"Dawn raids" - unannounced searches of businesses and residences - are a tool of choice for antitrust investigators worldwide. By arriving without warning to scrutinize records, seize equipment and data, and question personnel, competition authorities can directly inspect materials as maintained in the normal course of business and exploit the shock of the raid when interviewing witnesses. Recent actions by Indonesia’s principal competition authority, the Business Competition Supervisory Commission (KPPU), portend an increased threat of dawn raids in Indonesian antitrust investigations.
Dawn raids in the Motorcycle Investigation
On 20 February 2017, the KPPU published its determination imposing fines of IDR47.5 billion (approximately US$3.56 million) on the Indonesian subsidiaries of two foreign motorcycle manufacturers for price fixing in violation of Law No. 5 of 1999 concerning Prohibition of Monopolistic Practices and Unfair Business Competition (the "Indonesian Competition Law").1
During the course of its preliminary investigation, the KPPU conducted its first dawn raid.2 KPPU officers arrived unannounced at one of the motorcycle manufacturers offices in Jakarta, and then proceeded to collect evidence and interview one witness.3 The manufacturer's counsel subsequently objected that the KPPU infringed the company's right to due process of law by inspecting the premises, requesting documents and interviewing a witness without any advance notice to the company.4 The KPPU disagreed, noting in its published decision that Article 36 (i) of the Indonesian Competition Law authorizes the KPPU to obtain, examine and evaluate letters, documents, or other evidence during preliminary investigations.5 The KPPU decision also cited Article 31 (2) of KPPU Regulation No. 1 of 2010 regarding the Case Handling Procedure, which allows the KPPU during preliminary investigations to conduct "local examination" (pemeriksaan setempat).6 Moreover, the KPPU's published decision characterized the company's cooperation during the dawn raid as voluntary.7 The KPPU observed that "based on the evidence it cannot be found there was taking of documents forcibly at the location by the investigator; in fact the investigator's team conducted local examination of a witness …".8 The manufacturer filed an appeal to the East Jakarta District Court on 27 March 2017, and the appeal is still pending.9
The extent of the KPPU's authority to enter premises, seize evidence, and question witnesses without advance notification or consent remains controversial. Other Indonesian laws authorizing police, customs and other law investigative bodies to conduct unannounced raids and seize evidence use the terms "search" (penggeledahan) and "seizure" (penyitaan).10 Searches and seizures often require judicial warrants.11 Similarly, "local examination" (pemeriksaan setempat) is a term used in Indonesian civil procedure to describe judicial inspection of large or immovable objects that cannot be produced in court.12
During recent legislative debate over amendments to the Indonesian Competition Law, draft provisions explicitly empowering the KPPU to conduct "searches and seizures" were proposed and ultimately dropped.13 Indonesian media reported that the proposal was abandoned due to concerns about further expanding the investigative powers of the KPPU, which already enjoys the power to determine whether conduct infringes the Indonesian Competition Law and directly impose penalties.14 However, on 30 May 2017, the KPPU Chairman commented that the government and the legislature might still reach a consensus on empowering the KPPU to conduct "searches and seizures."15
KPPU cooperation with police
An alternative tactic is for the KPPU to cooperate with the police in conducting searches and seizures.16 On 20 July 2017, the KPPU accompanied the police in conducting a dawn raid of the premises of PT. Indo Beras Unggul, a subsidiary of an Indonesian public company, for allegedly misrepresenting the ingredients of rice sold to consumers.17 While the police investigated potential criminal offenses (such as unfair trade practices to mislead the public),18 the KPPU focused on potential antitrust violations (such as monopoly practices).19 This approach may not, however, be viable in cases of suspected antitrust violations involving no suspicion of criminal conduct.
Increased regulatory risks
Multinational companies active in Indonesia may face increased risks of KPPU enforcement actions in the future. The pending amendments to the Indonesian Competition Law would extend its extraterritorial reach to cover foreign conduct impacting Indonesia. 20 If the amendments are passed, the KPPU might target international cartels and other foreign anticompetitive conduct - and it might rely on dawn raids of local companies to acquire evidence. Many companies have adopted "dawn raid protocols" for responding to unannounced on-site inspections in other jurisdictions. With the KPPU’s demonstrated readiness to conduct dawn raids, dawn raid preparations should be extended to Indonesia.