On 20 September 2017, the Constitutional Court issued Decision No. 85/PUU-XIV/2016 which amended Law No. 5 of 1999 on the Prohibition of Monopolistic and Unfair Business Practices (the 'Indonesian Competition Law'). The main changes introduced by the Constitutional Court's decision related to the scope of the 'other parties' referred to in the provisions on conspiracy and the powers of the KPPU (Komisi Pengawas Persaingan Usaha, the Indonesian Competition Authority).
'Conspiracy' is currently regulated under Articles 22, 23, and 24 of the Indonesian Competition Law. The original language reads as follows:
|Article 22||An undertaking is prohibited from conspiring with other parties in arranging or deciding the winner of a tender which may result in unfair business competition.|
|Article 23||An undertaking is prohibited from conspiring with other parties in obtaining information on its competitors which is classified as 'trade secret' and which may result in unfair business competition.|
|Article 24||An undertaking is prohibited from conspiring with other parties in impeding the production and/or marketing of goods and/or services of a competitor with the purpose of limiting supply in a particular market, whether in terms of quantity, quality, or delivery times.|
The term 'other parties' in these articles was drafted with the intent of widening the concept of 'bid rigging' under Indonesian Competition Law to include both horizontal conspiracy between the participants of a tender in 'rotating' and arranging the winner of the tender, as well as vertical conspiracy between the tender committee and bidders participating in the tender. This intent was then adopted in KPPU Regulation.
The Constitutional Court opined that 'conspiracy' can only occur if at least 2 business undertakings conspire to act in contravention of the law in order to reach a mutual objective. The way the law currently reads allows for too wide an interpretation and the court held that 'other parties' should be interpreted as 'other parties related to another undertaking'.
Following the Constitutional Court's decision, Articles 22, 23, and 24 of the Indonesian Competition Law consequently read as follows:
|Article 22||An undertaking is prohibited from conspiring with another undertaking and/or other parties that are related to that other undertaking in arranging or deciding the winner of a tender which may result in unfair business competition.|
|Article 23||An undertaking is prohibited from conspiring with another undertaking and/or other parties that are related to that other undertaking to obtain information about its competitors which is classified as a 'trade secret' and which may result in unfair business competition.|
|Article 24||An undertaking is prohibited from conspiring with another undertaking and/or other parties which are related to that other undertaking to impede the production and/or marketing of the goods and/or services of a competitor for the purpose of restricting supply in a particular market, whether in terms of quantity, quality, or delivery times.|
The Constitutional Court further opined that the essence of 'conspiracy' is where an undertaking conspires with another undertaking – therefore, even if the law is extended to 'other parties', there must be a clear link that the 'other party' is connected or related to that other undertaking. The absence of a link between the 'other party' and the other undertaking will rebut the 'conspiracy' allegation.
This change will require the KPPU to shift its approach to the enforcement of bid rigging offence under Article 22 as its biggest case loads to date.
On the question of whether the KPPU has the power to issue a KPPU Regulation which operates as a regulation as well as an interpretation of the law, the Constitutional Court stated their view that Article 35(f) of the Indonesian Competition Law only permits the KPPU to issue guidelines or a manual, and in the same way may only be applied as guidance but not as a regulation.
However, the Constitutional Court did not look further as to whether the contents of the KPPU Regulation issued by the KPPU is in line with the Indonesian Competition Law as judicial review of regulation/legal instrument under the law (undang-undang) is a matter to be submitted before the Supreme Court and, therefore, falls beyond the scope of the Constitutional Court.
The power of the KPPU to 'investigate' (penyelidikan and/or pemeriksaan) in Articles 36(c), 36(d), 36(h), 36(i), 41(1) and 41(2) of the Indonesian Competition Law is to be interpreted within the ambit of the KPPU as an administrative institution. The KPPU may collect evidence for its own inquiries but does not have any pro justitia investigatory functions (penyelidikan and/or penyidikan) as separately provided for in the Indonesian criminal law system’s regulations.
Progress on the Amendment of the Indonesian Competition Law
The Government of the Republic of Indonesia has released its version on the List of Issues (Daftar Inventarisasi Masalah) regarding the draft amendments to the Competition Law which propose dramatic changes to the latest draft amendments to the Competition Law circulated by the House of Representative earlier in mid-2017. The proposal includes, among other matters, a reorganization/restructuring of the KPPU as a government institution, taking the procedural law out of the draft so that it be regulated separately, as well as proposing a different scheme for the pre-notification merger control.
Despite this twist, the aim of finalising the draft amendment before the end of the year is still on track. The selection committee for the next KPPU Commissioners has been decided and the current term of the KPPU Commissioners will end in December 2017. Discussions regarding the draft amendments to the Competition Law are expected to be more intense in order to reach this ambitious goal.