REPORTED PARTY:

Carrefour IndonesiaLebak Bulus Raya No. 8, Jakarta Indonesia 12310

KPPU VERDICT CASE

No: 02/KPPU-L/2005

Presentation by: Arnold Sihombing

STATEMENT ISSUES

1. That the Reported Party carry out trading terms that emphasize suppliers which are: listing fee, minus margin, fixed rebate, payment term, regular discount, common assortment cost, opening cost/new store, penalty

2. That the trading terms from the Reported Party can shut down Small Medium Enterprise, because the Reported Party does not make difference between big enterprise supplier and small medium enterprise

3. Along with the statement, the Rapporteur reported the trading terms between the Reported Party and the Reported Party’s supplier which contain:

1. Fixed Rebate : 7%2. Term of payment : 45 days3. Regular Discount : 7,5% - 10%4. Common assortment cost : 1%5. Opening cost/new store : Rp. 1.500.000,-6. Penalty : Rp. 5.000.000,- per item per store7. Etc.

4. That these trading terms cost about 20% from sales (outside listing fee)

5. That sampling and product demonstration at the Reported Party’s outlet was controlled by one agency called: Demo Power

RETAIL MARKET

• TRADITIONAL MARKET;

• MODERN MARKET:

- MINI MARKET

- SUPERMARKET

- HYPERMARKET

LAW NO. 5 OF 1999 VIOLATION INDICATION:

Based on the Reporter statement, the Reported Party statement, document and data’s that related to the preliminary examination, the Investigation Team has found indication violation of article 19 paragraph a, article 19 paragraph b, article 25 paragraph (1) sub paragraph a Law No. 5 of 1999

THE REPORTED PARTY POSITION WITH THE COMPETITOR

That the Reported Party have market power greater than any big ritel in hypermarket market’s, based on this reasons:

– The Reprorted Party is a modern market ritel which is biggest with sixteen outlet and some of its outlet are bigger than any other big ritel.

– That the reported party were one of the incumbent in retail market with hypermarket concept.

– The outlet position of the Reported Party are based on strategic position giving the Reported Party significance access to the consumers.

– The Reported Party outlet have a freshness and completeness on a high degree.

– Items that sold on the Reported Party’s outlets are most completeness

That based on market power that the Reported Party have caused a dependent to the suppliers for their products that can be sold on the Reported Party Outlet based on this reason:

The Reported Party have many outlet, that make the Reported Party have a access ability to sell product to the consumer bigger than it’s competitors.

The access ability had by the Reported Party, can make the Suppliers to sell more by channeling with the Reported Party Outlets so the turn over from sales of the suppliers is bigger at the Reported Party Outlets. That the Reported Party Outlet being promotion place that can improve the image of the suppliers product and promoting new product.

The Percentage of sales the supplier product in the Reported Party Outlest are significance enough compared to whole sales of the suppliers product.

The Reported Party Outlet’s are placed on strategic locations. By entering the Reported Party Outlets, the suppliers will be easier to enter the outlets of Competitor of the Reported Party

BUSINESS RELATIONSHIP BETWEEN THE REPORTED PARTY AND SUPPLIERS

GEOGRAPHICAL MARKET

» The trading terms that The Reported Party had to the supplier are valid nationaly based on national contract.

» The Reported Party competitor are Giant, Hypermart dan Clubstore

» The Reported Party have sixteen outlets, eleven in Jakarta, one in Tangerang, one in Bandung, one in Surabaya, one in Palembang, and one in Medan.

» Giant have ten outlets, two in Jakarta, one in Bogor, two in Tangerang, one in Bekasi, two in Bandung one in Sidoarjo, and one outlet in Surabaya

» Hypermart have eight outlets, one in Jakarta, three in Tangerang, one in Solo, one in Malang, one in Batam and one in Makassar.

» Clubstore have four outlets, three in Jakarta and one in Medan. » Based on this geographical market for the South Sumatra, there is no

the Reported Party competitor there for can be excluded.

» Based on the explanation above, the geographical market are Jakarta, Tangerang, Bandung, Surabaya and Medan.

RELEVANT MARKET ANALYSIS

• Based on the Law No. 5 of 1999 article 1 point 10 relevant market shall be the market related to a certain marketing range or area by business actor for the same or similar type of goods and/or services or subsitutes of such goods and/or services.

• In the Relevant Market in this case are Hypermarket Ritel that in direct competitive in area such as :Jakarta, Tangerang, Bandung, Surabaya, and Medan for daily household product such as food and beverages in ready pack, nine basic needs and fresh product, household product and electronics.

Whereas selection of the aforesaid market was based on the following considerations:

Traditional Market vs Modern Market

» Retail market consists of traditional market and modern market;

» Traditional market and modern market are not competing directly, since both can be differentiated based on the following characteristics: - The system of product selling, namely whether it

is placed in one place or several places; - Consumer's ability to bargain the product it

is going to buy; - The availability of a product's price tag; - Consumer's ability to pick out its own needs; - Shopping comfortness;

» Hence, it can be concluded that business actor of the traditional market does not compete directly with business actor of the modern market

THE MINUS MARGIN TERM

The following are facts attained from the investigation, which was considered as the objective evidences:

•That the Reported Party has implemented the minus margin in its trading terms

•Whereas such implementation of minus margin term was intended to create a condition in which the selling price of Competitor of the Reported Party would not be lower than that of the Reported Party, in the relevant market. The implementation of minus margin term constituted the Reported Party attempt to control selling price of its Competitor in the relevant market

• Whereas such minus margin term has indirectly resulted in the blockage of consumer access to buy product with competitive price in the relevant market

•Whereas accordingly, some Dealers were discontinuing their supplies to Competitor of the Reported Party selling product in lower price than that of the Reported Party, because afraid of being sanctioned on minus margin term

Whereas the discontinuance of supply by the Dealer as aforementioned has caused in the following:

» Competitor of the Reported Party is unable to sell the same product

» Product stock of the Competitor is getting lessen, hence reduce the consumers option in buying a product

» Based on the abovementioned, it can be concluded that the Reported Party act of implementing the minus margin term has the potential of preventing its Competitor from doing business in the relevant market

THE MINUS MARGIN TERM

IMPACT ANALYSIS • Whereas the Reported Party has stronger bargaining power than that of the Dealer,

hence it can compel the Dealer to be agreeable with trading terms as desired by the Reported Party

• Whereas the trading term of listing fee has the potential of preventing the Dealer to perform a trade relation with the Reported Party

• Whereas the trading terms which were progressively troubling the Dealer every year has resulted in the increase of marketing cost without any balance to the product sale. Accordingly, some Dealers found difficulties in continuing their business, hence expelled from the Reported Party business relation for they have failed to comply with the trading terms

• Whereas the Reported Party implementation of progressive trading terms to the Dealer without increasing sale of such Dealers’ products, clearly shows the Reported Party attempt to attain bigger additional profit

• Whereas additional profit gained from the implementation of excessive trading terms (i.e. the listing fee, common assortment cost, minus margin, negative margin, service level and others) to the Dealer in 2004 was amounted to Rp. 40.187.168.421,- (Forty billion one hundred and eighty seven million one hundred and sixty eight thousand and four hundred and twenty one Rupiah)

• Whereas percentage of the aforesaid additional profit was 17,46% compared to the Operating Income

• Whereas selling price to the consumer in vendors of a modern retailer is decided by the retailer itself. The Dealer merely gives a recommended selling price

• The minus margin term implemented by the Reported Party constituted the Reported Party act in burdening the Dealer for loss competition risk, namely when selling price of the Competitor is lower than that of Reported Party. Hence, the minus margin term which was implemented by the Reported Party to the Dealer given that the Competitor sold a product in lower price than that of sold by Reported Party, constituted an unfair act since the Reported Party has troubled the Dealer with something beyond its authority

• The minus margin term has disturbed business relation between the Dealer and the Competitor of the Reported Party

• The minus margin term has indirectly intended to maintain the selling price of a product in vendors of the Competitor, so that the selling price would not be lower than that of sold in vendors of the Reported Party

IMPACT ANALYSIS

• Whereas the implementation of minus margin term to the Dealer has resulted in the discontinuance of product supply to the Competitor selling product in lower price than that of sold by the Reported Party

• Prevented from the product supply, the Competitor could not sell such product in its vendors unless it raised the selling price of such product

• The abovementioned has prevented the Competitor to provide a competitive price in the relevant market

• Whereas the discontinuance of product supply has resulted in the decrease of such product stock, hence troubled the Competitor to compete within the relevant market

• Whereas the said condition has also resulted in the blockage of consumer right to attain competitive price for the same product in the vendors of the Competitor

• Whereas in the event that the Dealer discontinue the product supply to the Competitor, hence consumers could not buy the such product in vendors of the Competitor

IMPACT ANALYSIS

Article 19 Paragraph a of Law No. 5 of 1999 stating that :

“Business actor shall be prohibited from engaging in one or more activities, either individually or jointly with other business actor, which may result in monopolistic practices and or unfair business competition, in the following form:

a. Reject and or impede certain other business actors from conducting the same business activities in the relevant market “

Considering that based on the analysis on elements of the abovementioned article, it is concluded that elements of Article 19 Paragraph a is fulfilled

“Business actor shall be prohibited from engaging in one or more activities, either individually or jointly with other business actor, which may result in monopolistic practices and or unfair business competition, in the following form:

b. Ban consumers or customers of their competitors from engaging in a business relationship with such business competitors”

Considering that based on the analysis on elements of the abovementioned article, it is concluded that elements of Article 19 Paragraph b is not fulfilled

Article 19 Paragraph b of Law No. 5 of 1999 stating that :

Article 25 Paragraph (1) Sub Paragraph a of Law No. 5 of 1999 stating that :

“Business actors shall be prohibited from using dominant position either directly or indirectly to determine the condition of trading with the intention of preventing and or barring consumers from obtaining competitive goods and or services, both in terms of price and quality”

Considering that based on the analysis on elements of the abovementioned article, it is concluded that elements of Article 25 Paragraph (1) Sub Paragraph a is not fulfilled

JUDGEMENT• Declaring that the Reported Party has been proven legally and convincingly to have violated Article 19 Paragraph a of Law No. 5 of 1999;

• Declaring that the Reported Party has not been proven legally and convincingly to have violated Article 19 Paragraph b of Law No. 5 of 1999;

• Declaring that the Reported Party has not been proven legally and convincingly to have violated Article 25 (1) Paragraph a of Law No. 5 of 1999;

• Ordering the Reported Party to discontinue the implementation of 'minus margin' requirement to the dealer;

• Sentencing the Reported Party to pay a fine of 1,5 Billion Rupiah

THANK YOU

Commission for the Supervision of Business Competition

2007

No 2003 2004 2005

1 Fixed Rebate Fixed Rebate Fixed Rebate

2 Conditional Rebate Conditional Rebate Conditional Rebate

3 Promotion Discount Promotion Discount Promotion Discount

4 Promotion Budget Promotion Budget Promotion Budget

5 Regular Discount Regular Discount Regular Discount

6 Common Assortment Common Assortment Common Assortment

7   Reduce Purchase Price Reduce Purchase Price

8   Minus Margin Minus Margin

9   Penalty Delay Delivery for Event Penalty Delay Delivery for Event

10   Penalty on Short Level Penalty on Short Level

11   Opening Cost Opening Cost

12   Opening Discount for New Opening Discount for New

13   Additional Discount for Other Additional Discount for Other

14   Anniversary Discount Anniversary Discount

15   Store Remodeling Discount Store Remodeling Discount

16     Opening Listing Fee

17     Lebaran Discount

B