All questions

Cartels

The prohibition under the ICL covers several forms of cartel behaviourr, including price fixing, production arrangements, market allocation, boycotts, bid rigging, and other horizontal arrangements that may restrict competition or harm consumers.

The prohibition of cartels, as well as other stipulations under the ICL, applies to an undertaking, which is defined as any individual or business enterprise, whether incorporated or otherwise, established and domiciled or conducting activities within the territory of the Republic of Indonesia, whether individually or jointly through agreement, in the form of various operations in the economic sector. Although KPPU has included individuals as reported parties in several cases, there is still some debate over whether the ICL applies to individuals.

Violation of the ICL is subject to several forms of administrative sanctions. Should KPPU conclude that a violation has occurred it has the power to:

  1. annul the agreement that is in violation of the ICL;
  2. impose a fine in the amount of 1 billion rupiah up to 25 billion rupiah; and
  3. award compensatory damages incurred as a result of anticompetitive conduct.

Even though the ICL also stipulates criminal sanctions in the form of imprisonment and criminal fines, such sanctions are only applicable when an undertaking has obstructed the investigation or examination carried by KPPU or did not comply with a legally binding KPPU decision. The enforcement of criminal sanctions is under the jurisdiction of the National Police and not KPPU, since KPPU is only authorised to impose administrative sanctions. To date there has been no official guideline on how to carry out this criminal sanction procedure.

There is no stipulation regarding formal leniency programmes, an 'immunity plus' policy, 'plea bargains' or other forms of binding settlement, or programmes aimed at detecting cartels under the current ICL. KPPU in its decision might consider the cooperation offered by the reported party as a mitigating factor in determining the imposed fine.

There have been discussions and attempts to implement a leniency programme through amendments of the ICL. Based on the latest draft of the amendment that is available to the public, KPPU will have the authority to grant a reduction in the fine to undertakings that admit and report certain anticompetitive agreements. The details regarding the procedure for such leniency programme are still unclear, since the latest draft only stipulates that further provision on the leniency programme will be stipulated in a KPPU Regulation.

i Significant cases

There are no cartel cases that can be considered as 'significant' in 2017 and 2018 owing to to the small number of cases handled by KPPU in the past two years. The only cartel case in 2018 related to alleged bid-rigging practice, while in 2017, there were only five cartel cases and all of them related to alleged bid-rigging practice.

However, the Supreme Court in September 2018 annulled the KPPU's decision in the day-old-chick cartel case and many considered this as a ground-breaking one. KPPU initially launched its formal examination in 2016 following the rise of the price for live bird products since 2013. Since the fourth quarter of 2013, the poultry industry in Indonesia has been dealing with oversupply of day-old-chick final stocks (DOC FS), which led to the decline of the price for live bird products in the market. Such price decline has caused significant loss for breeders since the selling price of live bird products has gone below the production cost. In 2015, a high-ranking official in the Directorate General of Livestock and Veterinary Health Services of the Ministry of Agriculture stepped in to attempt to overcome this issue and delivered written and verbal instructions to poultry producers that were aimed to stabilise the market. One of the instructions required poultry producers to dispose a portion of their parent stocks in order to lower the production of DOC FS. In this matter, KPPU ordered all 12 poultry producers to fix the output together and fined them a total of 119,670,012,000 rupiah.

In 2017, the West Jakarta District Court overturned the KPPU's decision, stating that written and verbal instruction from a high-ranking official in the Directorate General of Livestock can be considered as a government policy. Therefore, the disposal of parent stocks by the poultry producers must be considered as a form of compliance with a government policy. In 2018, the Supreme Court upheld the West Jakarta District Court decision, which acknowledged that actions made by undertakings pertaining to instruction from government officials are exempted from the provisions in the ICL. The Supreme Court decision is unprecedented since such consideration has never been adopted in any previous decisions from the Supreme Court.

As of 2019, we can still expect developments on the chicken cartel case, as KPPU has filed a civil review against the Supreme Court decision.

ii Trends, developments and strategies

According to KPPU's official media releases, KPPU is currently examining four shipping liner companies offering freight services from Surabaya to Makassar over alleged cartel activity. KPPU is also focusing on its investigation of an alleged cartel among airlines in several aspects of the industry, among others, the alleged fixing of ticket prices and the paid baggage service.

iii Outlook

Reflecting on the close coordination between the government and the House of Representatives as of the end of 2018 and the beginning of 2019, there is a possibility that the amendment of the ICL could be enacted in 2019. The enactment of the amendment will bring major changes to cartel enforcement by KPPU, through the introduction of the leniency programme, which is expected to provide an efficient tool for KPPU in detecting cartels and is in line with competition law enforcement best practices in other jurisdictions. The leniency programme will be a very attractive option for undertakings that are involved in an anticompetitive agreement, considering the amendment will likely introduce higher fines compared to the current ICL. The latest draft sets the maximum fine at 25 per cent of an undertaking's total turnover in the relevant market during the period of violation.

However, there is also a possibility that the enactment of the amendment will be postponed following numerous criticisms that consider the provisions in the draft amendment to be incriminating towards undertakings.