Overview
On 19 December 2017, Indonesia’s
Commission for the Supervision of Business Competition (KPPU) concluded that PT Tirta Investama, a company producing “AQUA
Danone” bottled water (Aqua) and PT
Balina Agung Perkasa (BAP or Distributor) had breached the
provisions of exclusionary conduct under Law No.5 of 1999 on Prohibition of
Monopolistic and Unfair Business Competition Practices (Competition Law).
After
a series of investigations and hearings that lasted more than a year, KPPU
found that Aqua and BAP had violated Article 15(3) and Article 19(a) and (b) of
the Competition Law. KPPU imposed a fine
of Rp13.8 billion and Rp6.3 billion respectively, on Aqua and BAP.
The latest KPPU
decision sends a strong message that every business actor must comply with the
prevailing laws and regulations, including the Competition Law.
Background
The
initial case started with a summation (Somasi) made by Aqua’s competitor, Le Minerale (PT Tirta Fresindo
Jaya). The Somasi was published in several
national newspapers, demanding that Aqua and its Distributor stop forcing
outlets not to sell Le Minerale’s products.
KPPU kept an eye on this news by closely monitoring, and then initiating
its own investigation in this case.
During
its investigation, KPPU discovered evidence supporting its findings, including
conduct in the form of threatening or downgrading the outlets, from a star
outlet (SO) to becoming a wholesaler
(WS), if they continued to sell Le
Minerale’s products. This downgrading from
SO to WS resulted in the outlets paying 3% more when receiving Aqua’s products. In order to avoid paying 3% more, the outlets
(had to) follow Aqua and BAP’s instructions, which have caused a decrease in Le
Minerale’s sales in specific areas.
KPPU findings
were also supported by emails from Aqua and BAP or agencies to the outlets,
indicating that these instructions were effective in the field. KPPU considered that the instructions were effective
due to Aqua’s domination in the bottled water market shares in Indonesia.
Based
on the market share report from Goldman Sachs, in 2015, Aqua occupied more than
46.7% of the bottled water market share in Indonesia, followed by Club 4%
(Indofood), 2Tang 2.8% (PT Tang Mas), Oasis 1.8% (PT Santa Rosa Indonesia),
Super O2 1.7% (Garuda Food), and Prima 1.4% (PT Sosro).[1]
BAP
is Aqua’s exclusive distributor for 12 specified areas, including Cikampek,
Cikarang, Bekasi, Babelan, Pulo Gadung, Sunter, Prumpung, Kiwi, Lemah Abang,
Cibubur, and Cimanggis.
Exclusionary conduct
In its
decision, KPPU considered that Aqua and BAP breached the provisions on
exclusionary conduct (e.g. Articles 15(3) and 19(a) and (b)).
Article
15(3) of the Competition Law, stipulates that:
Business
actors shall be prohibited from entering into agreements concerning prices or
certain price discounts for goods and or services, setting forth the condition
that the business actor receiving goods and or services from the supplying
business actor:
a.
must be willing to buy other
goods and or services from the supplying business actor; or
b.
will not buy the same
or similar goods and or services from other business actors that are competitors
of the supplying business actor.”
Article
19(a), (b) of the Competition Law, stipulates that:
Business
actors shall be prohibited from engaging in one or several activities, either
individually or jointly with other business actors, which may cause
monopolistic or unfair business competition practices, such as:
a.
refusing to allow and
or impeding certain other business actors in conducting the same business
activity in the relevant market; or
b.
impeding consumers or
customers of their competitors in engaging in a business relationship with such
business competitors.
KPPU found that the
“exclusionary practices” conducted by Aqua and BAP have satisfied the elements
of Articles 15(3) and 19(a) of the Competition Law, which generally prohibits exclusionary conduct, if it prevents actual or
potential competitors from supplying the same products or prevents consumers
from obtaining similar products that are competitive in price or quality.
This case
serves as a reminder of past KPPU cases on exclusionary conduct, as follows:
Arta Boga Cemerlang (ABC, 2004)
In the ABC
case, KPPU determined that ABC had breached Article 25 of the Competition Law by
engaging in exclusionary practices towards its competitors and entering into
agreements with its wholesalers and grocers, which provided that:
- a 2 per cent discount would be given, if they agreed to sell ABC’s batteries; and
- an additional 2 per cent discount would be given, if they agreed not to sell ABC’s competitors’ products.
Telkom (2005)
In the Telkom
case, the Supreme Court determined that Telkom had breached Article 15(3)(b) of
the Competition Law by providing exclusive rebates to hotels and offices on the
condition that these hotels and offices would not use international
telecommunications services offered by Indosat, a competitor. With its dominance in the public switched
telephone network market, Telkom thereby also abused its dominant position, in
contravention of Article 25 of the Competition Law.
Appeal
After KPPU issues its
decision, the relevant business actors concerned (in this case, Aqua and BAP) would
be obliged to abide by the decision and report to KPPU within 30 days after
receiving formal notification of the KPPU decision.[2] However, the business actors may decide to
appeal the decision to the District Court, in which case they must file the
appeal no later than 14 days after being notified of the decision.[3]
The District Court is then obliged to examine the appeal within 14 days of the
filing of the appeal,[4]
and must make a decision within 30 days from the date of commencement of the
appeal hearing.[5]
Conclusion
KPPU’s decision went
against Aqua and BAP, stating that they were proven to have breached the
provisions on exclusionary conduct in the distribution and selling of Aqua
Danone bottled water. We note that on
31 January 2018, the appeal has filed by Aqua and we will see that the District Court
will review the KPPU findings and determination whether it had correctly applied the provisions on Competition Law.
[1] https://katadata.co.id/berita/2017/12/20/divonis-kppu-aqua-terbukti-larang-toko-jual-produk-le-minerale accessed on 15 January
2018.
[2] Article 44(1) of the Competition Law
[3] Article 44(2) of the Competition Law
[4] Article 45(1) of the Competition Law
[5] Article 45(2) of the Competition Law
