Verry's Log: Recent Update on the Indonesian Competition Law Bill

Background

It has recently been confirmed by the Chairman of the Indonesian Parliament (Dewan Perwakilan Rakyat, DPR), Bambang Soesatyo that four bills are in the planning for approval by the DPR, by 25 July 2019.

One of the bills is a bill on an amendment to Law No.5 of 1999 on Prohibition of Monopolistic and Unfair Business Competition Practices (Competition Law Bill).

According to the DPR website and its social media, the DPR is optimistic that despite the fact that the Government and the Parliament are still in discussions regarding the Competition Law Bill, they are targeting that the Competition Law Bill will be approved as scheduled.

Progress of the Competition Law Bill

Our observation on the progress of the Competition Law Bill indicates that it still requires extensive discussion due to the significant amount of items in the Competition Law Bill that need to be discussed, as set out in the bill’s Inventory List of Issues (Daftar Inventaris Masalah, DIM).

This prospect becomes much more pessimistic given that most members of the Parliament, in the aftermath of the legislative elections, are now focused on securing their re-elections, as opposed to discussing the Competition Law Bill (some of them might be reelected while others will not).

However, if the Competition Law Bill were to be approved, there would be several fundamental changes:

Fundamental Changes to:	Discussion and updates
Administrative Fines	Parliament has suggested administrative fines of up to 30% of the total value of the violation during the period that such violation was committed, whereas the Government has suggested a lower administrative fine of up to 25%.
Merger Notifications	Merger notifications will be mandatory before the M&A in question is effectively carried out, whereas previously only a post-merger notification was required. Furthermore, the scope of M&A notifications will also be expanded to cover the establishment of JVs and the acquisition of assets, and a fine of a maximum of 30% of the total value of the transaction will be imposed for late notification.
Leniency Programs	The Competition Law Bill introduces a leniency program, further details of which will be set out in an implementing regulation. However, the Government has suggested removing this leniency program, based on a number of considerations.
Exceptions	Currently, the article for exemptions in Law No.5/1999 (the current Competition Law) can only be granted by such Law. The Government, in its DIM, suggested that these exceptions be granted by its implementing regulations. In the Competition Law Bill, the Parliament has removed the exception for Intellectual Property Rights (IPR).
Interlocutory Decisions	The Competition Law Bill grants authority to the Commission for the Supervision of Business Competition (Komisi Pengawas Persaingan Usaha, KPPU) to issue Interlocutory Decisions upon the commencement of an examination, prior to the KPPU making a final decision.
Extraterritoriality	If approved, the Competition Law Bill will also introduce a new provision. The implementation of the “extraterritoriality” principle is based on the “effects doctrine”, whereby the KPPU may impose penalties under the Competition Law on business actors domiciled outside Indonesia that have violated the Law and have a negative impact on the market in Indonesia.
Abuse of Dominant Bargaining Position	This provision is mandated by Law No.20 of 2008 on Micro-, Small- and Medium-Scale Businesses, which requires the KPPU to supervise the partnership between Micro-, Small- and Medium-Scale Business owners and big business actors, such as the trend of inti-plasma relationships in large-scale plantations and livestock farms. However, further implementing regulations will be required before the KPPU can implement this provision.
Institutional status and strengthening of the KPPU’s role	The Competition Law Bill proposes that the KPPU should have the authority to, with the assistance of the Police, compel business actors to submit investigation documents. Furthermore, it raises the KPPU’s institutional status to that of a Commissioner as a state official.
Payment of 10% of value of fine if objecting to a KPPU decision	This provision will apply to business actors that have been imposed with a penalty by the KPPU and intend to submit an objection. They must first deposit a payment of 10%.