Interim measures until full implementation of anti-trust laws delayed since 1999, announced by Supervisory Commission of Business Competition ("KPPU") on 13 May 2009, including voluntary pre-notification procedure.
Law No. 5 of 1999 regarding the Prohibition of Monopoly Practices and Unfair Competition (the “Anti-Trust Law”), will prohibit mergers, consolidations or acquisitions of shares resulting in a monopoly and/or unfair business competition.
The Anti-Trust Law applies to all industry sectors, except where explicitly exempted by the KPPU. Failure to comply with the Anti-Trust Law would incur sanctions of Rp5 billion to Rp100 billion for non-compliance and could result in revocation of business licences.
Implementation and interim measures
As the Anti-Trust law is still not yet fully implemented, the KPPU adopted Regulation 1 of 2009 on 13 May 2009 (the "Regulation") which provides for interim measures to address competition matters until the introduction of the government implementation regulation for the Anti-Trust Law. Under the Regulation, notification to the KPPU is required if a merger or consolidation results in the merged or consolidated company having:
For all industry sectors:
- control over the relevant market exceeding 50% of market share; or
For non-banking/financial sector related transactions:
- asset values exceeding Rp2.5 trillion; or
- turnover exceeding Rp5 trillion.
For banking/financial sector related transactions:
- asset values exceeding Rp10 trillion; or
- turnover exceeding Rp15 trillion.
In the case of acquisitions, notification to the KPPU is also required for:
A corporate share acquisition of:
- at least 25% of shares with voting rights in the acquired company; or
- less than 25% shares with voting rights resulting in a change of control of the acquired company;
and in the case of an asset purchase, where there is an acquisition of assets:
- resulting in the change of control in the business; and
- resulting in control over the market;
where such acquisition (shares or assets) is to the value of those figures provided for mergers or consolidations (above) and in any event, where such acquisition results in control over 50% of the relevant market.
Such transactions include mergers, consolidations or acquisitions of/by:
- a foreign entity operating in Indonesia and an Indonesian entity;
- two or more foreign entities, where one such entity operates in Indonesia;
- a foreign entity and an Indonesian entity; or
- any other mergers involving foreign elements (a broad definition to be determined on a case by case basis by the KPPU).
Under the Regulation, a pre-notification can be made following the execution of a memorandum of understanding or similar document between the parties to reflect the planned transaction. It is made on a voluntary basis, by one or more parties, in order to obtain the views of the KPPU on the proposed transaction. The KPPU will issue an initial opinion of non-objection, objection, or qualified objection to the proposed transaction.
The advantage of making such a pre-notification is that the KPPU would only object to the transaction post-completion to the extent that it differs from the transaction detailed at the pre-notification stage, thus affording the parties a greater degree of compliance certainty – particularly after the introduction of the government implementing regulation which is expected to provide for sanctions for non-compliance.
However, such pre-notification will inevitably result in the transaction ceasing to be confidential, and given the difficulties this may present in the Indonesian business environment, particularly for listed companies, it is unlikely that in most cases a pre-notification will be in the parties' best interests. This will need to be assessed on a case by case basis.