Newsletter on Indonesian Competition Law and Policy

Volume II / 2014

THE 14 ANNIVERSARY OF KPPU th

FLASHNEWS

LAW ENFORCEMENT

n 14 Anniversary of KPPU: Years of Hard Work

n KPPU Approved Acquisition of KUFPEC by Saka Energi Indonesia n KPPU Punished PT. Angkasa Pura II and PT. Telekomunikasi Indonesia Tbk

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COMPETITION ADVOCACY n KPPU passes by the First Semester of 2014 with Five Policy Recommendations n KPPU - KPK Cooperation On Competition Law Enforcement n KPPU - OJK Cooperation in the Supervision of Financial Services

INTERNATIONAL n International Conference on Competition Law Enforcement in Asia n KPPU Shared the Malaysian about Indonesia Experience in Tackling Bid-Rigging Conspiracy n The 4th ASEAN Competition Conference (4th ACC)

EDITORIAL

CONTENT FLASHNEWS

3 14th Anniversary of KPPU: Years of Hard Work For 14 Years, KPPU has been established as an independent Indonesian Competition Authority. Hundreds of decisions has been issued and billions of Rupiah has been secured. Along the way, the Competition Authority faced so many hardships and challenges especially regarding it’s limited authority. And of course, even under such limitation this institution has growth and matured. Today, as a rememberance of the contributions from our counterparts and partners that spread around the globe. We’d like to pay our gratitude for their neverending support through this edition. And for those who start their baby walk with us, let’s walk some more. Because this path we choose is too beautiful to end. Take your glass and have a cheers with us for our 14th Anniversary. Enjoy your reading! Best Regards,

COMPETITION ADVOCACY

4 KPPU passes by the First Semester of 2014 with

Five Policy Recommendations 7 KPPU’s Opinion of MSME Loan Interest Rate Risk Premium 8 KPPU Submitted Policy Recommendation on Bancassurance to OJK 8 KPPU – OJK Cooperation in the Supervision of Financial Services 9 KPPU – KPK Cooperation On Competition Law Enforcement 9 Study Visit from UPN “Veteran” East Java 10 Developing Close Relationships with Local Governments and University 10 Visited KPPU, BLP Discussed the UK Competition Reform

LAW ENFORCEMENT

11 KPPU Approved Acquisition of KUFPEC by Director

Mohammad Reza

Editor in Chief

Verry Iskandar

Managing Editors

Retno Wiranti

Editorial Staff

Ardaiyene Suharyati



Rini Anjaswari



Maretha Wulandini

Photography

Nanang Sari Atmanta

Kompetisia Newsletter Public Relations and Legal Bureau Komisi Pengawas Persaingan Usaha (KPPU) INDONESIA Address Ir.H. Juanda Street No. 36 Central Jakarta 10120 Tel 021-3507015 / 3507043 Fax 021-3507008 Website http://eng.kppu.go.id/ Email [email protected] [email protected]

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Saka Energi Indonesia 11 KPPU Punished PT Tiara Marga Trakindo for Overdue Post-Notification 12 KPPU Punished PT. Angkasa Pura II and PT. Telekomunikasi Indonesia Tbk 12 Cartel on Electrical Installation Services in Nunukan 13 Bid Rigging Case of Embung Fatimah Hospital in Batam 13 Bid Rigging Case of National Road in West Sulawesi for Fiscal Year 2012

INTERNATIONAL

14 International Conference on Competition Law

Enforcement in Asia 14 KPPU Shared the Malaysian about Indonesia Experience in Tackling Bid-Rigging Conspiracy 15 Investigation and Case-Handling Training for Members of AEGC 16 The 4th ASEAN Competition Conference (4th ACC)

FLASHNEWS

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14th Anniversary of KPPU: Years of Hard Work

ourteen years ago, the historical milestone of KPPU started. The young agency has been grew and transformed. Eventhough there are so many ups and downs along the winding road, the agency keeps the hard work to implement the Competition Law & Policy in the emerging economy of Indonesia. In the glorious event of KPPU’s 14 th Anniversary, Mr. Nawir Messi, the Chairman of KPPU, expressed his optimistic on the agency’s capability to create effective and efficient business climate in Indonesia. The Minister for Economic Coordination, Chairul Tanjung (CT) also said that the duty of KPPU is not only to prevent monopoly practices, but also to ensure fair competition between business actors. Chairul, or commonly called CT, explained that this is in accordance with the mandate of Law Number 5

Year 1999 corcerning Prohibition of Monopolistic Practices and Unfair Business Competition. “KPPU put a lot of concern on national economic efficiency, in order to create people’s welfare. When KPPU is actively pursuing a cartel case, it is not only about the cartel conduct, but also about fair competition and efficiency. Thus, our products can compete domestically and internationally. That is our expectation from KPPU,” he said while giving a speech in the celebration of KPPU’s 14th Anniversary at the Grand Sahid Jaya, Jakarta, Thursday night (06/12/2014). Meanwhile, Deputy Chairman of the Supreme Court on Judicial Affairs, Mohammad Saleh said that KPPU deserved the praise, because this institution has been sufficiently developing and contributing in the creation of economic growth.

“I have been indirectly observing the development of KPPU, and I see that KPPU has grown stronger. This is an institution which worthy of being praised,” he said in KPPU’s 14th Anniversary. Saleh said, Indonesia has the Law Number 5 Year 1999 concerning Prohibition of Monopolistic Practices and Unfair Business Competition. Meanwhile, KPPU as the institution who responsible to implement this Law, was born a year after the Law enacted. Every year, KPPU in collaboration with Supreme Court held a seminar devoted to the Judges throughout Indonesia. Saleh said, this is an important cause due to the number of KPPU’s Decision appealed to the District Court. “The District Court became important stakeholders in competition law enforcement. In the near future, I hope there will be more training for Judges,” Saleh said. []

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COMPETITION ADVOCACY

KPPU passes by the First Semester of 2014 with Five Policy Recommendations KPPU has conveyed five policy recommendations to the central government and regional governments in the first semester of 2014. The recommendations conveyed to the Ministers, Heads of Agency, and Governors include several sectors such as construction, electric power, regional banking, food, and procurement. The following are some explanations relating to such competition policy recommendations. Policy on Mandatory SBU/SRP

The first recommendation in 2014 includes policy of the Governor of Aceh through Gubernatorial Instruction No. 01/INSTR/2007 regarding the Putting into Effect of Business Entity Certificate (SBU)/Company Registration Certificate (SRP) in Nangroe Aceh Darussalam Province. This policy obliges business actors from outside Aceh Province to re-

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enroll and obtain re-certification for business entity certificate or company registration certificate from the Chamber of Commerce and Industry of Aceh Province. In this policy, KPPU considers that central government regulation regarding registration and certification obligations have been national in nature, consequently, reenrollment in regions will just create barrier to entry for business actors from

outside the Province in participating in goods and services procurement processes in the relevant region. This also may pose discrimination among regions in the origin of business actors as well as capable of creating new cost for business actors from outside the region to compete in such province. Eventually, this policy may reduce the capability of Aceh’s local business actors to create highly competitive products or services. Based on the above-mentioned matter, KPPU, on March 17, 2014, recommended the Governor of Aceh to revoke the instruction and not to put into effect mandatory prerequisite to attach SBU/SRP issued by the Aceh Chamber of Commerce and Industry in goods and services procurement processes in the relevant region.

COMPETITION ADVOCACY Policy on Electric Power

The second recommendation conveyed by KPPU pertains to plan for electricity rate increase policy in 2014. This recommendation has been started with an observation conducted by KPPU on the 2014 electricity rate increase plan, especially based on the discussion among the Center for the State Revenues and Expenditures Budget Policy, KPPU, and the Ministry of Energy and Natural Resources on April 8, 2014. During the discussion, it was found that the government intends to raise electricity rate through three points of policy plan, namely (i) elimination of subsidy for industry 3 rate group (electric power >200kVA) especially for go public companies (publicly listed); (ii) elimination of subsidy for industry 4 rate group (electric power >30,000kVA); and (iii) adjustment of rate for certain groups, especially large households, middle scale business, large scale business, and middle scale government offices. The focus of attention of KPPU in such policy is the differentiation of rate for publicly listed companies and nonpublicly listed companies on the grounds that they (publicly listed companies) have more strength in the financial aspect. KPPU just considers that such policy is discriminatory in nature and capable of increasing production cost of publicly listed companies as compared to non-publicly listed companies. Consequently, the competitiveness of publicly listed companies will be affected. Such differentiation will also become disincentive to publicly listed companies which at the same time their openness is aimed at creating sound, transparent, and accountable companies with strong good corporate governance. This differentiation policy just stimulates companies to defend their closed nature and far from the effort to create transparent and accountable companies. The assumption of capital strength of publicly listed companies is also considered as less strong, because many non-publicly listed companies are owned by foreign companies and are supported with significant financial strength. This certainly may result in the removal of the national publicly listed

companies from the market for being lost in competing with non-publicly listed companies owned by foreign companies. With due observance of this matter, in a circular letter regarding policy addressed to the Head of the Fiscal Policy Agency on April 16, 2014, KPPU recommended the government not to put into effect different policy plan for publicly listed companies and non-publicly listed companies. It is recommended that the adjustment of electricity rate constituting the pure authority of the government should use other criterion that is in line with the principle of fair business competition and should guarantee equal opportunity for running a business for all business actors. Furthermore, considering that the recommendation is not yet adapted, KPPU also put forward the same recommendation to the President of the Republic of Indonesia on June 18, 20014.

of cross monitoring by fellow cattle raisers. This policy plan certainly will be contradictory to provisions of article 11 (Cartel) in business competition law. Furthermore, KPPU is also of the opinion that the true objective of plan for CSR use for price stabilization function needs to be analyzed further as intended in Law No. 40 Year 2007 regarding Limited Liability Companies. In view of such issue, KPPU through its circular letter dated April 17, 2014 recommended the Minister of Trade to further prioritize the regulating of the management of the grandparent stock (GPS) import and the granting of import permits in order to protect the interest of cattle raisers. KPPU also recommended the avoidance of coordinating CSR which may lead to cartel behavior and other unfair behaviors as well as prepare other instruments that are in line with the laws.

Policy on Corporate Social Responsibility (CSR) for Hatching Broiler Eggs

Policy on BUMN Synergy in the Procurement of Goods and Services

Policy on CSR for hatching boiler eggs is aimed at reducing the number of hatching broiler eggs through the allocation of approximately 15% of the total production of hatching eggs for CSR purposes, which in its implementation is coordinated by the association and evaluation of implementation through monitoring by fellow livestock business actors. This government policy plan (Ministry of Trade) is aimed at stabilizing the price of the day old chicken (DOC) and or that of broilers. Policy on CSR basically constitutes a positive matter and KPPU itself does not object and supports the implementation of such program insofar as not violating provisions in business competition law. However, the policy plan to be prepared by the Ministry of Trade will just facilitate or ease the establishment of cartel behavior in the future. Three points triggering the cartel are (i) the existence of allocation of the number of stock for CSR agreed upon jointly; (ii) the existence of form of coordination by the association; and (iii) the existence

The fourth recommendation conveyed pertains to the policy of the Minister of State-Owned Enterprises (BUMN) through Regulation of the Minister of State-Owned Enterprises No. Per-05/MBU/2008 regarding General Guidelines on the Implementation of the Procurement of Goods and Services of State-Owned Enterprises, as amended by Regulation of the Minister of State-Owned Enterprises No. Per-15/MBU/2012. This policy has been prepared to give flexibility to BUMN in conducting goods and services procurement, hence, capable of shortening time and improving business opportunity for government-owned companies. This policy applies to the procurement of goods and services the financing of which does not directly use the State Revenues and Expenditures Budget (APBN)/Regional Revenues and Expenditures Budget (APBD) fund. The focus of attention of KPPU in this policy is the existence of article 9 paragraph 3 sub-paragraph “j” explaining that the procurement of goods and services at State-Owned Enterprises can be conducted through

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COMPETITION ADVOCACY direct appointment if there are State-Owned Enterprises (BUMN), or BUMN subsidiaries, BUMN-affiliated companies acting as goods and services providers provided that the quality and price can be accounted for. The interesting point is that article 9 paragraph 4 also states that subsidiaries and or directly affiliated companies will obtain priority if BUMN that becomes the parent company conducts the procurement of goods and services. The scope of such special treatment is described in articles 12 and 12A regulating the scope. Such articles explain that the regulation applies to (i) BUMN in the form of publicly listed company; (ii) subsidiaries of BUMN more than 50% of the share of which is owned by BUMN; or (iii) BUMN-affiliated companies more than 50% of the share of which is owned by the subsidiary of BUMN, combination of subsidiaries of BUMN, or combination of subsidiaries of BUMN and BUMN. KPPU understands very much that the synergy of BUMN constitutes an effort to improve the performance and strengthen BUMN so as to have high competitiveness, especially in facing economic globalization and trade liberalization. However, KPPU sounds a note that other than foreign companies, there are still national private companies that become the competitors of BUMN at domestic market. With the allowing of direct appointment, national private companies will be obstructed in obtaining opportunity for the procurement of goods and services within BUMNs. This will create entry barrier for them. In addition to the above, direct appointment mechanism may generate goods and services that are not efficient in terms of price and or quality, especially for concentrated industry. Direct appointment by BUMN to subsidiaries or those affiliated to them will also improve the strength of monopoly and dominant position of BUMN at other market (through the foreclosure of market). Such direct appointment is not included in the exception of article 50 sub-article “a” of business competition law (Law No. 5/1999), either, because there is no article in Law No. 19/2003 regarding State-Owned Enterprises (BUMN) stipulating regulation relating to direct

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appointment or procurement of goods and services especially for BUMN. In this context, KPPU in its letter dated May 20, 2014 to the Minister of State-Owned Enterprises requested the government to revoke and redesign the policy on BUMN synergy in the procurement of goods and services within BUMNs adjusted to the principle of fair business competition. KPPU also recommended that coordination with other ministries and state institutions (including KPPU) be established in preparing laws and regulation pertaining to such BUMN synergy.

Policy on the Appointment of Banks for Extending Revolving Fund

The last recommendation conveyed by KPPU is to follow up the audience of the Cooperatives, MSMEs, and Trade Service Office of the Provincial Government of the Special Capital City Region (DKI) of Jakarta on April 1, 2014 raising the issue of plan for the appointment of banks in extending revolving fund. This policy plan has been discussed in line with the plan of the regional government for appointing banks as implementing partners for the extension of revolving fund to cooperatives in DKI Jakarta. In its recommendation dated April 16, 2014, KPPU recommended that mechanism for competition for the market such as beauty contest or tender be implemented and criteria and requirements for service providers in an open and transparent manner be created as well as not binding or leading to a certain bank so as to create an equal opportunity for running a business for all banks. This is in order to be in line with the objective of the making of the business competition law. The five recommendations have been conveyed by KPPU in line with the duties granted by article 35 sub-article “e” of Law No. 5/1999 regarding Prohibition of Monopolistic Practices and Unfair Business Competition stating that KPPU may provide recommendations and considerations for the government pertaining to monopolistic practices and unfair business competition. Although such recommendations and considerations are not binding (are voluntary) in nature, it is still expected that the government observes the opinion of KPPU in the preparation and implementation of its policies. Especially considering that the similarity of the main objective of the government and all state institutions is to create highly competitive economy culminating in the welfare of the general public. []

COMPETITION ADVOCACY

KPPU’s Opinion of MSME Loan Interest Rate Risk Premium

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PPU recommends the Financial Service Authority (OJK) to regulate Micro, Small, and Medium Enterprises (MSMEs) so as to prevent bank behavior from obtaining profits through excessive interest rate. It is expected that through this regulating, loan interest rate will decrease and stimulate MSMEs to become more competitive, hence, capable of competing during the implementation of the ASEAN Economic Community later. The statement of the Chairman of KPPU, Nawir Messi, was set forth in a letter of recommendation and consideration put forward to OJK on June 24, 2014. Furthermore, KPPU recommends OJK to conduct the following actions: 1. Regulate the process for stipulating risk premium by banks through a measureable and transparent method so as to prevent bank behavior from obtaining excessive profits in stipulating MSME loan interest rate; 2. Encourage the presence of an independent institution that has the authority to issue risk premium that will serve as a reference for all banks in Indonesia. Through, this method, the process for stipulating risk premium will be more transparent; and

3. The regulating of transparent process and the calculation of risk premium will be left to OJK as the Indonesian banking supervisory authority. Such various recommendations have been prepared based on an intensive assessment conducted by a team at KPPU for the last few months. Such assessment shows that the value of risk premium that exceeds the value of basic interest rate of loans (SBDK) occurs to the amount of MSME loan interest rate, on the grounds of high risk of extending loans to MSMEs. This has been worsened by difficulty in obtaining information by debtors with regard to the calculation of risk premium by banks. Risk assessment method is very subjective and is without a valid assessment benchmark. In addition to the above, possible duplication of double charge also arises for profit margin and risk margin. The assessment conducted by KPPU shows that the value of risk premium may reach 20%, which exceeds the average basic interest rate of MSME loan of 15% especially in the Eastern Region of Indonesia. With such condition, the basic rate of loans may not function as a reference for consumers in choosing banks with a low loan interest rate criterion. These recommendations and considerations constitute

the materialization of one of the duties of KPPU, namely providing recommendations and considerations for the regulator with regard to policies that have a potential of posing the occurrence of monopolistic practices or unfair business competition. In the context of performing such duty, KPPU always observes various Government policies and analyzes the impacts thereof in a competition perspective. Banking industry is one of the priority industries to be supervised by KPPU. Various activities have been focused on this industry, both in the aspect of assessment, policy analysis and law enforcement. This industry has become a focus in line with the high banking interest rate in Indonesia. The margin of the Indonesian banking industry is categorized as high compared to the banking industry of other ASEAN countries. In 2012, the Net Interest Margin (NIM) of Indonesian banks was above 5%, higher than that of other ASEAN countries of 3.5%. The same was also shown by the value of Return on Equity (ROE) and Return on Asset (ROA). The average value of bank ROE in Indonesia is at the range of 18% and the average value of ROA is 1.9%, higher as compared to other ASEAN countries whose average value of ROE is around 15% and that of ROA is 1.6%. This condition has affected loan consumers, especially MSME loans that have the highest loan interest rate value as compared to that of other loan interest rates, hence, reducing the competitiveness of Indonesia especially when entering the ASEAN Economic Community in the incoming 2015. These various factors have driven KPPU to take an initiative to identify if this high interest rate has been caused by the distortion of fair business competition by the behavior of certain business actors. The allegation of KPPU has further been strengthened by a finding that

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COMPETITION ADVOCACY the value of interest rate obtained by consumers, plus risk premium, skyrockets. The amount of final interest rate at the hand of consumers can reach twofold (even more) of the SBDK value, whereas transparency of SBDK has been regulated and announced periodically in accordance with Circular Letter of Bank Indonesia Number 15/1/DPNP dated January 15, 2013 regarding Transparency of Information on Basic Interest Rate of Loans, which at the same time by observing SBDK, consumers may evaluate the benefits and costs of loans offered by Banks before the value of risk premium. This certainly strengthens potential coming into effect of excessive loan interest rate in the Indonesian banking industry. []

KPPU Submitted Policy Recommendation on Bancassurance to OJK

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he study of KPPU about exclusive agreement on bancassurance, especially in unit link product, concluded that the exclusive agreement process in bancassurance could not categorized yet as an exclusive dealing practice which regulated in Article 15 Law Number 5 Year 1999. Because the bank acted as the channel for insurance product sales, and yet there are no dominant business actors in that channel line. The position of channeling in the insurance product sales was scattered. This policy recommendation was conveyed to the head of Financial Services Authority (OJK) on June 24th 2014. However, KPPU also argued that an exclusive agreement which only involving one business actor, will be potentially harmed the competition law if the appointment process’ ignoring the principle of fair competition. Therefore, KPPU suggested that the appointment should be implemented with transparent, non-discriminatory, and based on efficiency process with the supervision of OJK. The role of both institutions is to prevent exclusivity which can create inefficiency in business insurance and banking industry in long term. In the implementation of fair competition principle, KPPU asked OJK to cooperate with KPPU in every aspect of financial services regulation to prevent monopolistic practices and unfair business competition. []

KPPU – OJK Cooperation in the Supervision of Financial Services

“This partnership was addressed to develop a community”, said Chairman of KPPU, Nawir Messi, in his welcoming remarks for the formal partnership inauguration between KPPU and The Financial Services Authority (OJK), which was held on Tuesday, July 15th, 2014 in Jakarta. This partnership objective is to supervise business competition in the financial services. Furthermore, Nawir explained that since 2013, financial sector has been

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one of the main priorities of KPPU’s law enforcement and prevention, other than food, education, health, energy, and infrastructure. Some research has been done in the financial sector. KPPU has given at least three recommendations to OJK regarding the banking sector. In the future, this partnership will create effective communication between both agencies and assist both institutions towards their objectives. Chairman of OJK, Mr. Muliaman

Hadad, underlined the importance of cooperation in the form of systemic trust in his welcoming remarks, considering that financial sector has a complex interconnectivity. The cooperation has been proposed since early 2014 and has a main objective to harmonize regulations in the financial services sector with the competition policy. The cooperation also supports the prevention effort of unfair competition through joint research and study, as well as the exchange of information (such as corporate data and market share). To facilitate the prevention effort, KPPU and OJK have been agreed to convene a coordination meeting every three months. In a Press Conference, both Chairmen of those institutions u n d er l i n ed th e im p o r tan ce o f coordination to ensure the consistency of laws’ application which becomes responsibility for each institution. Even Muliaman said that they were considering making a particular regulation to support the implementation. []

COMPETITION ADVOCACY

KPPU - KPK Cooperation On Competition Law Enforcement

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onday (14/07), located in KPK’s building, Commission for the Supervision of Business Competition (KPPU-RI) with the Corruption Eradication Commission (KPK-RI) signed a Memorandum of Understanding (MoU). This cooperation was signed in order to improve the monitoring of monopoly practices and unfair competition as well as the prevention and eradication of corruption in Indonesia. “In 14 years of carrying out the tasks, there are so many things that we have done, but of course many are

not touched yet. Our hope is to make the resources of KPK for the better performance of KPPU. I believe if these two institutions works together, there will be a lot of State’s Budget that we can save, “said Chairman of the KPPU, Nawir Messi. Meanwhile, KPK chairman, Abraham Samad welcomed the cooperation between KPK and KPPU. He believed institutions like KPPU is an agency who knows how to correct irregularities –irregularities by unfair businesses. Abraham insisted that unfair businesses behavior handled by KPK have some similar causes, namely the moral factor and system that have been established for a long time. Hence, the approach taken by KPK was almost the same with KPPU, through the vision of prevention. “After 10 years of work, it turns out the corruption rate did not go down significantly. We see that such

institutions like KPPU and KPK must work harder and believe in each other because one can not work alone. This MoU is one of KPK’s commitment to eradicate corruption and unfair business behavior, “said Abraham. KPK deputy chairman, Zulkarnain, also explained that this MoU related to the duties and functions of KPPU. According to him, competition can not be separated from government procurement of goods and services. Through this MoU, KPK’s expecting the communication, coordination and synergy between two institutions to be more intensive. “KPK with KPPU chairman signed the MoU in terms of synergy between two institutions for the prevention and eradication of corruption. There are some sections that could be synergized so we can strengthen both institutions, “said Zulkarnain in the press conference of KPPU and KPK. To improve the enforcement of competition law, cooperation between law enforcement agencies have been initiated by KPPU since several years ago, such as with the National Police, the General Attorney, and the Ministry of Justice and Human Rights. []

Study Visit from UPN “Veteran” East Java

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hundred students from Faculty of Law, UPN “Veteran” East Java visited KPPU, on Tuesday (17/06). The visit led by Dean Hariyo Sutrisno Sulistyantoro and Vice Dean was a part of Field Study for Proficiency Education and Training of UPN Veteran, East Java. In his speech, Hariyo said that this visit is a routine part of the lecturing activities in his college (UPN “Veteran”). Through this visit, the students are expected to understand the court proceeding in law enforcement institutions. Previously, they have done similar visits to LPSK,

Supreme Court and Judicial Commission. Meanwhile, Head of Legal, Public Relations and Cooperation Bureau, Mohammad Reza, explained that KPPU as the spearhead of competition law enforcement needs support from all parties, including the youngsters such as students of UPN. This is the time for competition law to be adopted in every college which has the law and economic courses. Hopefully, someday when the students

are working in the law enforcement institutions, they will be familiar with fair competition principle and give their support to KPPU. []

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Developing Close Relationships with Local Governments and University There are still obstacles encountered by KPPU on the internalization of fair competition, especially in internalizing competition policy to local governments. Many of those local governments are unaware of the benefits that will be brought by the competition policy and law. This will be the ultimate challenge for the Indonesia Fair Trade Commission in facing ASEAN Economic Community. Therefore, in order to develop close relationship with those Local Governments and University, KPPU signed Memorandum of Understandings with Brawijaya University, Government of North Sumatera Province, Government of Riau Islands Province, and Government of DKI Jakarta Province. This Memorandum of Understandings expected to support the internalization of competition policy and law through workshops, seminars, focus group discussions, and Competition Learning Center in University. The Local Governments eagerly welcomed this cooperation with KPPU, even the Vice Governor of DKI Jakarta Province, Basuki T. Purnama said, “KPPU should be involved in monitoring the procurement process of DKI Jakarta. I have been instructed by the Regional Secretary to make a regulation that forbids cash transaction exceeds IDR 100 million. This will be an effort to eradicate corruption and collusion in procurement process.” []

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Visited KPPU, BLP Discussed the UK Competition Reform

hree representatives from Berwin Leighton Paisner (BLP) visited KPPU on Wednesday (16/07). This visit was lead by James Marshall, a Senior Associate from BLP London Office, and was accompanied by Jon Nair (Senior Associate) and Erline Herrmann (Associate) from BLP Singapore Office. Their visit to KPPU was aimed to share and discuss the transition of competition regime in the United Kingdom. During this visit, James Marshall gave a discussion on the UK Competition Reform to KPPU as he just got involved in the Leadership Team in the Competition and Market Authority (CMA) for six months. The CMA, which is the new and leading competition regulator in the UK, takes over many of the functions of the Office of Fair Trading (OFT) and Competition

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Commission (CC). The reform process is much broader. It consists of two fundamental aspects of reform namely institution and substantive reform. James explained that previous competition regime in the UK consists of OFT, CC, Sector Regulators, and Competition Appeal Tribunal. Since the OFT and CC has merged into CMA, then CMA becomes a new unitary competition regulator in the UK. James also said that the UK has an unusual system called concurrent power which is shared to regulator sectors. In this case, sector regulators have power to use the competition law within the sectors. The reforms made increases regulated sectors enforcement. In substantive area, there are five key reforms that have been undertaken namely antitrust investigations, criminal cartels, mergers, regulated sectors enforcement,

and market investigation. Although there are several changes on each of those key reforms, there are couple of things that are remained the same. In short, the CMA becomes the lead voice for UK Competition Policy and Enforcement with stronger investigation powers, stronger powers to impose penalties, tighter timetable, and high expectations. The merger regulations system and concurrent powers of regulated sectors became issues that attracted KPPU interest for the discussion. The discussion also shared KPPU experiences in tackling anticompetitive practices, investigation powers, merger control, and other KPPU and Indonesia Competition Law characteristics to the BLP team. The discussion took place in KPPU Building and attended by KPPU management. []

LAW ENFORCEMENT

KPPU Approved Acquisition of KUFPEC by Saka Energi Indonesia

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PPU concluded that there are no allegation of monopolistic practices or unfair competition in the acquisition of KUFPEG Indonesia (Pangkah) BV (KUFPEC) by PT. Saka Energi Indonesia. The conclusion was stipulated on May 9th 2014 through KPPU’s Opinion Number 14/KPPU/ PDPT/V/2014. The assessment started by a notification from PT. Saka Energi Indonesia on July 10th 2013 to KPPU and the Deed of Transfer of Shares in KUFPEC Indonesia (Pangkah) BV completed on June 21st 2013. The acquisition was carried out by a subsidiary company of PT. Gas

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Negara (Persero) Tbk, who took 100% shares of Kuwait Foreign Petroleum Exploration Company KSC (Closed) by the purchasing of 18,000 shares placed in KUFPEC. KUFPEC itself is the shareholder of 25% Participating Interest of Block Pangkah in the northwest island of Madura (50 km from Surabaya). PT. Saka Energi Indonesia, the acquirer, is a company engaged in the

exploration and exploitation of oil and gas. The company already has two oil and gas blocks, namely Ketapang Block in East Java and Bangkanai Block in Central Kalimantan. Both of these blocks are still in the exploration stage and have not produced oil and gas yet. At this time, Blok Pangkah has production capacity of 8,000 barrels oil per day. By this acquisition, the Saka Energi gained 25% KUFPEC’s right of this block, which is about 2,000 barrels oil per day. The other owners of Pangkah Block is Hess (Indonesia-Pangkah) Ltd with 65% shares (operator) and Hess Pangkah LLC with 10% shares. []

KPPU Punished PT Tiara Marga Trakindo for Overdue Post-Notification

akarta, 4 th June 2014 – The Commissioners Council whom chaired by R. Kurnia Sya’ranie has decided the Case Number 07/ KPPU-M/2014 on the Violation Allegation of Article 29 Law Number 5 Year 1999 juncto Article 5 Government Regulation Number 57 Year 2010. The Commissioners Council decided that PT Tiara Marga Trakindo, Tbk has been proven guilty on 41 days overdue for their Post-Notification in the acquisition of PT HD Finance. Based on the Investigation’s fact and finding, the Commissioners Council concluded that there has been a transfer of control in PT HD Finance, which is from Wealth Paradise Holdings Limited and HD Corpora to PT Tiara Marga Trakindo as the new controller. PT Tiara Marga Trakindo works in the sectors of trading, printing, construction, manufacturing, technical project, services, landed housing, agriculture, and PT HD Finance works in the sector of financing.

The asset value of PT Tiara Marga Trakindo and PT HD Finance after the acquisition is IDR 30.891.691.813.936, while the sales value of PT Tiara Marga Trakindo and PT HD Finance after the acquisition is IDR 24.518.222.804.928. From this number, the Commission noticed that the asset value has exceeded the threshold of IDR 2.5 trillion and the sales value has exceeded the threshold of IDR 5 trillion. Therefore, according to Article 29 Law Number 5 Year 1999 juncto Article 5 Government Regulation Number 57 Year 2010, the business actors should notify the acquisition to KPPU after the first Information Disclosure until 30 days after, at the latest. The first Information Disclosure was made by PT Tiara Marga Trakindo

when they delivered the acquisition notification to the Financial Services Authority (OJK / Otoritas Jasa Keuangan). Thus the overdue post notification was counted after that first Information Disclosure, plus 30 days. Weighed on those facts, KPPU decided that PT Tiara Marga Trakindo has been proven in violate Article 29 Law Number 5 Year 1999 juncto Article 5 Government Regulation Number 57 Year 2010. Nevertheless, PT Tiara Marga Trakindo already showed their good will by consulting the acquisition process to KPPU before the acquisition took place and KPPU has issued Non-Objection Letter for that acquisition. The main reminder in this decision was that a Non-Objection Letter from KPPU would not remove the mandatory Post-Notification. In the final decision, the Commissioners Council punished PT Tiara Marga Trakindo to pay fines with the amounts of IDR 1 Billion to the Government of Republic of Indonesia. []

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LAW ENFORCEMENT

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KPPU Punished PT. Angkasa Pura II and PT. Telekomunikasi Indonesia Tbk

as been proven for exclusive dealing on the production and distribution of goods/services in Soekarno – Hatta Airport, PT. Angkasa Pura II and PT. Telekomunikasi Indonesia Tbk was punished to pay fines with the amounts of IDR 3.402.000.000 and IDR 2.109.240.000. Both of them were accused on the violation of Article 15 (2), Article 17 (1) and Article 19 point c and d (about the limitation of goods/services distribution and discrimination practices). Meanwhile, Commissioners Council only found them guilty for Article 15 (2) on Exclusive Dealing.

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Cartel on Electrical Installation Services in Nunukan

alikpapan – KPPU decided fifteen reported parties guilty on price fixing of electrical installation services and PLN electrical network installation in Nunukan, East Kalimantan Province. The decision was read on Thursday, June 12th 2014 by the Commissioner Council that led by Kamser Lumbanradja. For that violation, the Branch Council of Electrical and Mechanical Contractors Association of Indonesia (DPC AKLI) Berau East Kalimantan Province who accommodate

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Moreover, the Commissioners Council recommended the Ministry of State’s Owned Enterprises to re-visit the Ministry of SOE’s Regulation Number 05/MBU/2008 about the General Guidelines on SOE’s Goods/Services Procurement, which regulated SOE’s synergy and allowing them to appoint provider of goods/services directly, in the name of efficiency. As an addition, KPPU also asked the Ministry of State’s Owned Enterprises to pay attention to the basic principle of fair competition. []

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those electrical contractors, was punished to pay fines with the amount of IDR 1 billion. However KPPU considered this sanction need not be implemented, unless DPC AKLI conducting such action that violate the competition law before passing their 2 (two) years’ probation. The Reported Parties in this case are; PT Nusa Mandiri, PT Sudi Indah, CV Citra Jayanuraga, CV Merkah, CV Sumber Maju, CV Albar Jaya, CV Putra Daerah, CV Alifah, CV Surya Agung, CV Wahyu Agung, CV

Anugrah Prima Perkasa, CV Putra Borneo, and CV Karya Jaya Mandiri. In the investigation process, KPPU has found the agreement of price fixing which signed by the Reported Parties (AKLI’s Members) on October 4th 2011 and January 12th 2012. Those facts became the basis for KPPU to order the cancellation of price fixing agreement for electrical installations, and DPC AKLI was punished with minimum penalty based on the Law (IDR 1 billion). []

LAW ENFORCEMENT

Bid Rigging Case of Embung Fatimah Hospital in Batam

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he Commissioners Council that led by Tresna Soemardi decided that PT Masmo Masjaya, PT Cipta Sangga Perwita and PT Trigels Indonesia guilty for Bid Rigging in the Procurement of Medical, Health and Family Planning Equipment in Embung Fatimah Regional General Hospital, Batam, for Fiscal Year 2011. They were punished to pay different

amount of fines to the state treasury. KPPU has found that the business actors have done false competition in the form of collusion, which regulated in Article 22, Law Number 5 Year 1999. The business actors were colluded in preparing the documents of price arrangement. In addition, there were a similarity on the Letter of Support

from medical equipment’s distributor and metadata evidences of bidding document from PT Masmo Masjaya, PT Sangga Cipta Perwita dan PT Trigels Indonesia. There was also an affiliation relationship between PT Masmo Masjaya and PT Sangga Cipta Perwita. This information was obtained from Fransisca Ida Sofia’s (witness) confession who said that there has been a request to join the procurement process, in order to establish a false competition. According to those facts, the Commissioners Council punished PT Masmo Masjaya to pay fines with the amounts of IDR 900 million, PT Cipta Perwita Sangga with the amounts of IDR 450 million and PT Trigels Indonesia with the amounts of IDR 100 million. The Commissioners Council also ordered all parties to submit their payment’s copy of a quo case fines to KPPU. KPPU also recommended the Regional Secretary of Riau Islands Province to give sanction to the tender committee. “Not only recommending a reprimand, KPPU is also recommending the National Police and Prosecutors to conduct further investigation,” said Tresna. []

Bid Rigging Case of National Road in West Sulawesi for Fiscal Year 2012

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akarta – On Friday (20/06), KPPU through the Commissioners Council that led by M. Nawir Messi has read the decision of Case Number 09/ KPPU-L/2013. The Reported Parties in this case are Procurement Unit of Region I West Sulawesi, Procurement Unit of Region II West Sulawesi, PT Passokorang, PT Aphasko Utamajaya, PT Usaha Subur Sejahtera, PT Bukit Bahari Indah, PT Putra Jaya, PT Latanindo Graha Persada and PT Duta Indah Pratama Mamuju. The investigation process has found that there are family relation and work relation between the shareholders and the commissioners. Moreover, the similarity of

shareholders in PT Passokorang, PT Aphasko Utamajaya, PT Usaha Subur Sejahtera, and PT Bukit Bahari Indah has facilitated the communication and cooperation among them to win the procurement. On the other hand, PT Putra Jaya, PT Latanindo Graha Persada and PT Duta Indah Pratama Mamuju have been posed as the procurement’s participants, in order to create false competition. Based on those facts, KPPU decided all Reported Parties to be legally and convincingly proven in the violation of Article 22 Law Number 5 Year 1999. Furthermore, KPPU punished them to pay fines from the amount of IDR 1 Billion to IDR 10 Billion. []

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INTERNATIONAL

International Conference on Competition Law Enforcement in Asia

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PPU continues to give contribution by sharing experience and knowledge with the professors from Asian countries on International Conference on Competition Law Enforcement in Asia hosted by Asia Pacific Law Institute (APLI) & Center for Competition Law, School of Law, Seoul National University in June 26th 2014. Mr. Nawir Messi, Chairman of KPPU was the solely speaker from Competition Authority, while the rest of Speakers come from various well known universities in Japan, China, Korea, Taiwan, and Thailand. In order to create effective market economy, free and fair competition needs to be maintained. Therefore, competition law is considered to be the foundational cornerstone for market economy. Today, many countries around the world are adopting and enforcing competition law, and Asian countries are no exemption. A growing number of Asian nations have embraced and enforced competition law, whilst the history and standard of their enforcement levels may vary from country to country. Countries like Japan and Korea have accumulated much experience in the enforcement of competition law, compare to the rest of Asian nations.

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The major concern in relation to the enforcement of competition law is setting adequate criterions which distinguish prohibited behaviors of market players from acceptable ones under the competition law. It is said there are two standards applied in the enforcement of competition law: one is global standard and the other is domestic standard. Many experts of competition law tend to comply with the former after exploring the concrete criterions of the two standards and comparing them. It should be noted, however, that the global standard has been shaped by the two mainstream models – so called American Standard and European Standard. For

this reason, Professor Oh Seung Kwon, as Director of APLI, Seoul National University suggested that instead of choosing to customize our competition law and policy by improving domestic standard to meet the global standard, further effort should be made to develop an “Asian Standard” that fits Asian particular history and circumstances. This forum was a worthwhile opportunity for greater interaction amongst the experts in the field of competition law and policy from around the Asian region and hopefully that interaction and cooperation will lead to further development of competition law in Asia. []

INTERNATIONAL

KPPU Shared the Malaysian about Indonesia Experience in Tackling Bid-Rigging Conspiracy

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n fighting bid rigging on public procurement in Malaysia, the Malaysia Competition Commission (MyCC) organized a ‘Workshop on Bid Rigging in Public Procurement’ on 23 June 2014 in Putrajaya International Convention Centre (PICC), Malaysia. Together with Antonio Capobianco from Competition Division of OECD

and Hongkeun Kim from KFTC, Ahmad Junaidi as the Director of Hearing in KPPU became the speakers in the Plenary session of How to Detect Bid Rigging Cartels in Public Procurement. In this session, Junaidi spoke about Indonesia experience in tackling bid rigging conspiracy. In his explanation, Junaidi stressed out 14 (fourteen) indicators of conspiracy that frequently appear based on the Guideline of Conspiracy in Bid-Rigging (Article 22 Law No.5/1999)1. In enforcing the law on those bid-rigging conspiracies, KPPU faces many barriers such as cultural and structural barriers and lack of power to obtain documents. In this case, KPPU has tried to cooperate with many stakeholders as many as possible such as with National Police, The Audit Board of the Republic of Indonesia, Indonesian Financial Transaction Reports and Analysis Centre, Attorney General, and Corruption Eradication Commission. During this workshop, MyCC also took the opportunity to launch the Malay version of the OECD Guidelines and a booklet on ‘Bid Rigging in Public Procurement under Competition Act 2010’. This launching was attended by Malaysian Minister of Domestic Trade, Co-operatives & Consumerism, Ministry of Finance of

Malaysia, Malaysian National Audit Department, and Malaysian AntiCorruption Commission (MACC). To deepen the discussion, this workshop was followed by the MyCC Interactive Session on Bid Rigging in Public Procurement which was held the next day at MyCC Office in Kuala Lumpur Sentral with the same Speakers from OECD, KFTC, and KPPU. [] 1 Those indicators are conspiracy in bid rigging planning, conspiracy in setting specifications of the product, conspiracy in forming the committee, conspiracy in tender announcement, conspiracy at the time of tender explanation, conspiracy at the time of pre-qualification, conspiracy in setting of owner estimate, conspiracy in getting bid rigging document, conspiracy at the time of submission and opening of bid documents, conspiracy during the evaluation of the winner, conspiracy during the announcement of the winner, conspiracy in filing objections, conspiracy in drafting contract, and conspiracy during project implementation.

Investigation and Case-Handling Training for Members of AEGC

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PPU participated on the ASEAN Experts Group on Competition (AEGC) Workshop on Investigation and Case-Handling in Kuala Lumpur, Malaysia on 17-18 June 2014. KPPU was represented by Daniel Agustino, Investigator. This workshop which was attended by and dedicated to the Members of AEGC discussed the investigation techniques for various types of infringements of the competition law, as well as good practices and experiences from the ASEAN regional and other jurisdiction. As countries who already implemented Competition Law; Indonesia, Malaysia, Singapore, and Vietnam were given opportunity to share their investigation challenges and lessons learnt in each respective jurisdiction. Among those four AMSs, it is only Indonesia who doesn’t have leniency program. Leniency program is a system that allows and protects anyone including business actor to be whistleblower of any infringement of

competition policy and law for the competition authority. This program will be beneficial for competition authority when it is also accompanied with the power of dawn raid. Besides AMSs, there was one representative from Japan Fair Trade Commission (JFTC), Katsunori Inaguma, who shared Japanese experience in doing the investigation. In this case, Japan would like to have cooperation with other jurisdictions in order to combat international cartel which always come as big scale cases. This workshop also trained by potential speakers such as Michael Albers, a Competition Law Expert from Germany and Prof. Robert Ian McEwin, a Khazanah National Chair in Regulatory Studies of the Malaysian Centre for Regulatory Studies of the University of Malaya who talked about several related topics such as initiating an anti-trust (cartel) investigation, gathering evidence, handling of evidence and case files, and the role of economics in competition policy. []

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INTERNATIONAL

The 4th ASEAN Competition Conference (4th ACC)

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SEAN Competition Conference (ACC) is an annual event which aimed to be key initiative spearheaded by the ASEAN Experts Group on Competition (AEGC) since 2011. Drawing the participation of competition experts, practitioners and stakeholders from the region and beyond, the ACC is a key platform for strategic discussions on pressing and emerging competition issues. This year, AEGC held the 4th ASEAN Competition Conference (4th ACC) in Manila, Philippines. The 4th ACC was organized under the ASEANAustralia-New Zealand Free Trade Area (AANZFTA) Economic Cooperation Work Program (ECWP), hosted by the Office for Competition - Department of Justice of the Philippines, and cosponsored by the Deutsche Gesellschaftfür

Internationale Zusammenarbeit (GIZ) GmbH, with funding from the Federal Ministry for Economic Cooperation and Development (BMZ) of Germany. The theme for the 4th ACC is “Building Blocks for Effective Enforcement of Competition Policy and Law (CPL)” which was aimed to highlight lessons from CPL implementation from various jurisdictions as well as to discuss innovative approaches for detecting and deterring anti-competitive conduct. It’s also to consider appropriate sanctions and remedies. The principal topics discussed during the 4th ACC included: • sharing of experiences among AMS with respect to CPL enforcement challenges; • appreciation of the economic impact of cartels;

• consideration of new strategies to detect and deter cartels; • adoption of methods to encourage compliance through appropriate sanctions and remedies; • study of current developments in private enforcement; and • discussion of innovative approaches for CPL enforcement by AMS. In this event, KPPU was represented by Kurnia Sya’ranie (Commissioner) and Chandra Setiawan (Commissioner) who were assigned as speakers. Kurnia gave her presentation in Panel 1: Tackling CPL Enforcement Challenges: Experiences from ASEAN. She conveyed pertaining to Competition Law Enforcement in Indonesia: Issues and Challenges. She also explained that KPPU has focused on 5 sectors i.e. infrastructure, energy, banking and insurance, food and education and health. Besides that, Kurnia also shared what KPPU has faced on its implementation to enforce Competition Law and Policy. Meanwhile, Chandra gave his presentation in Panel 2: The Economic Impact of Cartels. He summarized cartel and bid-rigging cases handled by KPPU, for example concerning SMS, pharmaceutical and fuel surcharge in Indonesia. He explained how KPPU deals with cartel and bidrigging cases. Officers of KPPU who also joined this event namely Dinnie Melanie (Senior Investigator), Maretha Wulandini (Foreign Cooperation Division Official), and Nurul Fadhilah (Legal Division Offical). []

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