Yogi Sudrajat Marsono is a partner in the competition division at Assegaf Hamzah & Partners and head of the real property practice. One of his merger notifications was the Asian-Mena Counsel’s deal of the year 2014: the acquisition of PT Axis Telekom Indonesia by PT XL Axiata Tbk from Saudi Telecom Company. He performed two competition audits for PT Holcim Indonesia Tbk and provided a wealth of competition advice for, among others, the aviation, investment and cement sectors.
Vovo Iswanto is of counsel at Assegaf Hamzah & Partners. He has more than 10 years’ experience advising various industries from shipping liners to online companies, consumer goods to electricity, aviation to oil and gas to broadcasting. He was the co-founder of Rizkiyana & Iswanto before joining Assegaf Hamzah & Partners. Some of his blue-chip clients are Yamaha, Unilever, Airbus ProSky, Nokia and Aramco Overseas Company BV. He co-authored Competition Law in Indonesia and has carried out competition audits for the flat glass, cement and fast-moving consumer goods sectors.
Farid F Nasution is a senior associate at Assegaf Hamzah & Partners. His solid expertise in competition is grounded in seven years’ experience working directly for the Indonesian Competition Commission. During his time there, Farid began as an investigator handling landmark cases and rose to become the head of substantive review at the KPPU Merger Directorate, leading the drafting of the implementing regulation on merger notification obligations and the KPPU’s first Guidelines on Merger Control. He has deep experience in a range of sectors, including e-commerce, telecommunication, pharmaceutical, automotive and public procurement.
“Most of the decisions (90 per cent) related to bid rigging in the port services, pharmaceutical procurement and infrastructure sectors.”
GTDT: What kinds of infringement has the antitrust authority been focusing on recently? Have any industry sectors been under particular scrutiny?
Yogi Sudrajat Marsono, Vovo Iswanto and Farid F Nasution: Despite several issues related to the selection of its new commissioners, the Indonesian competition commission (KPPU) has been maintaining its persistence in enforcing Law No. 5 of 1999 regarding the Prohibition of Monopoly and Unfair Business Practices (the Indonesian Competition Law (ICL)), which is the primary law regulating business competition in Indonesia. As there are no significant changes to the ICL from a technical perspective, its enforcement remains the same. Under the current law, the substantive test for cartels in the ICL takes the ‘per se illegal’ approach (as in cases of price fixing and group boycotts) or ‘rule of reason’ approach (as in cases of production arrangements, market allocation and bid rigging).
In terms of enforcement, according to publicly accessible sources, the KPPU issued 16 decisions in the period from the first quarter of 2017 up to the first quarter of 2018, all of which were cases that started in 2016 or 2017 and were decided in 2017 or the beginning of this year. Of those 16 decisions, only 10 decisions related to cartels. This number is somewhat lower than the previous year when the KPPU issued 19 cartel-related decisions up to the first quarter of 2017. This may be a result of the delayed selection of new KPPU commissioners for 2017–2022, which, at the time of this interview, is still ongoing. We can expect the KPPU’s cartel prosecution activities to return to normal after the selection process is concluded.
Most of the decisions (90 per cent) related to bid rigging in the port services, pharmaceutical procurement and infrastructure sectors. Price-fixing cartels in relation to tariff handling accounted for the remaining 10 per cent. The KPPU is currently still examining several bid-rigging cases in the provision of under water services, and the construction of infrastructures and sports facilities. Consistently, the KPPU remains focused in monitoring strategic industries, particularly those directly serving and affecting the end consumer, such as the livestock, pharmaceutical and telecommunication industries. In this new era of disruptive innovation, the KPPU has also set its sights on the e-commerce industry (as demonstrated by several workshops it has held).
GTDT: What do recent investigations in your jurisdiction teach us?
YSM, VI & FFN: As there are no significant changes to the ICL, the KPPU has been taking the same approach and implementing the same procedures as it has done in previous years. Under the current regime, the KPPU may initiate a case on its own initiative or on the basis of a report from any third party – with or without a damages claim. The report should include a detailed statement of alleged possible infringements conducted by the undertakings in question.
One aspect of the KPPU’s approach that is inconsistent with previous years is that the majority of bid-rigging cases were commenced based on its own initiative. From 2017 to the first quarter of 2018, only two of nine bid-rigging cases derived from reports. These were the road maintenance project in Tenggarong Seberang, East Borneo and the development of the port in Selayar Island, South Sulawesi. Compared to 2017, the number of reported parties debarred from participating in certain tenders has decreased (only two of nine bid-rigging decisions prohibit the reported parties from participating in certain tenders for two years). It continues to be debatable whether the debarment of companies is within the KPPU’s authority.
The KPPU’s approaches in the chicken and automatic motorcycle cartel cases remain the most significant. The chicken cartel case has given rise to debate as to whether complying with the government’s policy may be regarded as cartel conduct. In the automatic motorcycle cartel case, the KPPU allegedly executed an inspection similar to that of dawn raid, which, under the current ICL, it is not authorised to do.
GTDT: How is the leniency system developing, and which factors should clients consider before applying for leniency?
YSM, VI & FFN: The current ICL does not provide for the implementation of a leniency system. However, the draft amendment of the ICL will implement the leniency principle, which will allow the KPPU to reduce the sanction imposed for an undertaking that confesses or reports the activity that allegedly violates the ICL.
Further, it is worth noting that in 2014 the KPPU implemented the leniency principle in the Minahasa case by mirroring a similar act conducted by the Federal Trade Commission and the Japan Fair Trade Commission. In this respect, the KPPU gave an incentive in the form of a 50 per cent fine reduction for PT Ericko Grant Dinarto, which was the whistle-blower that reported the violation of the competition act in the tender process. The KPPU also gave an additional fine reduction of 10 per cent to PT Ericko Grant Dinarto for being cooperative in the examination process. The other three companies that also reported the violation were given a 10 per cent fine reduction on the total sanction imposed by KPPU to each party.
GTDT: What means exist in your jurisdiction to speed up or streamline the authority’s decision-making, and what are your experiences in this regard?
YSM, VI & FFN: There is no settlement procedure or other binding resolution for a party to resolve liability for an alleged violation with the purpose of speeding up the decision-making. The KPPU will open a formal investigation once it has discovered the violation of the ICL. If the KPPU states that the investigation result is sufficient, it will proceed to the hearing process of the investigation for further formal examination until it issues its decision.
GTDT: Tell us about the authority’s most important decisions over the year. What made them so significant?
YSM, VI & FFN: Bid-rigging cases are still dominating cartel enforcement and no cartel case outside tender was initiated or decided by KPPU in 2017. This apparent reduced rate of enforcement by the KPPU may be the result of two major events: the amendment of the ICL (not yet complete) and the selection of new KPPU commissioners. In addition to cartel cases, the only case that is worth noting from last year is an abuse of dominant position case that involves the largest producer of bottled drinking water. The KPPU found the producer guilty in impeding its competitor’s activity. The case was quite controversial as it challenged the liability of a company over the individual action of one of its employees.
GTDT: What is the level of judicial review in your jurisdiction? Were there any notable challenges to the authority’s decisions in the courts over the past year?
YSM, VI & FFN: The ICL provides a mechanism for defendants to file an appeal against the KPPU’s decision. A district court will serve as court of first instance where it has authority to uphold, overturn or self-adjudicate the KPPU’s decision. If the parties are not satisfied with the district court’s decision, they may file an appeal to the Supreme Court. The KPPU used to provide statistics of appeals cases, both at the district court and Supreme Court level, in its annual report, where it included information on the numbers of appeals and their status.
The most noteworthy appeal decision in the past year was the North Jakarta District Court decision that overturned a KPPU decision in the chicken cartel case. The appeal judges considered that the culling of day-old chicks by several day-old-chicken producers was legal as it was based on a formal instruction from the government to solve the issue of oversupply. The KPPU is filing an appeal to the decision with the Supreme Court.
“If a report includes a compensation request and is within the KPPU’s jurisdiction (ie, if it concerns competition), it will proceed directly to the examination stage.”
GTDT: How is private cartel enforcement developing in your jurisdiction?
YSM, VI & FFN: Pursuant to KPPU Regulation No. 1 of 2010 concerning case handling procedure, the KPPU accepts two types of report about one or several companies: a third-party complaint with or without a request for compensation. If a report includes a compensation request and is within the KPPU’s jurisdiction (ie, if it concerns competition), it will proceed directly to the examination stage without having to pass the investigation stage. The examination stage of the report with a request for compensation puts the reporting party directly as the challenging party during the hearing. Thus the parties involved here are the reporting party, the reported party and the commissioners of the KPPU who will then decide on the case. However, there is currently no precedent for this.
As already mentioned, the KPPU can initiate a competition case based on its own initiative. If any third party is planning to seek compensation, it must lodge a report with a compensation request to the KPPU before the examination of the case commences.
GTDT: What developments do you see in antitrust compliance?
YSM, VI & FFN: In December 2016, the KPPU has actively introduced the Guideline for the Competition Compliance Programme (the Compliance Guideline) to be used as a reference for companies establishing internal compliance programmes. The KPPU expects that the Compliance Guideline will help undertakings that are conducting business activities and establishing how to interact with suppliers, competitors and consumers in accordance with the principles of fair business competition as regulated in the ICL. Unlike in some other jurisdictions, the KPPU has clarified that adhering to the Compliance Guideline does not necessarily relieve undertakings from being subject to law enforcement if they violate the ICL.
Following the Compliance Guideline, the KPPU established a compliance course where it provides training to undertakings in the form of a one-day workshop. To the best of our knowledge, it only conducted one workshop in 2017. This is likely to be because, among other things, no technical guidance illustrating the implementation of the Compliance Guideline has been issued. The Guideline only mentions the framework of the compliance report, which consists, among other things, of the company’s commitment to fair business competition by identifying the potential infringing element.
GTDT: What changes do you anticipate to cartel enforcement policy or antitrust rules in the coming year? What effect will this have on clients?
YSM, VI & FFN: As is widely known, the ICL is in the process of being amended and there has been a lot of intense discussion between the parliament and the government. The latter has released its version of the list of discussion topics regarding the latest draft amendments to the ICL circulated by the parliament in mid-2017, which proposes significant changes. There are several crucial issues related to cartel enforcement in the amendment, as follows.
The draft introduces provisions that provide an opportunity for the whistle-blower to have their fine reduced by participating in a leniency programme. The draft does not elaborate on the procedures, stating that they will be address in a government regulation. The leniency programme will not apply to conspiracy during tender or bid rigging. Leniency might also be granted to a firm making a confession, which makes it easier for the antitrust enforcer to produce proof. Leniency programmes could reveal conspiracies that may otherwise not be detected by the antitrust authority and make the investigation more efficient and effective.
Increase in administrative fines
The existing law regulates that the amount of fines that can be imposed by the KPPU cannot be less than 1 billion rupiahs and cannot exceed the amount of 25 billion rupiahs. The government has proposed that the amount of the fine should be a maximum of 25 per cent of the company’s turnover associated with the alleged violation during the period of infringement.
With regard to the proposed revised amount of fines, the leniency programme is the most convenient option for a business to mitigate its risk if it realises that it has been involved in any cartel arrangement.
The Inside Track
What was the most interesting case you worked on recently?
Recently we handled the appeal of the KPPU’s decision in the chicken cartel case where we firmly objected to an allegation of cartel conduct by way of limiting production unlawfully. The case originally came from a written and formal instruction from a high-ranking ministerial officer to several providers of day-old chicken to cull their products in order to solve the oversupply issue. The culling was done, and it was monitored openly, including by government and universities. The KPPU argued that the government instruction facilitated the day-old-chicken producers to adjust their production unlawfully. The appeal judges shared our view that the culling was lawful because the providers complied with a legitimate government instruction, and the district court overturned the KPPU’s decision. The KPPU has filed an appeal with the Supreme Court.
If you could change one thing about the area of cartel enforcement in your jurisdiction, what would it be?
The problem with proving the existence of cartels in Indonesia is the lack of the KPPU’s competency in collecting direct evidence. In order to respond to such difficulties, the KPPU may use indirect evidence to prove the allegation of cartel conduct. However, the legal certainty of indirect evidence is still debated in Indonesia. Several KPPU decisions were dismissed at the level of appeal because the indirect evidence was not recognised under Indonesian law. Therefore, a provision about indirect evidence should be inserted in the Competition Law for the purpose of legal certainty in the investigation process of cartel violation.
Yogi Sudrajat Marsono, Vovo Iswanto and Farid F Nasution
Assegaf Hamzah & Partners