ICC scrutinizes rising crude palm oil prices

Following calls to investigate the crude palm oil industry, the authority carried out a study and issued recommendations to the Government to lessen entry barriers to the industry.

During this past quarter, there have been public calls for the Indonesian Competition Commission ("ICC") to investigate whether the crude palm oil ("CPO") industry has acted as a cartel, following increases in the price of cooking oil. CPO is the primary material for cooking oil in Indonesia. In response, the ICC initiated a market study.

On 24 January 2022, the ICC concluded that the price increases were in line with the increase in demand. Demand for CPO has increased due to the growth of the biodiesel industry, lower export taxes in India, and an increase of demand for fuel from abroad. The position of CPO as a global commodity has also made it difficult for domestic cooking oil producers to compete against foreign buyers. High export prices means CPO producers will not give priority to domestic buyers. Meanwhile, the ICC also stated that the current government policies have not encouraged the growth of the cooking oil industry as the regulations still limit business competition.

The ICC recommends that the Government should revoke regulations that create entry barriers for new business actors in the cooking oil industry, including local and small-medium scale business actors, to increase the number of competitors in this industry.

This case is a recent example of the ICC declining to take immediate action in response to public outcry. There have been precedents when the ICC eventually launched an investigation, such as in cases when its recommendations were not implemented by the Government.

Competition law reforms to be re-done by 2023

Competition law reforms which were passed as part of an Omnibus Law in 2020 will have to be redone after the Law was found to be unconstitutional.

On 3 December 2021, the Indonesian Constitutional Court ruled that the 2020 Omnibus Law on Job Creation was conditionally unconstitutional on the ground that the process by which it was drafted violated the Constitution. The Government has been given two years to "re-do" the legislation of this law, this time in compliance with constitutional guarantees, among others by ensuring appropriate level of public participation. In the meantime, the Omnibus Law will continue to be in force. The Court ruled that if the Government does not implement this remedy as required, the Laws which were replaced by the Omnibus Law will come back into force so there will be no legal vacuum.

By way of background, the Omnibus Law revised some provisions of the Indonesian Competition Law. Among other things, it increased the maximum fine for violation of Competition Law. Previously this was set at IDR 25 billion. Now, fine may be imposed up to a maximum of either 50% of profit or 10% of revenue in the relevant market. It also abolished criminal liability for violation of Competition Law, except for obstruction of justice. If the Government fails to properly redo the Omnibus Law by 2023, these revisions will be undone. Financial risk for violations will be decreased while the risk of criminal liability will return.

Currently, there is no indication of any political will to substantially revise the Omnibus Law. Nevertheless, given the Constitutional Court's order to increase public participation, we may see pressure on the Government to revise the substance of the Law, including provisions relating to the Competition Law.