines are basic fines, and the imposition of administrative measures in the form of fines by the KPPU shall be carried out based on the following provisions:

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  • a maximum of 50% (fifty percent) of the net profit obtained by business actors in the relevant market, during the period of violation of Law No. 5/1999; or

  • a maximum of 10% (ten percent) of the total sales in the relevant market, during the period of violation of Law No. 5/1999.

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Provision regarding the determination of fines is also based on several considerations, namely: 

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  • negative impacts caused by violations;

  • duration of time the violation occurred;

  • mitigating factors;

  • aggravating factors; and/or

  • the ability of business actors to pay. 

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As a guarantee for the fulfilment of the KPPU's decision containing administrative measures in the form of fines, the reported party is required to submit sufficient bank guarantees, for a maximum of 20% (twenty percent) of the amount of fines, by no later than 14 (fourteen) business days after receiving the notification of the KPPU's decision. 

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Moreover, specifically for merger, consolidation, or acquisition notification, KPPU has regulated that any business actor who does not submit a written notification to KPPU in accordance with the specified time period under the applicable regulations will be subject to administrative sanction of Rp1.000.000.000,- (one billion rupiah) for each day of delay, provided that the total administrative sanction shall not exceed Rp25.000.000.000,- (twenty-five billion rupiah). 

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Exemptions from the Implementation of Prohibitions related to Monopolistic Practices and Unfair Business Competition

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The following actions were not subject to Law No. 5/1999's enforcement: 

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  • actions and/or agreements intended to implement applicable laws and regulations;

  • agreements related to intellectual property rights, such as licenses, patents, trademarks, copyright, industrial product design, integrated electronic circuits, and trade secrets as well as agreements related to franchise;

  • agreements for the stipulation of technical standards of goods and/or services products which do not inhibit, and/or hinder competition; 

  • agency agreements whose content does not include provisions to resupply goods and/or services at a price level lower than the agreed price; 

  • cooperation research agreements intended to upgrade or the living standard of society;

  • international agreements ratified by the Government of the Republic of Indonesia; or

  • export-oriented agreements and/or actions that are not disrupting domestic needs and/or supplies;

  • business actors classified as small-scale enterprises; or

  • activities of cooperatives aimed specifically at serving their member. 
     

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