Law No. 5 of 1999 concerning Prohibition of Monopolistic and Unfair Business Competition Practices (the Indonesian Competition Law (ICL)) is the primary legislation regulating business competition in Indonesia. Besides being the basis for the prohibition of anticompetitive agreements and conducts, the ICL is also the basis for the establishment of the Commission for the Supervision of Business Competition (or Komisi Pengawas Persaingan Usaha (KPPU)). As the only authority responsible for the enforcement of the ICL, KPPU may initiate investigations and examinations as well as issue decisions and impose administrative sanctions for any violation of the ICL.

Since its establishment in 2000, KPPU has actively enforced the ICL and conducted investigations and examinations in various industries. Up to 2018, KPPU has issued 307 decisions regarding alleged violation of the ICL.2 Among those, 223 decisions were related to bid rigging.

In 2018, KPPU went through a major change in its leadership. In April 2018, the House of Representatives appointed nine new KPPU Commissioners for the 2018–2023 period.3 Such appointment concluded the lengthy selection process that began in mid 2017, which should have been completed in December 2017. This process has affected the enforcement of the ICL by KPPU in 2017 and 2018, which can be seen in the number of cases that were handled by KPPU in those years. In 2017, KPPU handled 10 cases followed by four cases in 2018.4 In comparison, in 2015 and 2016, KPPU handled 22 and 21 cases, respectively.5

Immediately after their appointment, the new KPPU Commissioners emphasised in media releases that they would prioritise the enforcement of the ICL in several sectors: food commodities, automotives, the digital economy, banking, property, and the hospitality industry. Notwithstanding such statement, reflecting on the developments as at March 2019 it is likely that KPPU will focus its enforcement efforts in the airline industry following alleged cartel practice by several airlines.6


The prohibition under the ICL covers several forms of cartel behaviourr, including price fixing, production arrangements, market allocation, boycotts, bid rigging, and other horizontal arrangements that may restrict competition or harm consumers.

The prohibition of cartels, as well as other stipulations under the ICL, applies to an undertaking, which is defined as any individual or business enterprise, whether incorporated or otherwise, established and domiciled or conducting activities within the territory of the Republic of Indonesia, whether individually or jointly through agreement, in the form of various operations in the economic sector. Although KPPU has included individuals as reported parties in several cases, there is still some debate over whether the ICL applies to individuals.

Violation of the ICL is subject to several forms of administrative sanctions. Should KPPU conclude that a violation has occurred it has the power to:

  1. annul the agreement that is in violation of the ICL;
  2. impose a fine in the amount of 1 billion rupiah up to 25 billion rupiah; and
  3. award compensatory damages incurred as a result of anticompetitive conduct.

Even though the ICL also stipulates criminal sanctions in the form of imprisonment and criminal fines, such sanctions are only applicable when an undertaking has obstructed the investigation or examination carried by KPPU or did not comply with a legally binding KPPU decision. The enforcement of criminal sanctions is under the jurisdiction of the National Police and not KPPU, since KPPU is only authorised to impose administrative sanctions. To date there has been no official guideline on how to carry out this criminal sanction procedure.

There is no stipulation regarding formal leniency programmes, an 'immunity plus' policy, 'plea bargains' or other forms of binding settlement, or programmes aimed at detecting cartels under the current ICL. KPPU in its decision might consider the cooperation offered by the reported party as a mitigating factor in determining the imposed fine.

There have been discussions and attempts to implement a leniency programme through amendments of the ICL. Based on the latest draft of the amendment that is available to the public, KPPU will have the authority to grant a reduction in the fine to undertakings that admit and report certain anticompetitive agreements. The details regarding the procedure for such leniency programme are still unclear, since the latest draft only stipulates that further provision on the leniency programme will be stipulated in a KPPU Regulation.

i Significant cases

There are no cartel cases that can be considered as 'significant' in 2017 and 2018 owing to to the small number of cases handled by KPPU in the past two years. The only cartel case in 2018 related to alleged bid-rigging practice, while in 2017, there were only five cartel cases and all of them related to alleged bid-rigging practice.

However, the Supreme Court in September 2018 annulled the KPPU's decision in the day-old-chick cartel case and many considered this as a ground-breaking one. KPPU initially launched its formal examination in 2016 following the rise of the price for live bird products since 2013. Since the fourth quarter of 2013, the poultry industry in Indonesia has been dealing with oversupply of day-old-chick final stocks (DOC FS), which led to the decline of the price for live bird products in the market. Such price decline has caused significant loss for breeders since the selling price of live bird products has gone below the production cost. In 2015, a high-ranking official in the Directorate General of Livestock and Veterinary Health Services of the Ministry of Agriculture stepped in to attempt to overcome this issue and delivered written and verbal instructions to poultry producers that were aimed to stabilise the market. One of the instructions required poultry producers to dispose a portion of their parent stocks in order to lower the production of DOC FS. In this matter, KPPU ordered all 12 poultry producers to fix the output together and fined them a total of 119,670,012,000 rupiah.

In 2017, the West Jakarta District Court overturned the KPPU's decision, stating that written and verbal instruction from a high-ranking official in the Directorate General of Livestock can be considered as a government policy.7 Therefore, the disposal of parent stocks by the poultry producers must be considered as a form of compliance with a government policy. In 2018, the Supreme Court upheld the West Jakarta District Court decision, which acknowledged that actions made by undertakings pertaining to instruction from government officials are exempted from the provisions in the ICL. The Supreme Court decision is unprecedented since such consideration has never been adopted in any previous decisions from the Supreme Court.

As of 2019, we can still expect developments on the chicken cartel case, as KPPU has filed a civil review against the Supreme Court decision.

ii Trends, developments and strategies

According to KPPU's official media releases, KPPU is currently examining four shipping liner companies offering freight services from Surabaya to Makassar over alleged cartel activity. KPPU is also focusing on its investigation of an alleged cartel among airlines in several aspects of the industry, among others, the alleged fixing of ticket prices and the paid baggage service.

iii Outlook

Reflecting on the close coordination between the government and the House of Representatives as of the end of 2018 and the beginning of 2019, there is a possibility that the amendment of the ICL could be enacted in 2019. The enactment of the amendment will bring major changes to cartel enforcement by KPPU, through the introduction of the leniency programme, which is expected to provide an efficient tool for KPPU in detecting cartels and is in line with competition law enforcement best practices in other jurisdictions. The leniency programme will be a very attractive option for undertakings that are involved in an anticompetitive agreement, considering the amendment will likely introduce higher fines compared to the current ICL. The latest draft sets the maximum fine at 25 per cent of an undertaking's total turnover in the relevant market during the period of violation.

However, there is also a possibility that the enactment of the amendment will be postponed following numerous criticisms that consider the provisions in the draft amendment to be incriminating towards undertakings.


Chapters 3 and 4 of the ICL regulate provisions prohibiting vertical restraint. In addition to the above, KPPU has issued several regulations serving as guidelines for interpreting provisions under the ICL.

The ICL stipulates the following specific prohibitions related to vertical restraints:

  1. resale price maintenance: any agreement with distributors or other undertakings obliging distributors to refrain from reselling or resupplying goods or services below the set minimum price, creating an unfair business competition;
  2. vertical integration: any agreements between businesses at different levels of the production chain with the intention of one business controlling the production of the other business's products, in which the latter's products are used as the part(s) of inputs for the former business;
  3. exclusive distribution agreement: any agreement requiring distributors to only supply or not supply such goods or services to certain parties or in particular places;
  4. tying arrangement: any agreement requiring customers who purchase one product or service to purchase another different product or service (the tied product or service);
  5. discount or rebate: any agreement offering certain prices or lower prices on goods or services that requires customers to purchase other goods or services from suppliers or not to purchase suppliers' competing goods or services; and
  6. market control: any agreement requiring suppliers to engage in discriminatory practices against certain undertakings.

There are no industry-specific provisions or rules applicable under the ICL in general or even more specifically for provisions related to prohibitions of vertical restraint.

When assessing vertical restraint under the ICL, KPPU should undertake an analysis of whether all the elements of the related ICL article have been fulfilled. KPPU should know the facts concerning the vertical restraint background and also the implications of the agreement for all parties. Further, the KPPU should stress its analysis of market structure and whether a dominant undertaking has the ability to abuse its market power. KPPU may also consider whether there are any restrictions on an undertaking's strategy that forecloses access for potential entrants into upstream and downstream markets. Vertical restraint provisions under the ICL adopt the rule of reason approach, which means in order to declare a violation of such articles, the vertical restraint must be proved by (1) the emergence of a negative impact on the market and (2) the motive and economic benefits gained by the undertaking in doing such restraint.

i Significant cases

Since the enactment of the ICL, KPPU has rarely initiated an investigation for cases related to vertical restraint prohibitions. Based on KPPU's official website, during 2018 there were only four cases resolved by KPPU and none of these cases related to restrictive business practices or dominance issues.

In 2017, KPPU issued Decision No. 22 of 2016 on an alleged vertical restraint in the bottled water industry. The reported party in the case was a distributor of bottled mineral water named Aqua. KPPU was of the view that Aqua was the largest brand of bottled mineral water in Indonesia with insignificant competitors.

KPPU found that Aqua had allegedly instructed its sub-distributor, which was the second reported party in the case, to impede the market by prohibiting its wholesalers from selling its competitors' products.

Despite claiming that it never issued the prohibition instruction, Aqua argued that unlike a principal-agent relationship, its distributor was naturally independent and could not in any way be influenced by Aqua's decision. KPPU disregarded the distributorship agreement between Aqua and its sub-distributor and concluded that their relationship was that of an agency.

In this case, KPPU also emphasised that an act of a corporate's employee can be considered as a corporate action, despite the absence of instruction from authorised officials of the company to such employee.

Aqua and its sub-distributor were found guilty and imposed with fines of 13.8 billion and 6.2 billion rupiah, respectively.

ii Trends, developments and strategies

As there are hardly any decisions that relate to vertical restraint prohibition in recent years, there have been no significant developments on the enforcement of the provisions by KPPU.

iii Outlook

With the rise of digital business in Indonesia, we can expect more enforcement of the provisions by KPPU towards companies in digital markets.

For vertical restraint prohibitions, one of the challenges of enforcement would be defining the relevant market. Since vertical restraint prohibitions are closely related to abuse of dominance conducts, the challenges in this respect also include the determination of the market shares in order to accurately conclude the relevant parties' dominance in the market.


In 2017, KPPU published a report regarding digital economies issues in Indonesia. The report was made as part of the Technical Cooperation Agreement with the Australia Indonesia Partnership for Economic Governance (AIPEG) to promote Effective Competition Policy. KPPU also conducted some consultations with several stakeholders that have an interest in Indonesia's digital economy, such as the Indonesian Ministry of Trade, the Financial Services Authority (Otoritas Jasa Keuangan), among others.

The report explains that digital technology is quite disruptive and is transforming the traditional markets and business models. In this era, the relevant stakeholders, such as the government as well as the competition authorities, should be able to protect and empower consumers in a complex and rapidly developing online environment. However, at the same time, the government should be able to maintain the growth of the economy and business, including the growth of digital technology-related businesses.8

Furthermore, the report explains that most of the challenges faced by the government involve the competition between the traditional and digital services providers. Since the governing regulations related to the digital business operations are not similar to the traditional ones, the traditional service providers often face an uneven playing field in the market.

The report also describes that the regulation of digital services is considered challenging as regulators must determine whether there is a basis for regulation; whether the regulation will restrict the market entry; and whether the regulation is practical and enforceable. If regulation is too strict, it can hamper innovation and increase costs, as well as restrict the growth of the Indonesian economy in the future. From a competition perspective, the issue that arises is whether the entry barriers can prevent the competition, and whether they are natural or induced (e.g., by anticompetitive practices or exclusive licences). As such, any regulatory framework on digital technology aspects must be flexible in order to keep pace with and benefit from technological advances. The new framework should also be able to reduce the entry barriers while at the same time maintaining consumer protection and the certainty of rules.9

Further, the report also recommends that to underpin the digital economy and enhance trust from the consumers, a coherent data framework is required. Any data protection must be flexible to further enable innovation. The economic and social benefits of data flows, including increased market access, investment, innovation, development and growth, as well as increased productivity, are best realised when there are no data residency restrictions.10


Under the current regime, there is no specific provision under the ICL regarding state aid. KPPU currently does not have any focus on state aid control, therefore state aid control is not applicable in Indonesia.


The Indonesian merger control regime adopts a mandatory post-merger notification system whereby all mergers that satisfy the statutory threshold and certain criteria shall be notified to KPPU within 30 working days of the transaction becoming legally effective.11 KPPU outlines three transactions that are subject to the Indonesian merger control rules: mergers, consolidation, and the acquisition of shares (hereinafter collectively referred to as 'mergers').12

In general, the criteria for notifiable mergers under Indonesian merger control are as follows:

  1. The transaction satisfies the statutory threshold, which is:
    • the combined sales value in Indonesia of the merging parties (buyer and target) exceeds 5 trillion rupiah; or
    • the combined assets value in Indonesia of the merging parties (buyer and target) exceeds 2.5 trillion rupiah. If both of the merging parties are banks, the combined assets values shall exceed 20 trillion rupiah. If only one of the merging parties is a bank, it shall adhere to the asset value threshold of 2.5 trillion rupiah.13
  2. The transaction is performed by and between non-affiliated parties.14
  3. The transaction results in a change of control through shares or equivalent transactions.15

As for foreign mergers, two additional criteria need to be satisfied:16

  1. The target company in the transaction is a foreign company.
  2. The transaction has a direct impact on the Indonesian market. The Indonesian merger control rule provides alternative schemes that may indicate potential direct impact:
    • all the merging parties have business activities in Indonesia either directly or indirectly, for instance, through a subsidiary or subsidiaries in Indonesia;
    • one of the merging parties has business activities in Indonesia while the other party or parties have sales to Indonesia; or
    • one of the merging parties (target company) has business activities in Indonesia and the other party or parties (acquiring company) have no business activities in Indonesia but have a sister company or companies that have business activities in Indonesia.

i Significant cases

Since the enactment of the regulation of Indonesian merger control in 2010, KPPU has never issued any opinion with objections. An opinion will be issued only if there is any alleged potential of anticompetitive impact resulting from the merger. To date, KPPU has only issued no objection opinions with or without remedies. Based on publicly available opinions, to date KPPU has issued around nine no objection opinions with remedies. One of the recent high-profile conditional no objection opinions is the acquisition of shares of Vinythai Public Company Ltd (Vinythai) by Asahi Glass Company Ltd (Asahi). Asahi is a Japanese company that engages in the production of glass, electronic chemicals and ceramics. Meanwhile Vinythai as the target company is domiciled in Thailand and engages in the manufacture of polyvinyl chloride (PVC) and epichlorohydrin which are mostly used in the plastic industries.

In its assessment, KPPU only focuses on one type of PVC product sold by Vinythai in Indonesia, namely suspension PVC (S-PVC). S-PVC is used for the production of pipes, film and sheets, floors, bottles, cables, etc. In its opinion, KPPU found that one of Asahi's subsidiaries in Indonesia was the market leader in PVC with a market share of more than 50 per cent. This resulted in a significant increase in the Hirschman-Herfindahl Index (HHI) for this transaction particularly on the S-PVC market. KPPU then continued the assessment on this transaction to Phase II (comprehensive assessment) as the HHI was higher than 1,800.17

Based on KPPU's Phase II assessment, there was a significant structural barrier for the S-PVC market in Indonesia. KPPU also found that based on upward pricing pressure (UPP) analysis, this transaction could put significant pressure on the domestic price of S-PVC. The result from the efficiency test also showed that the potential efficiency of this transaction may not lead to a price decrease to one of the merging party.

Considering the above analysis, KPPU decided to issue a no objection opinion towards this transaction with the following conditions:

  1. Asahi should report their production, sales and price of S-PVC in Indonesia to KPPU on a quarterly basis for the next three years; and
  2. Vinythai should report its export and price of S-PVC to Indonesia on a quarterly basis for the next three years.

The above conditions were imposed by KPPU on the merging parties to prevent the acquisition from resulting in anticompetitive effects.

In addition, to date there have been 16 decisions issued by KPPU related to the failure to notify mergers. Among these 16 cases, KPPU imposed penalties on 14 transactions. As for the remaining two cases, KPPU decided that the merging parties in those transactions were not proven guilty for the failure to notify allegation. Thus far there is only one foreign transaction that has been sanctioned by KPPU due to failure to notify, which is the share acquisition of Woongjin Chemical Co by Toray Advanced Material Korea Inc.

In 2016, KPPU imposed the highest fine ever in a failure to notify case in the amount of 8 billion rupiah on LG International Corp for submitting the notification of the share acquisition of PT Binsar Natorang Energi 20 working days past the deadline.

Currently KPPU is quite active in carrying out merger control investigations in Indonesia. During 2018, KPPU issued eight decisions or half of the total number of all decisions on the failure to notify cases. All of the issued decisions relate to domestic transactions.

One of the significant cases on merger control enforcement in 2018 is the decision of the late notification of PT Erajaya Swasembada, Tbk (Erajaya), an Indonesian company engaged in the mobile phone import industry. Erajaya was alleged to have notified its acquisition of PT Axioo International Indonesia (Axioo), an Indonesian company in the mobile phone manufacturing industry, 145 working days late. Even though Erajaya was found to have notified the transaction late, KPPU did not impose any sanction on Erajaya, considering that its acquisition over Axioo was conducted in order to comply with the requirement under the Ministry of Trade Regulation which obliges mobile phone distributors to have a manufacturing facility in Indonesia.

ii Trends, developments and strategies

In 2018, KPPU received 74 notifications of mergers.18 There was a decrease in the number of mergers notified to KPPU in 2018 compared with 2017, which amounted to 90 transactions.19 According to KPPU, this might be for two reasons: the lack of awareness of the undertaking to submit the notification to KPPU; and a significant decrease in the number of corporate actions, especially merger transactions.20

Furthermore, 97.3 per cent of the notified transactions in 2018 were share acquisitions. The remaining 2.7 per cent of notified transactions were merger transactions. However, there were no consolidation transactions submitted to KPPU during 2018.21

Based on KPPU's website, 14 out of 74 notifications were foreign-to-foreign transactions. Japan, Singapore and United States are listed as the top three countries that notified the most transactions to KPPU in 2018.22

In general, the most notified mergers related to the manufacturing industry (35.4 per cent), the energy sector (17 per cent), and the property sector (14 per cent). There were several mega transactions whose values exceeded 1,000 trillion rupiah notified to KPPU in 2018, which, among others, include:23

  1. the acquisition of PT Freeport Indonesia by PT Inalum;
  2. the merger between KWA Investment Co and Monsanto Company;
  3. the acquisition of PT Bank Danamon, Tbk by MUFG Bank Ltd; and
  4. the acquisition of TMF Orange Holding BV by Saphire Bidco BV.

iii Outlook

One of the key points in the amendment of the ICL related to the merger control issue is the change from a mandatory post-merger notification to a pre-merger notification regime.24 Based on certain publicly available sources, there is also a proposal to increase the notification threshold as well as increase the penalties imposed for any breaches of the Indonesian merger control rules. Furthermore, there is also a discussion related to the deadline of KPPU assessment. Some sources have confirmed that the assessment period for any notified transactions to KPPU will be changed from 90 working days to 25 working days. The discussion on such amendments is still ongoing between the government and the parliament to date. Unfortunately, there has been no clear deadline set by the parliament on when the amendment to the ICL will be enacted.


KPPU focused more on merger control enforcement during 2017 and 2018. In the coming year, we can expect KPPU to put more effort into cartel enforcement compared to that in 2017 and 2018, particularly in industries that are closely related to the interest of the general public, such as food commodities, airlines, the digital economy, etc.

KPPU will surely benefit from the amendment to the ICL, which is likely to be enacted in 2019, both in its cartel and merger control enforcement. The implementation of the extraterritoriality principle through the amendment will provide KPPU with the power to review and supervise cross-border agreements, activities, and transactions that potentially affect the Indonesian market. This may be necessary to address the developing competition issues entailing the rise of the digital economy that by nature are likely to involve markets in different jurisdictions.


1 Farid Fauzi Nasution is a partner, Anastasia Pritahayu RD is a senior economist and Berla Wahyu Pratama is an associate at Assegaf Hamzah and Partners.

2 The authors' own calculation based on the KPPU's website.

4 The authors' own calculation based on the KPPU's website.

5 The authors' own calculation based on the KPPU's website.

7 West Jakarta District Court Decision No. 01/PDT.SUS-KPPU/2017/PN.JKT.BRT.

10 See the Digital Economy in Indonesia Report.

11 See Indonesian Government Regulation No. 57 of 2010 on Merger or Consolidation of Business Entities and Acquisition of Shares that may result in Monopolistic and/or Unfair Business Competition Practices (GR No. 57/2010), Article 5(1).

12 See GR No.57/2010, Article 1.

13 See GR No.57/2010, Article 5(2).

14 See the Commission Regulation No. 2 of 2013 on the third Amendment of the Commission Regulation No. 13 of 2010 on the Guidelines for Mergers or Consolidation of Business Entities and Acquisition of Shares of Other Companies (Merger Guidelines 2013).

15 See Merger Guidelines 2013.

16 See Merger Guidelines 2013.