Newsletter on Indonesian competition law and policy

Vol. 07/II/2009 July 2009

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

Inside

What’s New?The Declaration for Fair Competition

Law EnforcementKPPU asked ASTRO to Implement the Supreme Court Decision on Astro CaseFuel Surcharge Cost in the Airline's Cost ComponentThe Violation of Competition Law in Check-In Counter Service Facilities in the Juanda Inter-national Airport of Surabaya

Competition AdvocacyKPPU Advocacy Activity through the Seminar on Business CompetitionDiscussion on Public Procurement and Franchise Agreement in the Perspective of Fair Com-petition

InternationalThe 1st AEGC Workshop on Regional Guideline: an Effort to create a business competitionenvironment in ASEAN regionIndonesian Peer Review on The Tenth UNCTAD IGE Meeting

Commission for the Supervision ofBusiness Competition (KPPU)

Jl. Ir. H. Juanda No. 36, JakartaINDONESIA 10120

Tel: (62-21) 3507015/16/43Fax: (62-21) 3507008

www.kppu.go.idinternational@kppu.go.id

What’s New?

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supports from the country’s leader.Thus, inline with the presidential elec-tion for 2009-2014, KPPU initiated aconcept on Fair Competition Pact. Thepact is one of KPPU’s demand on thepresidential candidate to have full com-mitment on economic democracy andfair competition. The pact signed bythe President candidates is showinghow important the commitment andsupport from the elected President tocreate fair competition as central poinin gearing overall economic resourcesfor the benefit of society at large. Thepact is signed by two of three Presi-dential candidates competing for theupcoming election. It is through thispact that KPPU aimed to gain supportfrom elected President in supportingmain agendas such government regu-lation on merger and acquisition, insti-tutional status, and amendment of thelaw.

Competition law enforcement requiresactive roles and continuous efforts ofall state elements such the govern-ment, competition authority, businessactor, and society. For a decade of theimplementation of Law No. 5/1999,

The Law No. 5/1999 concerning theProhibition of Monopolistic Practicesand Unfair Business Competition is alaw that is parallel with the IndonesianConstitution 1945 that set rule on na-tional economic system based on affin-ity and economic democracy orientat-ing to the people’s welfare. The Article3 letter “a” of the Law No. 5/1999 stipu-late that the objective of the Law is toprotect public interest and increasenational economic efficiency as oneways to increase people’s welfare.

Without proper competition law en-forcement, national economic couldfilled with monopolistic practices, car-tel, unfair acquisition, and bid riggingthat will create vulnerable economicstructure that lead to poverty, eco-nomic gap, and unemployment. Mean-while, the Article 27 of the Constitutionstipulates that the State will guaranteecitizen’s right on proper living and em-ployment. This concluded that theState has the right to intervere in orderto guarantee the people’s welfare.

The creation of fair business competi-tion will demand commitments and

KPPU has handled 2,094 complaintsresulting 229 cases and lead to 186decisions and 43 resolutions. KPPUalso provided 64 policy advices to thegovernment on their policy in severalsectors affecting business competitionclimate. KPPU issued eight guidelineson certain articles of the law to havesame interpretation in implementing it.

Notwithstanding that KPPU also facesseveral challenges and unfinished pri-orities such the government regulationon post merger notification, attempt inenhancing the authority to search thepremise, and KPPU’s institutionalstatus. Through this pact, whoever thePresident will be, it is expected that theupcoming President will commit to thepeople that Indonesia will develop infacing global challenges. This commit-ment surely will assist competition au-thority in optimizing its roles for thecreation of fair business competition toenhance people’s welfare.

The Declaration for Fair Competition

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of the Law No. 5/1999 concerningAgreement with Foreign Parties. KPPUdecided that both alleged parties haveto withdraw their agreemen on controland placement of broadcasting right forBarclays Premiere League 2007-2010.

Both alleged parties also ordered toamend their broadcasting right agree-ments and conduct a competitive proc-ess between Cable TV Operators inIndonesia in determining the right’sowner. Moreover, All Asia MultimediaNetworks and FZ-LLC also ordered toguard and protect the consumer forcable TV in Indonesia by continuouslymaintain business arrangement withDirect Vision Corp and provide ser-vices to their subscriber until furtherlegal arrangement on the ownership ofDirect Vision Corp is made.

To follow-up the KPPU’s decision, bothalleged parties applied for an objectionto the District Court. However, their

Indonesian Supreme Court denied ces-sation request by ESPN STAR Sports(ESPN) and All Asia Multimedia Net-works, FZ-LLC (AAMN) and affirmedKPPU’s Decision N. 03/KPPU-L/2008on Astro Case. The affirmation showedfacts and legal consideration used byKPPU in concluding the decision wereaccurate and reliable. The SupremeCourt decision also acknowledge thatexamination and decision making proc-ess by KPPU was undertook profes-sionally and independently based ondue process on law stipulated by theLaw No. 5/1999. Thus, therefore itshould not correlate with other sub-stance apart from the procedural proc-ess and case subject.

KPPU’s decision on Astro Case thatissued on 29 August 2009 stipulatedthat ESPN STAR Sport and All AsiaMultimedia Network and FZ-LLC, haveconvincely proved to breach Article 16

objection is denied by the DistrictCourt, while now, their cessasion isalso refuse by the Supreme Court De-cision. Under this new development, itwould be irrevant should there is cer-tain party questioning decision for As-tro Case with consumer protection is-sue by KPPU in its ways to create fairbusiness competition process in paidcable TV industry. KPPU is now re-questing related parties to accept thisdecision and obey sanctions stipulated

KPPU asked ASTRO to Implement the Supreme Court Decision

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issuing it as their owned initiative. Asresult, the jet fuel price nowadays isworking on a market mechanism.

KPPU’s surveillance rise issue that fuelsurcharge is continuously increasingwith percentage that imcomparablewith the percentage of jet fuel’s priceincrease. The Airline Company is fixthe fuel surcharde using their own esti-mation and not by an accurate calcula-tion. The government then conducts acoordination to provide a methodologyin calculating the fuel surcharge.

However, during its development, thefuel surcharge increased continuouslyalong with the increase of jet fuel’sprice. Notwithstanding that when thejet fuel’s price is decreasing, the fuelsurcharge is still high. Obviously, theirfluctuation should be equal. This phe-nomenon shows that fuel surchargetreated as a fixed cost, and not an in-strument to compete. With regard to anincrease tendency of the cost, thus thisindicate that fuel surcharge as other

Fuel surcharge is a new cost compo-nent in airline industry paid by con-sumer. This applied, as part of AirlineCompany’s attempt to cover emergedcost as the result of fuel jet’s price in-crease. The amount was differingamongst Airline Company that dependon the volume of jet fuel used and pas-senger capacity owned.

On the early of 2006, Airline Companywas beginning to discuss the need forcompensation cost on jet fuel’s priceincrease. Indonesia National Air Carri-ers Association (hereforth recall as“INACA”), a trade association of Indo-nesia airline industry, proposed thegovernment to include fuel surchargeas part of component for Airline Com-pany. However, INACA unilaterallyconduct the regulation without the gov-ernment’s approval. This encouragesinitiative by KPPU in monitoringINACA’s behavior and issuing an ad-vice and recommendation. INACA wasthen cancelled the fuel surchargeagreement and let the Airline Company

function other than to recover the costemerged as result of jet fuel’s priceincrease. This function suspected tosubsidize other increased cost and toincrease the company’s incomethrough explointing the limitation ofconsumer’s access on information.At this very moment, KPPU is continu-ously monitoring the behavior and ifnecessary will advance to law enforce-ment when there is strong indicationon the violation of law. KPPU also willprovide advice and recommendation tothe government to play an active rolein regulating the fuel surcharge.

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Fuel Surcharge Cost in the Airline's Cost Component

Law Enforcement

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implemented at five major airports un-der the supervision of Angkasa Pura ICorp, including Juanda InternationalAirport, Hasanuddin International Air-port, Ngurah Rai International Airport,Sepinggan International Airport, andAdisucipto International Airport. Theexamination team found facts that theMUCS is performed by third party,namely Citra Candika Corp, through anOperational Cooperation with AngkasaPura I Corp for 5 (five) consecutiveyears. The service charge for MUCS(including VAT and counter rent) isvarying based on the period. For De-cember 2006 – June 2007, the MUCSis charged Rp. 1,950/pax, while onJuly 2007 and afterward the servicecharge is Rp 2,100/pax. The examina-tion team also found that AngkasaPura I Corp had proposed and imple-ment tariff system for MUCS in accor-dance with existing regulation whichbased on Angkasa Pura I Corp’s au-thority as the airports administrator.

Angkasa Pura I Corp is suspected toviolate Article 15 (2), 17 (1), 25 (1.a) ofthe Law no. 5/1999 in the managementof check-in counter services at theJuanda International Airport of Sura-baya. A series of examination processby examination team of KPPU foundedseveral indications on the violation ofthe law, especially concerning exclu-sive dealing agreement and abuse ofdominant position provision. The ex-amination result showed an existenceof authority of Angkasa Pura I Corp tomonopolize management of check-incounter services for every airport inIndonesia through its Multi UserCheck-in System (MUCS). This systemis design to overcome problems onpassager line, data accuracy, and pas-senger service charge (PSC).

MUCS aims to optimize counter’s utili-zation, thus could be shiftly use by dif-ferent airlines by their check-in sched-ule and respective departure controlsystem. The MUCS is scheduled to be

The examination team also found factsthat the technology use by each airlinehad difference level of sophistication.Several airlines already computerizedthe entire process, while several othershad semi-computerized characteristic,and few other even still using the man-ual system in conducting the check-inprocess. This condition emerge anopinion that the MUCS application wasactually not in accordance with the op-erators airlines needs as the serviceuser. The imposition of MUCS tariffservice clearly created additional op-erational and sunk cost for airlines.

Based on the facts and evidences, theCommission Council made conclu-sions as follows:1. Common use check-in counter

system was a system that shouldand normally applied in airport asan effort to increase the airportservice standard quality.

2. In short term, the application sys-tem did not yet give the optimalbenefit, since the airlines need tomake adjustments on the check-insystem owned and operated byeach airlines.

3. In long term, the application sys-tem will benefit to maximisedcheck-in service and supportedtransparency to ease the Govern-ment supervision, especially re-lated to flight safety and security.

4. The MUCS application in JuandaAirport is part of Angkasa Pura I,Corp’s tasks and obligations toincrease airport service. Therefore,the Commission Council con-cluded that Angkasa Pura I, Corpwas not proven guilty to breachArticle 15 point (2), Article 17 point(1) and Article 25 point (1) letter (a)of the Law No. 5/1999.

Furthermore, the Commission Councilhas KPPU to provide advice and rec-ommendation to the Government, es-pecially the Minister of Transportationto develop and supervise the imple-mentation of MUCS, including the de-termination of MUCS service tariffwhich apllied by Angkasa Pura I, Corp.

The Violation of Competition Law in Check-InCounter Service Facilities in the Juanda Inter-

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Kompetisia Vol. 07/II/2009

Competition Advocacy

have choices on products and serviceavailable in the market, to create inno-vation, and to ensure the competitiveprice of products and service consid-ered from production quality and cost.Whereas the purpose of LawNo.5/1999 was to safeguard the publicinterest, to create a conducive busi-ness climate to ensure the certainty ofequal businees opportunities, to pre-vent monopolistic practices and or un-fair business competition, and to cre-ate effectiveness and efficiency inbusiness activities.

The discussions forum aimed to giveunderstanding to KPPU’s stakeholderon the Franchise Agreement in accor-dance with provisions in Article 50 let-ters (b) Law No. 5/1999. Subject onfranchise agreement focussed on con-dition and requirement that oftenemerged in franchise agreement linkedwith competition law issues. The condi-tions could cover such the selling

As one of KPPU advocacy activity todisseminate fair competition principlesto its stakeholder, KPPU periodicallyconducted dissemination programscarried out in various areas in Indone-sia. In July 2009, KPPU held publicdiscussions forum in 3 areas, namelyKupang (Timor Island), Pontianak(Kalimantan Island) and Jambi(Sumatra Island), under the theme of“Public Procurement and FranchiseAgreement in the Perspective of FairCompetition”. The discussions at-tended by delegation of governmentagencies, business association, Indo-nesia Chamber of Commerce and In-dustry and academicians.

In the forum, KPPU explained thebenefit of competition law implementa-tion through Law No. 5/1999, namelyto create fair competition in order toachieve an efficient market economy,to allocate the natural resources effi-ciently, to ensure that consumer could

price, requirement to buy supplies fromthe franchisor or any certain side, re-quirement to buy products and servicefrom the franchisor, restriction of terri-tory, and requirement to not conductsame business activity for certain pe-riod after the franchise agreement ex-pired.Apart from franchise, the discus-sions forum also discussed the themeon public procurement for goods andservices in accordance with provisionsof Article 22 Law No. 5 Year 1999.

From the government point of view, thepublic procurement principles were toobtain goods and services with thebest price, delivery, quantity and qual-ity in accordance with Governmentrequirement. Therefore, Governmentas the organiser for public procure-ments was expected to encourage faircompetition principles in the procure-ment, namely open, announced widely,non-discriminatory, could be enteredby any business actors with the samecompetence, and did not contain re-quirement and technical specificationthat lead to certain business actor.In each process of procurement byGovernment, there were several prob-lems oftenly emerged, namely: theDutch auction, the bid conspiracy (bothvertical and horizontal conspiracy), andmislead procurement procedure whichmight lead to bid conspiracy. There-fore, the government is expected com-prehend the principle and KPPU toresolve the problems and weakness ofpublic procurement. The harmonizationof both surely will encourage the goodcorporate governance in Indonesia.

Discussion on Public Procurement and Franchise Agreement in thePerspective of Fair Competition

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Competition Advocacy

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mentation of Law No. 5/1999 could behighlighted and uses as reference forCentral Government to transfer theauthority to the local government.

During discussion, participants’ com-plaint about the high selling price ofseveral product, especially in Manok-wari. KPPU said that the principle of“price depended on supply and de-mand” was difficult to be fully appliedon market mechanism since it onlyeffective for efficiency based, whereaseconomic intereet stated by Article 33of the State Constitution 1945 alsoshould be considered. Therefore,KPPU (with the implementation of LawNo. 5/ 1999) purposed to maintaine thebalance of interest between businessactors and consumers, as well as tocreate people welfare through fair busi-ness competition. Moreover, the localgovernment is expected to play activerole in fighting obstacles in global busi-ness world such technical and pricebarrier.

As one of advocacy activity on fairbusiness competition, KPPU host busi-ness competition seminar concerning“The Implementation of Business Com-petition Policy as Stipulated in Law No.5 Year 1999” conducted in Bukittinggi(in West Sumatra Province) andManokwari (in West Irian Province) onJuly 2009. Seminar attended by gov-ernment delegation, mass media, aca-demicians, and business associationfrom Indonesia Chamber of Commerceand Industry (KADIN).

During the seminar, KPPU deliveredsubject on competition law implemen-tation in Indonesia. Competition law isexpected to create fair competition inglobal business. As stated in Article 3of the Law No. 5/1999, competition lawwas beneficial for the better work ofmarket economy mechanism. KPPUalso explained the provisions of viola-tion stipulated in Law No. 5/1999, suchas prohibited agreement, prohibitedactivity, and dominant position. Most ofcase handled by KPPU is tender/procurement cases, which behaviorsexplain in the Guideline of Article 22concerning the Prohibition of Conspir-acy in Procurement/Tender activity.

KPPU considered the importance ofsupport and participation from Govern-ment towards KPPU achievement, es-pecially the local government involvedin procurement process which draughtwith business competition principles.During the procurement process, boththe business actors and the Bid Com-mittee have to convey the procurementprovisions. The awareness on competi-tion principles will create fair competi-tion in procurement process. KPPU,along with the Government, is ex-pected to conduct intensive dissemina-tion to swift paradigm and behaviour oflocal and national business actors inany public procurement. Through theseminar, it is expected that the imple-

The socialisation activity in both Bukit-tinggi and Manokwari is conducted bycondition in which there are number ofparties that did recognize the impor-tance of competition law and policy.Through the seminar, it is expectedthat a fair competition in business envi-ronment could be comprehend in thefuture as result of the competition lawimplementation all sector in Indonesia.

Apart from seminars on KPPU andguideline on prohibition of bid rigging(tender conspiracy), KPPU also dis-seminate pre-merger notification pro-gram to its stakeholder. As acknowl-edge before, the article 35 letters (f) ofLaw No.5/1999 gave mandate toKPPU in compiling guideline and publi-cation on competition law. Guidelinewas compiled to give legal security forbusiness actors in conducting theirbusiness strategy.

In accordance with the task, KPPUrecently ratified the Commission Regu-lation No. 1/2009 concerning Pre-Merger Notification. As a new regula-tion, it is important that KPPU shoulddisseminate the guideline to providebetter implementation by the stake-holder. One of the dissemination pro-grams was held in July 27, 2009. Theseminar participated by the govern-ment agencies, business actors, theChamber of Commerce, academiciansand journalists.

The dissemination program is ex-pected to elevate understanding onmerger criterias, process, as well asqualification of market concentration asstandard regulation. It is also expectedthat the Commission’s regulation willnot obstruct their business develop-ment or investment. Instead, the regu-lation is aimed to create transparencyon the process and standard used.The business actors also will by as-sisted by the assurance on prospect oftheir merger plan.

KPPU Advocacy Activity through the Seminaron Business Competition

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As part of the compilation process ofthe Regional Guideline, AEGC in coop-eration with InWent (German CapacityBuilding International) and KPPU(Commission for Supervision of Busi-ness Competition) Indonesia; held“The 1st Workshop of Work Group onDeveloping Regional Guidelines onCompetition Policy” (WG Guidelines)on July 30-31 2009 in Bali, Indonesia.This workshop was held to facilitateAEGC members to review and revisethe draft of Regional Guideline com-piled by Singapore, as the chairman ofWG Guidelines. The meeting attendedby AEGC member delegation fromCambodia, Indonesia, Lao PDR, Ma-laysia, Myanmar, Philippines, Singa-pore, Thailand and Vietnam, as well asdelegation from ASEAN Secretariat

As stated in ASEAN Economic Com-munity (AEC) Blueprint, ASEAN Mem-ber States (AMSs) agreed to apply thecompetition law and policy in their re-spective country on 2015. As an effortto realize it, the ASEAN Experts Groupon Competition (AEGC) agreed tocompile the Regional Guideline onCompetition Policy. Regional Guidelinewas a guideline for AMSs to help themunderstand the competition law andpolicy, based on best practices fromcountries, which implemented the com-petition law, including Indonesia. Re-gional Guideline was expected to helpall AMSs on their efforts in compiling,implementing and enforcing the effec-tive competition law and policy on theirrespective Country.

and the expert from Fratini FerganoEurope. The expert was appointed toassist AMSs in formulating the conceptand contents of Regional Guideline.The Meeting was chaired by Mr. OwYong Tuck Leong from CompetitionCommission of Singapore (CCS), inhis capacity as the Chairman of theWG Guidelines.

As the host country, the KPPU Chair-man, Dr. Benny Pasaribu, in his open-ing remark, shared his expectation thatRegional Guidelines on CompetitionPolicy could increased the AMSs un-derstanding towards the importance ofimplementation of competition law andpolicy in creating fair business compe-tition on economic sector in ASEANRegion. Chairman also expected thatRegional Guideline could encourageAMSs that did not yet apply the com-petition law to immediately ratify it. Asfor Indonesia, Regional Guidelines wasexpected to elevate the quality of com-petition law and policy enforcement inIndonesia.

Regional Guideline itself is a generalguidance for AMSs to introduce, imple-ment and develop competition policy intheir respective Country, in accordancewith the characteristics of economystructure in each AMSs. Therefore, theGuideline functioned as reference with-out binding justification. Periodically,AEGC will update the contents of theGuideline to reflect all the changes anddevelopment in competition policy inASEAN and international community.With the application of Regional Guide-line among AMSs, it is expected thatthe economic integration in ASEANregion could be realized. The econom-ics integration, together with fair busi-ness competition environment andconducive business environment willattract the interest of foreign investorand increase economics growth inASEAN region. The enhancement inAMSs co-operation through the imple-mentation of competition policy alsowill increase economic efficiency andcompetitiveness in ASEAN region.

The 1st AEGC Workshop on Regional Guide-line: an Effort to create a business competi-tion environment in ASEAN region

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United Nation Conference on Tradeand Development (UNCTAD) is part ofthe United Nations focusing on ex-change of knowledge in supportingcountries development, in which theirintergovernmental meeting is the keymeeting in any decision making. Inter-governmental group of expert on com-petition policy and law is the assem-bling of competition agencies in theworld. During the yearly meeting, nu-merous new issues represented toelaborate best solutions to overcomeit. Apart of exchange of information,this meeting also reviews competitionpolicy and law implementation in de-veloping countries to find recommen-dations for improvement and technicalassistance needed in supporting therecommendation.

During the Workshop, KPPU gave theirview that Regional Guideline necessar-ily should be coordinated and dissemi-nated with relevant government agen-cies, such as the Ministry of Economic,Ministry of Trade, Ministry of Industry,Ministry of Justice, and the InvestmentCoordinating Board. This is due tosince the issues of competition policywas not only the authority of competi-tion agency, but also the government.KPPU also considered the overlappingin the use of term ’competition law’ and’competition policy’ in the Guideline,while in fact the two terms were verydifferent one with another. Severalother terms that were felt confusing inthe Guideline were between ’Mergerand Acquisition’ and ’Concentration’,‘exemption’ and ‘exclusion’, as well as‘Market Power’ and ‘Dominant Posi-tion’.

The AEGC members also suggestedproposal on the guidance’s structure. Itwas highlighted that there should threeparts in the guideline, such as:

the part that accommodated inputfrom ASEAN countries imple-mented the competition law andpolicy (Indonesia, Singapore, Thai-land, Vietnam),the part of ASEAN country in theprocess of preparing the competi-tion law and policy (Malaysia, Phil-ippines, Cambodia), andthe part for ASEAN country withoutcompetition policy (Lao PDR,Brunei Darussalam, Myanmar).

As the conclusion, all delegationagreed that results of the workshopwould be brought and discussed in theSecond Workshop of WG Guidelinesthat will be conducted on 29-30 Sep-tember 2009 in Manila, Philippines,and afterwards will be circulated toeach member of the working group.Furthermore, AEGC requested the ex-pert to immediately improve and com-plete the additional information, basedon input from all participants workshop.

UNCTAD Peer Review of ConditionalLaw and Policy is a voluntary evalua-tion by UNCTAD on the implementa-tion of competition law and policy of acountry. This evaluation is differentfrom similar evaluation conducted byWorld Trade Organization (WTO) andOrganisation of Economic Cooperationand Development (OECD). Thisevaluation is voluntary and aimed spe-cifically on developing competitionagency from developing country. Thisevaluation is to enhance country devel-opment through sharing experiencesand best practices and identify techni-cal assistance needed in developing acompetition agency.

One review could involve extendedprocedures, especially in preparing thereport. Report formulated by independ-

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Indonesian Peer Review on the Tenth UNCTADIntergovernmental Group of Expert Meeting

Indonesia esteemed succeeded and consistent in implementing competition lawand policy. Moreover, amongst all reviewed countries, review on Indonesia isthe best reviewed ever by UNCTAD in term of the organization and report sub-stances. The opinion shared by the UNCTAD during the closing ceremony ofthe Intergovernmental Group of Expert Meeting held last July in UN Headquar-ter in Geneva.

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International

of reviewed country.

In the report, Prof. Elizabeth Farinasubmitted that Indonesia showed sig-nificant and positive growth in competi-tion law, neither law enforcement norcompetition policy. KPPU as a newagency also shows increased perform-ance in capacity building, in which itsdecision is well accepted andstrengthen by the judiciary, and in-crease transparency through publica-tions that numerously available for thepublic. Notwithstanding that, severalchallenges still faced by Indonesia,specifically on the identified weaknessof the Law No. 5/1999, as well as sub-stantial challenges and competition lawprocedures by the judiciary. In her rec-ommendation, Prof. Farina identifiedseveral proposals for improvement onthe law and expansion of capacity incompetition for relevant jurisdictions.

In addition to the report, KPPU sharedrecent development on competitionwhich not covered by the report, espe-cially on the strengthening of competi-tion law’s instrument, adjustment onbudget system, internal regulations,and attempts to increase cooperationwith the Indonesian Audit Board andthe Indonesian Police. The report re-ceived warm appreciation by state

ent consultant using inputs from re-viewed country. Data and informationobtain from respective competitionagency and from consultations withsector regulator, government, judicial,consumer protection agency, businessactor, and academia. Any developmenton report always consulted with re-viewed competition agency in order togain inputs and consents. For Indone-sian peer reviews, Prof. Elizabeth Fa-rina (former President of BrazilianCompetition Authority) developed thereport using independent inputs fromthe Coordinating Ministry of EconomicAffair Office, District Court, SupremeCourt, Corruption Eradication Commis-sion, Consumer Protection Organiza-tion, Indonesian Chamber of Com-merce, and Mr. Faisal Basri as the rep-resentative of academia.

Peer review on Indonesia held in themargin of the Tenth UNCTAD Intergov-ernmental Group of Experts (IGE)Meeting held in UN Headquarter inGeneva, 7-9 July 2009. The review isadopted in several steps, namely pres-entation of report by an independentconsultant, observation by reviewedcountry, comment and discussion withparticipated country through submittedinquiries, and recommendation ontechnical assistance that suit the need

members through comments and fol-low-up questions arose. The com-ments mostly involved KPPU’s effort incontrolling merger and acquisition, ef-fectiveness of sanction, law enforce-ment and appeal procedures in court,agency’s independency facing highinfluence by political party, interrelationbetween competition policy and sectorpolicy, and advocacy strategy imple-mented by KPPU.

Several challenges in the law alsoarose in the discussion, specifically onmultiple objective, definitions, applica-tion of per se illegal and rule of reason,and low sanctions. The meetingshared that multiple objective in thelaw will create potential conflict be-tween objectives and less focused onthe ultimate objective of the law. More-over, it also stipulated the contradictoryof definition that might haze terminol-ogies use by the law. Maximum sanc-tions provided by the law argued astoo low for effective law enforcement tomajor business actors. Thus, thereforethe meeting encourages the Commis-sion to create definitive sanction in re-placing occurred damages.

As whole, it was deemed that the peerreview will not only provide best rec-ommendations on the implementationof Indonesian competition law and pol-icy, but also could treated as tool forstrategic introduction to world competi-tion agencies as well as in increasinginternational acknowledgement onKPPU and Indonesian competition lawand policy implementation. This resultwill soon be transformed as severaltechnical assistances in supportingand overcoming the underlined chal-lenges. It is expected that the result ofpeer review could be disseminated tostakeholders in showing tremendoussupport by international fora on Indo-nesia’s achievement in implementingher competition law and policy.

Kompetisia Vol. 07/II/2009

News Picks

stocks are sufficient for this year, ac-cording to the sugar industry and thegovernment.”

Taufik Ahmad, KPPU’s director of pub-lic policy, said the commission wouldalso study whether the government’spolicy of restricting sugar imports hadunduly affected supplies and encour-aged speculators to take advantage ofthe situation.

“The focus of the study will be on find-ing out the major causes of the pricesrises — whether they are related tounfair business practices or the impactof government policies, such as thesugar trading mechanism, sugar importquotas and import bans,” he said.“However, there appears to be strongindications that sugar distribution isbeing controlled by speculators andcartels, as prices remain high eventhough the milling season started inMay.”

The onset of the milling season in Javanormally leads to a fall in domesticprices. Separately, Subagyo, the TradeMinistry’s director general of domestictrade, said he also believed specula-

With sugar prices skyrocketing overthe past few months, the country’s anti-monopoly watchdog said it was on thecusp of launching a formal investiga-tion.

“As part of the effort to prevent mo-nopolies and protect the public fromthe consequences of unfair businesspractices, the Business CompetitionSupervisory Commission intends toascertain whether rising sugar pricesare the result of the hoarding of sugarstocks or cartel-like practices,” AhmadJunaidi, the antimonopoly commis-sion’s director of communications, saidon Wednesday.

He said the commission, also knownas KPPU, would first survey the mar-kets in Makassar, Balikpapan, Sura-baya, Batam and Jakarta to identify thecauses of the price hikes. However,analysts said the hike was not entirelysurprising, given that bad weather inthe world’s two biggest producers, Bra-zil and India, have pushed global sugarprices to a three-year high. Whitesugar fetched $485 a metric ton onWednesday. And it looks like pricesare set to continue climbing. The Fi-nancial Times on Tuesday quotedNicholas Snowdon, a soft commoditiesanalyst with Barclays Capital in Lon-don, as saying the weather problemshave paved the way for “a global deficitof historic proportions, thus offering aseemingly irrefutable fundamental casefor a strong price performance.”

Locally, the price of white sugar hasrisen from an average of Rp 6,649 (66cents) per kilogram in January to aboutRp 8,491 per kilogram in July. Whitesugar is of a lower grade than refinedsugar and is normally for householduse, while refined sugar is used by thefood and beverage industry. Whenasked about the impact of high interna-tional prices, KPPU’s Ahmad said,“The price increases here should notbe continuing for so long as domestic

tors and hoarding might be behind theprice rises.

“The traders sometimes hoard theirsugar even though we have instructedthem to do nothing to disrupt the mar-ket,” he said. Among those most in-censed by the surging sugar prices isThomas Darmawan, the chairman ofthe Indonesian Food and BeverageAssociation (Gapmmi), who said thatcurrent prices would eventually feedthrough as higher food and beverageprices.

However, he insisted that food proces-sors were doing their best to containprices. “Even though production costshave risen by up to 3 percent, produc-ers are trying not to pass these on,given the current weak purchasingpower of consumers,” he said.

Total consumption of white and refinedsugar this year is predicted to hit 4.85million tons, with 2.7 million tons des-tined for household use and 2.15 mil-lion tons for industrial use, he said.The Indonesian sugar industry can beviewed as a tale of two segments —the white sugar industry, obsolete anddominated by state companies, andthe modern, efficient refined sugar in-dustry, controlled by the private sectorand whose output is sold primarily tothe food and beverage sector.

During the colonial era, the countrywas at one stage the second biggestsugar exporter in the world. Sincethen, however, production has de-clined due to outdated cultivation tech-niques and obsolete machinery in thestate sugar factories. To turn the in-dustry around again, the governmenthas launched a revitalization plan toachieve self-sufficiency in white sugarby 2014, but little success has beenachieved to date.

Source: http://thejakartaglobe.com/news/court-upholds-antitrust-decision-in-favor-of-direct-vision/319880

Antimonopoly Group Ponders Move To LookInto Escalating Sugar Prices

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Kompetisia Vol. 07/II/2009

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