Newsletter on Indonesian competition law and policy

Vol. 05/II/2009 May 2009

News Pick

Temasek Seeks a Review on MonopolyCase

Temasek holdings Pte, the Singapore-based invest-ment giant, has restarted its legal battle over allega-tions it had breached the country's antimonopolylaws by registering a case review with the SupremeCourt while insisting its innocence... [page 9]

KPPU, Carrefour Trade Dispute Heating Up

The anti-monopoly watchdog has upped the stakesin its competition investigation of PT Carrefour In-donesia, and is now pursuing an examination ofalleged monopolistic practices on the part of theretail giant…[page 10]

© 2009 Komisi Pengawas Persaingan Usaha All Rights Reserved Publish and Design by Institutional Cooperation Division

Quick Highlight

Bid Rigging in Procurement of the Road and Bridge ConstructionService in Sumbawa

...Based on the investigation results conducted by the examination team,Adhi-Metro Jo convincingly performed a conspiracy with the Bid Committeeand Eka Praya Jaya, Ltd. The Bid Committee proved to conducted re-evaluation during the bid process by ignoring the Supporting Letter issuedby local Bank in East Java and Appeal Letter of the Minister of Public...[page 2]

Bilateral Meeting between KPPU and KFTC

...The meeting discussed several important agendas including the latestdevelopment on the competition law and policy implementation, generaldiscussion on competition law and policy, discussion on certain law en-forcement (competition case), the enhancement of co-operation, as well asthe possibility for further co-operation... [page 3]

Competition Law and Intellectual Property Right

...the harmonization between IPR and the competition law stipulates byArticle 50 letter “b”. This article states that the agreement that links withIntellectual Property Rights such as license agreement, patent, trademark,copyright, industrial product design, integrated circuit design, and tradesecret, as well as the franchise agreement was exempted from the provi-sions of Law Number 5 Year 1999... [page 2]

Competition Law and Policy: a Comparison (Report of the Asian Meet-ing Forum in Wellington – New Zealand)

...In ensuring compliance with the legislation it enforces, the Commissionundertakes investigation and where appropriate takes court action; consid-ers applications for authorization in relation to anti-competitive behaviorsand mergers; and makes regulatory decisions relating to access to tele-communications networks and assessing compliance with performancethresholds by electricity lines businesses... [page 4]

Inside

What’s New?Indonesian Merger Regulation did not intended to hampermerger amongst the State Owned Enterprise

Law EnforcementsBid Rigging in Procurement of the Road and Bridge Con-struction Service in SumbawaCompetition Law and Intellectual Property Right

InternationalBilateral Meeting between KPPU and KFTCKPPU Merger Control WorkshopTraining of Trainer: an Attempt to Shaped Trainer in Competition AreaCompetition Law and Policy: a Comparison (Report of the Asian Meeting Forumin Wellington – New Zealand)Appraisal Mission : Competition Policy and Law (CPL) in ASEAN3rd AEGC Workshop: Cost and Benefit of Competition Policy, Law and Regula-tory Bodies

What’s New?

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tively caused the effective shifting of control.

In paying close attention to the merger assess-ment, there are two assessments conducted,namely Initial Assessment and Complete/Comprehensive Assessment. The Initial assess-ment conducted to evaluate the potential occur-rence of monopolistic practice and or unfair busi-ness competition as the result of merger, consoli-dation or acquisition based on the concentrationdegree on the respective market. This assessmentshould be made at the latest in 30 (thirty) days.

The Complete/Comprehensive Assessment wasconducted to evaluate whether there is (or not)any monopolistic practices or unfair business com-petition as the result of merger, consolidation oracquisition, with the consideration of potential anti-competitive behavior, as well as efficiency pro-duced as the result of a merger, consolidation oracquisition on the relevant market. This assess-ment also determine the possibility if a company(or companies) will go bankrupt or exit from themarket without the merger action, so could createa people loss and damaged public interest. ThisComplete/Comprehensive Assessment should bemade in 60 (sixty) days.

This provision concluded that pre-notification doesnot mean to obstruct merger among business ac-tors, as long as the merger process is in line withthe respective regulation and based on the as-sessment by competition agency. The Commis-sion’s regulation provides no exemption onmerger, and thus KPPU’s authority to carry out theassessment of merger in all business sectors.

Indonesian Merger Regulation did notintended to hamper merger amongst theState Owned Enterprise

Indonesia enters a new regime with the implemen-tation of a voluntary pre-merger notification regula-tion (the Commission Regulation No. 1/2009 con-cerning Pre-Notification of Merger, Consolidationand Acquisition) issues by the Commission for theSupervision of Business Competition (KPPU) in 13May 2009.

The Commission’s regulation contained severalprovisions for the business actor in carrying outthe merger activity. These provisions includesgeneral provisions, the regulation purposes, thelimitation of merger threshold, the Initial Assess-ment, the Final Assessment, Assessment Resultand other provisions. As stipulated by the Article 1Paragraph (5) of the regulation, business actorshall be any individual or business entity, eitherincorporated or not incorporated as legal entity,established and domiciled or conducting activitieswithin the jurisdiction of the Republic of Indonesia,either independently or jointly based on agree-ment, conducting various business activities in theeconomic field.

The Commission Regulation No. 1/2009 did notexempt pre-merger notification performs by: theState Owned Enterprise, the Local Owned Enter-prise, and the foreign business actor operated inIndonesia and may impact the domestic market, ifthe merging company assets exceeded 2,5 billionRupiah or the turnover of the merging companyexceeded 5 trillion Rupiah. As for financial serviceindustry (bank and non-bank), the thresholds aredifferent. The current provisions regulate as fol-lows: (1) the merging company's assets exceeded10 trillion Rupiah; or (2) the sales (the turnover) ofthe merging company exceeded 15 trillion Rupiah;or (3) resulted a market control more than 50%(fifty percent) to the relevant market.

Apart from the assets and turnover, pre-notification could be carried out to: (1) the shareacquisition with at least 25% (twenty-five percent)voting rights; or (2) the share acquisition with lessthan 25% (twenty-five percent) voting rights buteffectively caused the effective shifting of control;or (3) the assets or other acquisition that effec-

Bid Rigging in Procurement of the Roadand Bridge Construction Service in Sum-bawa

Commission for the Supervision of BusinessCompetition (KPPU) stated that three reportedparties were proven to breached the Article 22of the Law Number 5 Year 1999 concerningProhibition of Monopolistic Practices and UnfairBusiness Competition (“Law No. 5/1999”). Thethree reported parties, namely Bid Committee,Adhi-Metro Jo and Eka Praya Jaya, Ltd, wereconducted a collusive agreement during pro-curement process of product/service SNVT roadand bridge construction in Sumbawa, road de-velopment package of Sejorong Tetar Lunyuk.In KPPU’s decision issued in May 18, 2009,stipulate that the Commission Council imposefine to Adhi-Metro Jo with the amount of of 1,5billion Rupiah.

The case started with a report on the occur-rence of collusive agreement in the procurementof road and bridge construction project in Sum-bawa, which aimed to determine Adhi-Metro Joas the tender winner. Based on the investigationresults conducted by the examination team,Adhi-Metro Jo convincingly performed a con-spiracy with the Bid Committee and Eka PrayaJaya, Ltd. The Bid Committee proved to con-ducted re-evaluation during the bid process byignoring the Supporting Letter issued by localBank in East Java and Appeal Letter of the Min-ister of Public. While Eka Praya Jaya, Ltd delib-erately did not provide the contract evidence, inorder to win Adhi-Metro Jo.

The collusive agreement managing the tenderwinner was one of prohibited behavior accord-ing to Law No. 5/1999, since it could lessen thefair competition and damaging public interest.

In addition to the imposed fine, the CommissionCouncil also hinder Eka Praya Jaya, Ltd to enterany procurement in NTB province for 1 (one)year commencing from the affirmation of deci-sion. The Commission Council also recom-mended the direct supervisor of the Bid Com-mittee to give administrative sanction, as well asgave a recommendation to the Department of

Law Enforcement

Public Work to carry out other procurement inaccordance with fair competition principles.

Competition Law and Intellectual Prop-erty Right

Along with Free Trade Era and globalization ofinformation and communication, issue on theIntellectual Property Rights (IPR) Law Systemthat linked with the technology development,industrial growth, and world wide trade wereproblems that globally acknowledged. The as-surance on these problems became an impor-tant issue to attract foreign investment to Indo-nesia.

Meanwhile, market arrangement to open a wideopportunity for creating public welfare, as inter-pret as market openness (free entry) is one ofthe reasons why the Law No. 5 Year 1999 con-cerning Prohibition of Monopolistic Practicesand Unfair Business Competition is developed.

In a glimpse, it is foreseen that the establish-ment of IPR concept is against the competitionlaw. But in fact, the two legal spheres werecomplementary in harmonizing the legal systemitself, which is to increase efficiency and devel-oping the economic system.

In Law Number 5 Year 1999, the harmonizationbetween IPR and the competition law stipulatesby Article 50 letter “b”. This article states thatthe agreement that links with Intellectual Prop-erty Rights such as license agreement, patent,trademark, copyright, industrial product design,integrated circuit design, and trade secret, aswell as the franchise agreement was exemptedfrom the provisions of Law Number 5 Year1999. Considering the importance of Article 50letter b, it was foreseen that there must be aspecific explanation concerning this provision.Therefore, based on the provision, KPPU com-piled the Guideline concerning the Provisions ofArticle 50 letter “b’ of the Law Number 5 Year1999.

In order to make the exemption to be inline withthe principles and purposes of competition law,

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then these provisions shall not look literally orconsider as an absolute liberation from all theavailable restrictions. The current exemptions inthat context are as follows:

That the IPR license agreement not auto-matically produce monopolistic practice andunfair business competition;That the monopolistic practice and unfairbusiness competition emerged as the resultof the implementation of license agreementare the one that will be prevented by thecompetition law;That to enact competition law on the IPRlicense agreement, it must be proved that:this IPR license agreement was in accor-dance with the condition determined in theIPR legislation/regulation, and;the existence of factual condition showedthe occurrence of monopolistic practice andunfair business competition;That the exemption provisions towards theIPR license agreement only provided on theIPR license agreement that clearly showsrelevant anti-competitive practices.

In carrying out the IPR provisions of the compe-tition law, a competition law enforcer shall notassuming that IPR ownership was a form to cre-ate market control as regulated by the competi-tion law. The law enforcer shall have a generalview assuring the IPR agreement is inline withthe purpose of competition law, namely to pro-mote the national economic system facing thecurrent free trade era and globalization, encour-age innovation and creativity, as well as to in-crease public welfare.

Bilateral Meeting between KPPU andKFTC

As one of the first competition authority estab-lished in ASEAN region, the Commission forSupervision of Business Competition (KPPU)honored to welcome a visit of Prof. Yong-HoBaek, Chairman of Korea Fair Trade Commis-sion (KFTC) accompanied by his senior officialsand representative of Korean Embassy in Ja-karta. This meeting was held in May 14, 2009 atKPPU office in Jakarta.

The Korea Fair Trade Commission (KFTC) is aministerial-level central administrative organiza-tion under the authority of the Prime Ministerand also functions as a quasi-judiciary body.The Commission formulates and administerscompetition policies, and deliberates, decides,and handles antitrust cases. The KFTC per-forms its roles and duties independently withoutany intervention from an outside organization.The KFTC is committed to four main mandates:promoting competition, strengthening consum-ers' rights, creating a competitive environmentfor SMEs and restraining concentration of eco-nomic power.

The bilateral meeting between KPPU and KFTCaimed to share experience between the twoagencies (KPPU and KFTC). The meeting dis-cussed several important agendas including thelatest development on the competition law andpolicy implementation, general discussion oncompetition law and policy, discussion on cer-tain law enforcement (competition case), theenhancement of co-operation, as well as thepossibility for further co-operation.

The purpose and target of the cooperation wereto increase communication and coordination forthe better application of competition law andpolicy in both countries. It could be achievedthrough several activities, namely through theperiodic meeting and discussions to sharingknowledge and information on several substan-tial problems, workshop and seminar, as well asthe staff exchange.

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During the meeting, Dr. Benny Pasaribu(Chairman of KPPU) provides explanation onthe latest development of competition law andpolicy in Indonesia. KPPU as the competitionsupervisor agency in Indonesia had the strate-gic aims related to the competition law enforce-ment, namely the enhancement awareness frompublic and decision-makers concerning the busi-ness competition, the behavioral change ofbusiness actors, and the increase of people wel-fare. To achieve the purpose, KPPU used sev-eral work indicator, including the price/tariff de-crease in several sectors (such as the telecom-munications sector), the swift product distribu-tion and supplies, the increase of public's ser-vice quality, the procurement of goods and ser-vices as well as permit issue was being moretransparent and more competitive.

KPPU Merger Control Workshop

In order to give legal security for business actorin Indonesia, as well as to anticipate merger andacquisition activity as part of strategy to developand enlarge their business, KPPU ratified Com-mission Regulation Number 1 Year 2009 con-cerning Pre-Merger Notification, Consolidationand Acquisition on May 13, 2009 that will regu-late the implementation of the merger and ac-quisition in Indonesia.

KPPU realized that merger and acquisition ac-tivity will have significant impact to businesscompetition among the business actors in therelevant market, which may impact the con-sumer. Merger and acquisition could increase orlessen the competition, and potentially damageconsumer and public at large. KPPU aimed tocontrol this merger impact through the Guidelineon procedures that regulate aspect and phaseof merger assessment towards merger activity,in order to decide whether or not the mergercould result into monopolistic practice and unfairbusiness competition.

Along with the released of Merger Guideline,KPPU incorporation with UNCTAD (United Na-tions Conference on Trade and Development)and GTZ held a Merger Control Workshop on

May 14-15, 2009. The workshop conducted toincrease the quality of KPPU’s human re-sources in understanding, anticipating and so-cializing the Merger Guideline. The workshopalso attended by several participants from Indo-nesia government agencies (Bank of Indonesia,Department of Justice and Human Right, Indo-nesia Investment Coordinating Board, and Indo-nesia Capital Market and Financial InstitutionSupervisory Agency). Through this workshop,KPPU’s internal officer were expected to beready to handle and carry out the pre-notification and assessment process towardsmerger and acquisition plan conducted by busi-ness actor, as well as carry out the assessmenttowards merger and acquisition processed be-forehand. Acted as speakers and experts in theworkshop were Acting Head of Competition andConsumer Policies Branch UNCTAD, Mr. Has-san Qaqaya, accompanied by Ms. Ulla Schwa-ger, Associate Expert of Competition and Con-sumer Policies Branch UNCTAD, and Mr. FaridF. Nasution, Head of Merger Division of KPPU.

This workshop aimed as a socialization effort toKPPU’s officers and government agencies. Thisworkshop also purposed as a tool of exchang-ing best practices experience of merger ruleimplementation in the other countries.

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Training of Trainer: an Attempt toShaped Trainer in Competition Area

Although it has been ratified since 1999, Indo-nesian competition law is being regarded asnew knowledge in Indonesia. Intensive advo-cacy efforts conducted by KPPU were felt not tobe optimum to promote competition law and pol-icy in Indonesia. Yet, it still acknowledges manybusiness actors, local governments and acade-micians that were not aware of this law as wellas its benefit for economic development. Coin-cided with the one decade celebration of LawNo.5/1999 concerning the Prohibition of Mo-nopolistic Practice and Unfair Business Compe-tition, KPPU once again stressed its endeavorand dedication in socializing competition princi-ples on its entire stakeholder by holding the atraining for the trainer (ToT) program.

In co-operation with United Nations Conferenceon Trade and Development (UNCTAD) andDeutsche Gesellschaft fur Technische Zusam-menarbeit - Implementation of Competition Law(GTZ-ICL) Project, KPPU held “Validation Work-shop Training of Trainer (ToT) for the Competi-tion Manual”, which conducted on May 18-20,2009 at the Borobudur Hotel, Jakarta. Thisseminar was attended by KPPU officer and aca-demicians from various foremost law faculties inIndonesia. Specifically, the chosen participantwas those directly in touch with business com-petition study. This workshop presented two in-ternational experts from UNCTAD, the ActingHead of Competition and Consumer PoliciesBranch UNCTAD, Mr. Hassan Qaqaya, and Ms.Ulla Schwager, Associate Expert of Competitionand Consumer Policies Branch UNCTAD.

“Validation Workshop Training of Trainer (ToT)for the Competition Manual” was an initial stepto achieve the final objective anticipated byKPPU, namely to shape competent trainer incompetition law and policy. Eventually, thesetrainers was hoped to become KPPU’s exten-sion to socialize competition law and policythrough out Indonesia. Actively, these trainersalso hoped to be KPPU’s partner in conductinginternalization of business competition principlesto the public. ToT was an initiative program

based on the fact that competition law advocacyprocess in Indonesia was not yet optimal, dueto limited human resources that makes transferof knowledge process hindered. Therefore,KPPU incorporation with UNCTAD formulates aToT program expected as one of bilateral coop-eration amongst two institutions. Under the ToTprogram, it is aimed that competition advocacyprocess could be conducted in consistent man-ner to achieve the KPPU’s final purpose, theinternalization of business competition princi-ples to the public and policy makers.

As an initial step for the ToT program, UNCTADdeveloped a manual book on competition lawas the future handbook for the trainer. Thismanual was adopted from UNCTAD Manual onCompetition Law accustomed with Indonesiacontext, especially the competition principlesstated in Law No. 5 Year 1999. The ToT Valida-tion Workshop conducted by KPPU and UNC-TAD carried out to ascertain that CompetitionManual compiled by UNCTAD was in accor-dance with Indonesian unique characteristics.

Substances summarized in the manual con-sisted of 10 chapters. These chapters open withthe basic understanding of the competition lawdefinition as well as the benefit and purpose ofthe competition law, to discussions concerningthe concept of natural monopoly as well as theregulation of essential facilities that controlledthe public interest (from the competition lawpoint of view).

The validation process for each chapter con-sisted of 3 stages. First, the UNCTAD expertwill present the contents from related chapter,and then the participants were asked to discussthe main points and evaluate its compatibilitywith Law No.5/1999. The final results of discus-sions will be substance as revision material ofthe manual “Competition Law and Policy forPractitioners”. As a follow up, KPPU and UNC-TAD will develop further the Training of TrainerProgram in forming competent trainer on Indo-nesian competition law and policy with interna-tional certification.

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Competition Law and Policy: a Compari-son (Report of the Asian Meeting Forumin Wellington – New Zealand)

On May 24 2009, the KPPU Chairman, Dr.Benny Pasaribu, was invited by The CommerceCommission of New Zealand to attend a discus-sion forum namely “Asia Forum” in Wellington –New Zealand. The theme of the meeting was“Comparative Study on Sharing Information onIndonesian and Australian Competition Law andPolicy Implementation, Institutional, Arrange-ment, Advocacy Strategy, and Technical Coop-eration Issues”. This meeting was attended bythe Chairman of Commerce Commission, aca-demicians, representatives of New Zealand gov-ernment, as well as business actors in NewZealand.

Amongst Asian countries, the Commerce Com-mission was one of the independent agencieswith a good reputation. The Commerce Com-mission is New Zealand's primary competitionregulatory agency and was established undersection 8 of the Commerce Act 1986.The Com-mission is an independent Crown entity. TheCommission’s purpose is to promote dynamicand responsive markets so that New Zealand-ers benefit from competitive prices, better qual-ity and greater choice. The Commerce Commis-sion enforces legislation that promotes competi-tion in New Zealand markets and prohibits mis-leading and deceptive conduct by traders. Inensuring compliance with the legislation it en-forces, the Commission undertakes investiga-tion and where appropriate takes court action;considers applications for authorization in rela-tion to anti-competitive behaviors and mergers;and makes regulatory decisions relating to ac-cess to telecommunications networks and as-sessing compliance with performance thresh-olds by electricity lines businesses.

Through this visit, KPPU Chairman held an in-tensive discussion with the Chairman of Com-merce Commission, Mark Berry. Mark Berry ex-plained that Commerce Commission in NewZealand handled two functions: First, as theregulator, they have the right to make regulationand policy. Second is law enforcement function,

in which they are restricted only to the prosecu-tion function. The Commerce Commissionprosecuted the business actors for competitioncases in the general jurisdiction court namelyDistrict Court and High Court. If the judge de-cided that the Commerce Commission prosecu-tion could not accepted or null, then CC mustpay all the council expenses during the judica-ture process. If compared with KFTC (KoreanFair Trade Commission) in South Korea, Com-merce Commission in New Zealand had morelimited authority. KFTC, in addition of becomingthe main regulator also had the function of in-vestigation, prosecution and decision determi-nation.

Indonesian competition agency is resembledwith KFTC and European Competition Commis-sion, although with fewer authority. For in-stance, KPPU did not have the authority asregulator (of policy), but KPPU could give thesuggestion and recommendation that could beaccepted or refused by regulator. In law en-forcement, KPPU functioned as the investigator,prosecutor, and judge.

Through out this forum, KPPU could gain bestpractices that could be implemented in theframework of competition law enforcement inIndonesia. For the near future, KPPU must beable to encourage government to publish poli-cies for people. Vital production braches shouldbe controlled by the government. The functionof competition law enforcement is aimed to pro-vide broader and better access to the businessand its actors, including the SME’s. KPPU taskis to ensure that during the implementationprocess, there are no abuses by the businessactors that could harm consumer, such as ex-cessive pricing, scarcity, or low quality of publicservice.

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Appraisal Mission : Competition Policyand Law (CPL) in ASEAN

Cooperation between ASEAN and Governmentof German started with a meeting on November2008 by ASEAN Secretariat and German-BMZ,and followed by a series of meeting of appraisalmission on March and April 2009 to draft thedesign of the cooperation programme on“Competition Policy and Law (CPL) in ASEAN”.Technical Cooperation between ASEAN andGTZ for a duration of three years (Period end2009 – 2012) and shall be recommended thatthe focus would be to create a regional Plan ofAction on Competition Policy 2010-2015, with aspecial focus on capacity development and in-troduction of best practices.

This cooperation was taken place due to a re-quest by the ASEAN Secretariat (ASEC) to theGovernment of the Federal Republic of Ger-many to support the ASEC and ASEAN MemberStates (AMSs) in the field of competition policywith a focus on advisory services and capacitydevelopment.

The concrete meeting to discuss details of thelast meeting’s highlight was conducted in Ja-karta on May 12 – 13, 2009 where agreed onareas of understanding reached between all theparties on the scope of the future programme,the proposed areas of intervention, as well asdetails regarding financing and implementationarrangements. However, the planned projectshall complement the ongoing ASEAN-Germancooperation programme on competition policyimplemented by InWEnt, and that these pro-grammes will be closely coordinated.

The ASEAN region is among the most dynamicand fastest growing regions in the world. Afterrecovering from the economic setbacks of theAsian financial crisis of 1997/1998, the ASEANcountries responded to the emerging challengesof globalization and economic development bycommitting themselves to increased regionaleconomic integration and an open market orien-tation. The ASEAN Economic Community Blue-print acknowledges the importance of competi-tion policy and law in the context of promoting

economic development and integration by spell-ing out the commitment to “endeavour to intro-duce competition policy in all Member States by2015”.

However, the fact that AMSs are at variousstages of development regarding CompetitionPolicy and Law (CPL) where with six out of tencountries having no base of national CPL orcompetition authorities to begin with, along witha relative lack of expertise and resources, havemade the achievement of their regional commit-ment a critical and difficult task. In light of this,the ASEC, the AEGC members, as well as theGerman side agree that technical assistance(TA) is needed to work towards this long-termvision. In this connection, a comprehensive ap-proach and certain degree of flexibility are re-quired to make any proposed TA in this areaeffective and realistic.

The challenges and needs in ASEAN with re-gard to CPL are two-fold, at both the regionaland national level. Given potential resourceconstraints and in order to ensure efficiency andeffectiveness, the objective of the proposed 3-year TA programme would be “the introductionor improvement of the legal framework and/orinstitutional set-up for promoting competition inAMSs”. As such, the programme is designed asa regional programme with two dimensions: (1)strengthening and developing CPL frameworksand institutions on regional and national levels;(2) providing advisory services concerning thelegal, procedural and economic aspects of CPLon national and regional level.

The technical assistance is expected to be de-livered through different means, such as advi-sory and consultancy services, training, studytours, research activities, regional workshopsand symposia, provisions of guidelines and net-working, etc. Target beneficiaries shall includethe AEGC, AMSs and ASEC.

With this in mind, the future programme wouldfollow a two-pronged approach: regional andnational interventions, with the participation ofall stakeholders. The detailed programme plan,including provisions for specific outputs and re-

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sults, shall be translated into operational plansafter the inception of the programme and shallform the basis for systematic impact monitoring.At the regional level, the AEGC and ASECwould be the target beneficiaries, benefitingfrom measures aimed at their institutional devel-opment. AMSs shall benefit from national-levelactivities on institutional development, legalframework development, and advocacy andawareness-raising.

3rd AEGC Workshop: Cost and Benefitof Competition Policy, Law and Regula-tory Bodies

ASEAN Experts Group on Competition recentlyconducted its third training activity aimed for thecompetition authority in ASEAN region. Theworkshop that focused on the Cost and Benefitof Competition Policy, Law and Regulatory Bod-ies was held in Malaysia on May 18-19 2009.This workshop is aimed to share experiencesamong ASEAN countries and developed coun-tries on the development and application ofcompetition law and policy. The two days work-shop was attended by experts from US FTC,OECD, JFTC, USAID, Antimonopoly Bureau ofChina, as well as delegation of ASEAN coun-tries. Indonesia (KPPU) as the member ofAEGC is one of the speakers that took part inthe fruitful workshop.

The first session, “Introduction on the Cost andBenefits of Competition Policy and Law”, dis-cussed a profit one country could obtain whenthey applied competition law and policy in thecreation of competitive market. Empirical evi-dences showed that the application of competi-tion policy could support the state development.Profit of competitive market as result of globalcompetition will enjoyed by large business actoras well as medium and small scale entities. Inimplementing competition law and policy, shortterm social cost is one of possible cost occurs inthe early introduction of competition law. Thus,therefore competition advocacy to the Govern-ment is one of applicable solutions by competi-tion agency to overcome.

Further session was involving “Designing andDeveloping an Effective Competition Law” byCompetition Commission of Singapore (CCS),Competition Administration Department of Viet-nam (CADV) and Japan Fair Trade Commission(JFTC). CCS started to apply competition law in2004. In order to construct an effective competi-tion law, CCS put priority in practices that hadsignificant impact on national economy, had thelong-term effect, always objective and transpar-ent in handling cases, as well as carrying outintervention for better result. While in Vietnam,the competition authority tries to harmonizecompetition policy through coordination, consul-tation, and cooperation with the sectoral regula-tor, so they could review each regulation linkedwith competition principles.

The next theme was “Country Experiences inDesigning and Developing an Effective Compe-tition Law” and presented by JFTC and USFTC. The two countries made a constructiveeffort to create an effective competition lawthrough the law amendment. In Japan, JFTCcarried out the amendment on their competitionlaw in 2005 and stressed the importance of ad-vocacy to gets support from public and busi-ness community for the amendment. While USFTC explained that there is a changing para-digm on business competition law in UnitedStates, in which they began to abandon the “perse illegal” rules and used “rule of reason” rulesin enforcing the competition law. This is exe-cuted due to the reason that the “per se illegal”rule tended to cause two mistakes, which are (i)punishing the not guilty party and (ii) releasedthe guilty party. Nevertheless the use of “rule ofreason” rules must be provided with a strongassumption.

The next theme was “Efficiency of CompetitionRegulatory Bodies” which presented by thedelegation of Vietnam and Indonesia. Vietnamexplained that in an effort to develop good co-operation with other regulatory bodies, VCADconstruct MoU (Memorandum of Understand-ing) between sectoral regulator and competitionagency including cooperation in holding theseminar/workshop to increase the understand-ing of competition law in related sector. Indone-

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sia (KPPU) explained that the harmonisation ofcompetition policy and sectoral regulation couldbe carried out through intensive communicationbetween the two parties through meeting, dia-logue, seminar, cooperation, as well as thecompilation of MoU. The efficiency of Competi-tion Regulatory Bodies could be measured fromthe increase of public welfare, the behaviouralchange, as well as the increase of public andregulator’s interest and awareness concerningcompetition law and policy.

OECD clarifies the development of a regulationanalysis method, the Regulatory Impact Analy-sis (RIA). RIA was very beneficial to analysewhether a Government regulation had an impacton national economy. In order to assist theevaluation process of competition impact,OECD developed the Competition AssessmentToolkit. KPPU shared their experience in apply-ing the Toolkit to analyse the regulation thatsuspected hampered competition. The casewas the standardization of duck feather’s traderegulation in East Java. Duck feather was themain commodity for shuttlecock industry in Indo-nesia. KPPU used the OECD Toolkit to conductthe regulation analysis to conclude that regula-tion applied by East Java government ham-pered the competition process. KPPU sent apolicy advice and recommendation to relatedlocal government to withdraw the regulation.

Temasek Seeks a Review on MonopolyCase

Temasek holdings Pte, the Singapore-basedinvestment giant, has restarted its legal battleover allegations it had breached the country'santimonopoly laws by registering a case reviewwith the Supreme Court while insisting its inno-cence.

Late last year, the Supreme Court in principleupheld a decision by a lower court which ruledthat Temasek was guilty of violating the antimo-nopoly law through its cross-ownership in thecountry's two largest cell phone firms - PTTelkomsel and PT Indosat, as alleged by the

Business Competition Supervisory Agency(KPPU).

The cross ownership, according to the KPPU,could have led to prices fixing. Among the pun-ishments that Temasek must bear is a fine ofRp 15 billion (about US$1.46 million), in addi-tion that the company has had to relinquishownership of one of the two companies.

The decision is actually no longer relevant asTemasek subsidiary Singapore TechnologiesTelemedia (STT) Pte has already sold its entirestake in Indosat to Qatar Telecom (QTel) in adeal worth $1.8 billion.

Temasek now only indirectly owns Telkomsel,through Singapore Telecommunications Ltd(SingTel), another of its subsidiaries. It controlsa 54 percent stake in SingTel, which in turnowns 35 percent of Telkomsel.

Still, despite no longer owning a stake in In-dosat, thus clearing them of the cross-ownership allegation, Temasek would continueto defend its position and continue to seek jus-tice to clear its name of any alleged antimonop-oly infringement, according to Todung MulyaLubis, Temasek's lawyer,.

"Temasek believes that the court can oncemore thoroughly examine our evidence andprove the company's innocence," Todung saidMonday.

He however refused to elaborate on what newevidence the company has to back up its case.Findings of new evidence are a prerequisite be-fore registering a Supreme Court case review.Temasek believes the previous courts had mis-interpreted the anti monopoly law.

"Temasek has never given instructions to sub-sidiaries regarding the managements ofTelkomsel and Indosat. So it cannot be consid-ered as monopolistic (in fixing prices)," said To-dung. (mrs)Source: http://www.thejakartapost.com/news/2009/05/26/temasek-seeks-a-review-monopoly-case.html

News Picks

KPPU, Carrefour Trade Dispute HeatingUp

The anti-monopoly watchdog has upped thestakes in its competition investigation of PTCarrefour Indonesia, and is now pursuing anexamination of alleged monopolistic practiceson the part of the retail giant.

The decision to upgrade the investigation levelwas taken after the Business Competition Su-pervisory Commission (KPPU) found “strongindications” of unfair business practices carriedout by Carrefour during its 30-day preliminaryinvestigation, said communication directorAhmad Djunadi Thursday.

The KPPU now has up to 90 working days tohand down a judgement to Carrefour, which isbeing accused of monopolistic practices in thecountry’s retail sector following its acquisition ofsupermarket operator PT Alfa Retailindo.

KPPU is accusing Carrefour of misusing itsstrengthened bargaining position to charge ad-ditional costs such as promotional fees, and list-ing fees to Carrefour’s suppliers. Such practicesare in violation of the 1999 anti-monopoly law.The bargaining power of Carrefour, KPPUclaimed, had improved significantly since the2008 acquisition of Alfa both with suppliers(market share from 45 to 67 percent) and con-sumers (market share from 38 to 48.4 percent).

Carrefour responded by insisting the allegationswere untrue.“Carrefour’s stance is still the same. Our com-pany does not monopolize the market and doesnot break any trade laws,” responded IrawanKadarman, Carrefour’s corporate communica-tions director.Irawan said that his company has not receivedany letter from KPPU regarding the lengthy in-vestigation.

“Therefore, I cannot give you detailed informa-tion of what our company is going to do,” Ira-wan said.

However, he added that Carrefour would coop-erate and be willing to continue its communica-tions with KPPU in order to find satisfactory so-lutions for both sides. He reiterated the com-pany’s position that based on AC Nielsen’s re-cent research, after the acquisition, Carrefour’smarket share was only 17 percent.

It remains unclear what the consequences maybe for Carrefour if KPPU finds the company tobe in breach of competition rules. Allegationsagainst Carrefour on unfair business practiceshave not only been made in Indonesia.

In 2006, Carrefour was fined US$1.5 million bythe Korean Fair Trade Commision (KFTC) be-cause the retailer was found to have forcedsuppliers to sell goods at heavy discounts forcertain periods, according to KPPU chairmanBenny Pasaribu, after a meeting with KFTC’stop executives Thursday.

In a meeting with Yong-Ho Baek, chairman ofthe Korea’s anti-monopoly watchdog, Bennysaid KPPU and KFTC had discussed the Carre-four case here due to similarities with the casein Korea.

In 2006, KFTC also faced another major caseon an acquisition involving Carrefour. In thiscase it was Eland Retail, a local Korean retailer,which acquired Carrefour in Korea. However,Eland took the KFTC objection to court andeventually won its case. Asked about the possi-bility of the same outcome happening in theCarrefour-Alfa case, with the KPPU possiblylosing the case in court, Benny answered: “Ofcourse the same outcome may happen again.

“That is why KPPU and KFTC have discussedthe case. Both watchdogs try to learn from eachother’s experiences.” (mrs)

Source: http://www.thejakartapost.com/news/2009/05/15/kppu-carrefour-trade-dispute-heating.html

Kompetisia Vol. 05/II/2009

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