An extract from The Cartels and Leniency Review, 10th Edition

Enforcement policies and guidance

Law No. 5 of 1999 concerning the Prohibition of Monopoly and Unfair Business Competition Practices (the Indonesian Competition Law or the ICL) is the primary law regulating business competition in Indonesia. Chapters 3 and 4 of the ICL, regarding restrictive agreements and activities respectively, set out provisions prohibiting cartel conduct in relation to price, production or market, as well as bid rigging. In addition, provisions on restrictive agreements or activities are contained in other laws and regulations, such as Article 382 bis of the Indonesian Criminal Code, which prohibits unfair competition. Law No. 11 of 2021 concerning Job Creation (the Omnibus Law) has partially amended the ICL, among other things by removing the criminal sanctions for anticompetitive conduct violations and imposing a higher cap on criminal sanctions for obstructing a competition investigation or examination.

The competition authority responsible for the enforcement of the ICL, from research into certain industries, investigations and examinations to the imposition of sanctions, is the Indonesia Competition Commission (KPPU).2 The KPPU may commence investigations and examinations, as well as issue decisions and impose administrative sanctions for all violations of the ICL. The KPPU has the power to summon undertakings, witnesses or experts to obtain, examine and evaluate documents or other instruments of evidence.

The prohibition of cartels under the ICL covers horizontal restricted agreements or cartels through its prohibitions on price-fixing, production arrangements, market allocation, group boycotts, bid rigging and other arrangements, conspiracy or concerted practices that may restrict competition in the market or may cause harm to consumers. In the clause on bid rigging in particular, the ICL does not clearly state whether purely horizontal or vertical arrangements are covered. However, in its guidelines on this matter, the KPPU adopts both arrangements.

The substantive cartel test in the ICL takes either the 'per se illegal' approach or the 'rule of reason' approach in each article. The provisions that employ the phrase 'which may result in monopoly or unfair business practices' generally adopt the rule of reason approach. In the application of the provisions of the ICL, certain conduct or an agreement is considered a violation only after the KPPU has conducted an in-depth assessment to establish whether the conduct or agreement has an adverse impact on the market or on competition. This assessment applies to certain cartel conduct, such as output restriction, market allocation and bid rigging.

The per se illegal approach is adopted in those provisions that do not include the above-mentioned phrase. In this approach, the KPPU does not have to analyse the effect on the market of conduct or an agreement as the existence of a prohibited agreement or conduct is itself considered a sufficient violation of the provisions. This approach is similar to the application of the per se illegal rule in other jurisdictions and is applicable to price-fixing and boycott provisions in the ICL. To date, the KPPU has issued several guidelines relating to cartel assessment, namely guidelines on the assessment of bid rigging, restrictions on output and marketing, and price-fixing.