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The primary legislation governing antitrust practices in Indonesia is Law No. 5 of 1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition (last amended by Government Regulation in Lieu of Law Number 2 of 2022 Concerning Job Creation, which has been stipulated as Law by virtue of Law Number 6 of 2023), commonly known as the Indonesian Antitrust Law (IAL).

Enacted shortly after the monetary crisis that hit Indonesia in 1998, the IAL incorporates elements from German antitrust law, as well as internationally recognised standards issued by the United Nations Conference on Trade and Development (UNCTAD).

Key provisions of the IAL include, among other things, the prohibition of agreements or actions that restrict competition and unfair business practices, such as cartels, closed agreements, vertical integration and abuse of dominant positions, as well as the regulation of mergers.

For antitrust supervision purposes, the IAL mandates the establishment of the Commission for the Supervision of Business Competition (Komisi Pengawas Persaingan Usaha, or KPPU), a government body directly responsible to the president of the Republic of Indonesia. The KPPU is vested with broad powers to oversee business competition and enforce the law through investigations and the imposition of fines and/or other forms of penalties on companies found guilty of anticompetitive behaviour.

Due to its rushed enactment, the IAL has faced criticism for not adequately addressing Indonesia’s rapidly evolving economic landscape and complex antitrust issues. To fill regulatory gaps, the KPPU occasionally issues regulations and guidelines, although their legal standing within Indonesia’s legal hierarchy has been questioned by practitioners. Nonetheless, these regulations and guidelines are generally accepted and utilised by businesses as references in their day-to-day operations.

This article highlights several landmark cases adjudicated by the KPPU and focuses on its views and interpretations concerning closed agreements and cartels, particularly how the KPPU addresses regulatory gaps in these cases. It also briefly discusses merger control rules under the IAL, which adopts a post-merger approach, and highlights recent developments in the government’s plan to amend the IAL.

KPPU on landmark cases

Closed agreements. Article 15 of the IAL prohibits agreements that prevent other parties from engaging in similar transactions, including exclusive agreements, tying agreements and vertical agreements on discounts.

In a notable 2006 case involving one of Indonesia’s largest cement producers, the KPPU ruled against the cement producer for establishing a consortium of distributors. Through this consortium, the cement producer restricted distributors from selling products from other producers and limited their sales to designated customers and regions only.

The KPPU determined that this action violated Article 15(1) of the IAL, which explicitly prohibits businesses from compelling or limiting their buyers to supply or otherwise not resupply goods to certain parties and/or locations.

The cement producer appealed up to the cassation level, but the appeal was rejected by the Indonesian Supreme Court, affirming the KPPU’s decision that the cement producer had violated the provisions of article 15(1) of the IAL.

While article 15 of the IAL is considered as per se illegal prohibition, requiring no analysis of the impact of the closed agreement, as also notably absent in the KPPU’s analysis of the cement case, yet many practitioners believe that it is crucial for the KPPU to assess the impact of the agreement on the market (rule of reason) for objective analysis.

This perspective is particularly relevant in cases involving multiple distributors where exclusive distribution agreements can be commercially sensible, for example, to avoid intra-brand competition at the distributor level. Some experts also support this view, adding that exclusive distribution agreements can provide certainty of distribution, reduce costs and eventually result in increased efficiency.

Acknowledging these concerns, the KPPU has signalled a shift towards adopting the rule of reason approach by issuing KPPU guidelines on closed agreements under KPPU Regulation No. 5 of 2011, where the KPPU indicates that the rule of reason approach is more sensible for adjudicating closed agreement cases under article 15 of the IAL.

Cartels. Article 11 of the IAL and its implementing regulations, issued by the KPPU, set the general rules on cartels, including:

1. Price fixing (article 5 of the IAL);
2. Market allocation (article 9 of the IAL); and
3. Group boycotts (article 10 of the IAL).

Price fixing, also known as a hardcore cartel, and group boycotts fall under the “per se rule” principle.

In fact, cartels have been among the most “actively investigated cases” by the KPPU, with more than 20 cartel cases documented in the KPPU’s database between 2003 and 2023.

Proving the existence of a cartel has always been challenging for the KPPU due to stringent requirements under the IAL, which mandate the KPPU to rely only on direct evidence. In a landmark 2017 case, however, the KPPU insisted that communication between parties through high-level employee meetings and concerted actions linked to price parallelism should be deemed hard evidence of price fixing.

Despite facing criticism, the KPPU held its position and found the implicated companies guilty of price fixing based on circumstantial evidence. The KPPU’s decision was upheld by the Supreme Court, marking it as one of the first cases where the use of circumstantial evidence was accepted in Indonesian courts.

Following from this, in handling competition cases including cartel cases, the KPPU, through its regulations, continues to acknowledge the admissibility of circumstantial evidence, whether economic evidence (i.e. the use of economic postulates supported by quantitative and/or qualitative data processing methods) or communication evidence (i.e. a meeting or communication with or without explaining the substance of the meeting or communication).

This has prompted various reactions from practitioners and scholars who believe that reliance upon indirect evidence may pose serious challenges.
For example, the pattern of price parallelism in the market could naturally occur due to pure business competition rather than an intentional price fixing agreement.

To avoid potential legal and financial issues, businesses should carefully conduct their activities and seek advice from local counsel before engaging in communications with other businesses, including association meetings and even casual interactions.

Merger control

Unlike many other jurisdictions, Indonesia mandates a compulsory post-merger notification requirement, which also applies to offshore mergers and transfers of assets (both tangible, such as land and factories, and intangible, such as intellectual property rights and consumer data).

The post-merger notification obligation is triggered only if specific conditions are met cumulatively, such as involving non-affiliated parties, resulting in a change of control, exceeding certain Indonesian asset and/or sales thresholds, or with all transacting parties having assets and/or sales in Indonesia.

Notifications must be submitted to the KPPU within 30 business days of the merger’s effective date. Failure to meet the deadline may lead to substantial monetary fines. Therefore it is crucial for businesses to engage local counsel to effectively navigate compulsory post-merger notification requirements.

New antitrust bill

A new antitrust bill is currently under parliamentary review. The bill introduces a pre-merger filing regime to replace the existing IAL. The timeline for its enactment remains uncertain, but parties should monitor potential changes that could impact current transactions.

While the bill promises enhanced detection of anticompetitive practices before mergers, concerns linger about potential delays in the merger process that could affect the valuation of the target company.