1. Legal and enforcement framework
1.1 Which legislative and regulatory provisions regulate dominance in your jurisdiction?
Dominance is regulated under Law 5/1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition ('Competition Law'), as amended by Law 11/2020 on Job Creation ('Omnibus Law'). Following the Competition Law, the Commission for the Supervision of Business Competition (KPPU) - the authority responsible for enforcing the Competition Law - has issued the following commission regulations (CRs) and other instruments:
- CR 7/2009 on Guidelines for Implementing Article 26 (Interlocking Directors) under the Competition Law;
- CR 6/2010 on Guidelines for Implementing Article 25 on the Abuse of a Dominant Position of the Competition Law;
- CR 3/2011 on Guidelines for Implementing Article 19 d. (Discriminatory Practice) of the Competition Law;
- CR 5/2011 on Guidelines for Implementing Article 15 (Closed Agreements) of the Competition Law;
- CR 6/2011 on Guidelines for Implementing Article 20 (Predatory Pricing) of the Competition Law;
- CR 7/2011 on Guidelines for Implementing Article 27 (Share Ownership) of the Competition Law;
- CR 11/2011 on Guidelines for Implementing Article 17 (Monopolistic Practices) of the Competition Law;
- CR 3/2012 on the Second Amendment to CR 13/2010 on Guidelines for Mergers or Consolidations of Businesses and Taking Over Company Shares which may Result in Monopolistic Practices and Unhealthy Business Competition;
- CR 3/2019 on the Assessment of Mergers or Consolidations of Business Entities, or Acquisitions of Company Shares which May Result in Monopolistic Practices and/or Unfair Business Competition;
- CR 2/2021 on the Imposition of Sanctions for Violation of Monopoly Practices and Unfair Business Competition;
- the 2020 KPPU Guidelines for the Assessment of Mergers, Consolidations or Acquisitions; and
- Government Regulation 44//2021 on the Implementation of the Prohibition of Monopolistic Practices and Unfair Business Competition, one of the implementing regulations of the Omnibus Law.
1.2 Do any special regimes apply in specific sectors?
The Competition Law applies to all sectors. Some specific rules apply - for example, a higher threshold applies for merger control and filings in the banking sector.
In sectors which are classified as being for the public interest under Articles 50 and 51 of the Competition Law, several exemptions are available for:
- actions and/or agreements intended to implement applicable laws and regulations;
- agreements related to IP rights, such as licences, patents, trademarks, industrial product designs, integrated electronic circuits, trade secrets and franchise agreements;
- agreements that set technical standards for goods or services that do not inhibit or impede competition;
- agency agreements that do not require any resale price maintenance;
- cooperation agreements for research to improve the living standards of society at large;
- international agreements that have been ratified by the Indonesian government;
- agreements relating to exports of goods or services that do not disrupt domestic needs or supplies;
- agreements between small business enterprises;
- agreements made by and between cooperatives aimed specifically at serving their members; and
- monopolies and/or concentrations of activities relating to the production and/or marketing of goods and or services which control the livelihoods of the public and production branches which are important to the state and are regulated by law and administered by state-owned enterprises and/or agencies or institutions established or appointed by the government.
1.3 Is the legislation intended purely to protect economic interests or does it have other aims?
The Indonesian competition legislation is mainly intended to protect economic interests and, according to the Competition Law, has the following aims:
- Economic development must be directed at the realisation of public welfare;
- Democracy in the economic field requires that equal opportunities be provided to all citizens to participate in the production and marketing of goods and services, in a business climate that is healthy, effective and efficient so as to promote economic growth and the operation of a fair market economy; and
- Everyone doing business in Indonesia must be in a healthy and fair competition situation, so as not to cause a concentration of economic power in certain business actors.
1.4 Which authorities are responsible for enforcing the legislation?
The KPPU - the institution responsible for enforcing the Competition Law - was established in 2000 and is recognised as a state auxiliary organ that conducts administrative law enforcement. The KPPU has the following authorities:
- to accept reports from the public and business actors regarding the alleged occurrence of monopolistic practices or unfair business competition;
- to investigate allegations of monopolistic practices and unfair business competition;
- to conduct investigations into and examinations of suspected cases of monopolistic practices and unfair business competition resulting from its research;
- to summon business actors which are suspected of having violated the Competition Law;
- to summon and present witnesses, expert witnesses and anyone that is deemed to have knowledge of a Competition Law violation;
- to request information from government agencies in connection with investigations and examinations;
- to obtain, examine and assess letters, documents and other evidence for its investigations and examinations;
- to decide and determine whether any loss has been suffered by other business actors or the public;
- to convey its decisions to business actors suspected of engaging in monopolistic practices or unfair business competition; and
- to impose sanctions in the form of administrative actions against business actors that violate the Competition Law.
1.5 How active are the enforcement authorities in taking action against abuse of dominance in your jurisdiction? What key decisions have the enforcement authorities adopted most recently?
In 2020, approximately 60% of the cases that KPPU handled were late notification cases and 13 of the 15 cases it handled were initiated by the KPPU. There were 39 active cases in 2020, only seven of which were market domination cases.
One of the most widely discussed cases in 2020 involved PT Solusi Transportasi Indonesia ('Grab') and PT Teknologi Pengangkutan Indonesia (TPI). The case was initiated by the KPPU based on the results of its initiatives and was taken to the investigation stage due to alleged vertical integration (Article 14 of the Competition Law) and discriminatory practices (Article 19d of the Competition law). Grab - a ride-hailing application provider - entered into an agreement with rental transportation company TPI. It is alleged that the agreement provided Grab with an opportunity to create an exclusive channel that would make it easier for Grab drivers registered with TPI to obtain customers compared to non-TPI registered drivers.
On 2 July 2020, the KPPU declared that Grab and TPI had violated Articles 14 and 19d of the Competition Law. Grab was fined IDR 7.5 billion for the Article 14 violation and IDR 22.5 billion for the Article 19d violation; while TPI was fined IDR 4 billion for the Article 14 violation and IDR 15 billion for the Article 19d violation. However, this decision was subsequently overruled by the South Jakarta District Court. The KPPU appealed unsuccessfully to the Supreme Court and Grab and TPI were thus released from the fines.
2. Definitions and scope of application
2.1 What parties are covered by the dominance legislation? Are any exemptions available?
In general, all business actors are covered by the dominance legislation. 'Business actors' are defined in Article 1(5) of the Competition Law as all individuals and business entities, in the form of either a legal entity or a non-legal entity established and domiciled or engaged in activities within the jurisdiction of Indonesia, either individually or collectively through an agreement, that engage in various business activities in the economic sector. For exemptions, see question 1.2.
2.2 How is 'dominance' defined in your jurisdiction?
Article 1(4) of the Competition Law defines 'dominance' as a situation in which a business actor:
- has no significant competitors; or
- has a better position than its competitors in the relevant market in terms of:
- market share;
- financial capacity;
- access to supplies or sales; and
- the ability to adjust the supplies of or demand for certain goods or services.
Specifically regarding abuse of a dominant position, Article 25 of the Competition Law defines a 'dominant position' as:
- one party having a 50% or more share of the relevant market; or
- two or more parties having more than a 75% market share.
2.3 How important is market share in assessing dominance in your jurisdiction? Do specific thresholds apply in this regard?
Market share is regarded as one of the factors for assessing dominance under Article 1(4) of the Competition Law.
Under Article 25(2) of the Competition Law:
- a business actor or a group of business actors will be declared to have a dominant position if it controls 50% or more of the market for a certain type of goods or services; and
- two or three business actors or a group of business actors will be considered to have a dominant position if they control 75% or more of the market for a certain type of goods or services.
2.4 What other factors are considered when assessing dominance?
Under Article 1(4), in addition to market share, the other important factors in assessing dominance are:
- financial capacity;
- access to supplies or sales; and
- the ability to adjust supplies of or demand for certain goods or services.
2.5 How are the product and geographic markets defined in your jurisdiction?
'Relevant markets' are defined in Article 1(10) of the Competition Law as certain markets or areas covered by business actors for the same or similar goods and services or substitutions for these goods and or services. Under Commission Regulation 3//2009, relevant markets constitute the following:
- Product markets: A market for competitor products for a particular product and other products that may be a substitute for that product. A product market can be identified from the demand side, followed by a review of the supply side.
- Geographic markets: The area in which a business actor can increase its price without:
- attracting new business actors into the market; or
- losing a significant number of consumers that switch to other business actors outside the area.
2.6 Does the dominance legislation make any distinction between dominant purchasers and suppliers?
No. No law distinguishes between dominant purchasers and dominant suppliers.
2.7 Is collective dominance recognised in your jurisdiction? If so, how is it defined?
Collective dominance is recognised in Indonesia and is defined in Article 25(2) of the Competition Law as two or three business actors or a group of business actors controlling 75% or more of the market for a certain type of goods or services.
2.8 What is the statute of limitations to prosecute abuse of dominance cases in your jurisdiction?
The statute of limitations for the Commission for the Supervision of Business Competition to prosecute monopolistic and unfair business practices in the Indonesian jurisdiction is 30 years.
3. Abuse of dominance
3.1 How is 'abuse of dominance' defined in your jurisdiction?
Article 25(1) of the Competition Law provides that the following actions constitute the abuse of a dominant position, either directly or indirectly:
- setting terms of trade in order to prevent or hinder consumers from obtaining competitive goods or services, in terms of both price and quality;
- limiting market and technology development; and
- hindering other business actors that have the potential to be competitors from entering the relevant market.
3.2 What specific types of conduct constitute an abuse of dominance in your jurisdiction?
According to Commission Regulation (CR) 6/2021 on Guidelines for Implementing Article 25 of the Competition Law on the Abuse of a Dominant Position, the following are considered the types of conduct under the Competition Law that may constitute abuse of a dominant position:
- discriminatory pricing (Article 6 of the Competition Law);
- closed agreements (Article 15 of the Competition Law);
- monopoly (Article 17 of the Competition Law);
- monopsony (Article 18 of the Competition Law);
- market control (Article 19 of the Competition Law);
- predatory pricing (Article 20 of the Competition Law);
- interlocking directorships/double positions (Article 26 of the Competition Law);
- share ownership (Article 27 of the Competition Law); and
- mergers, dissolutions and acquisitions (Article 28 of the Competition Law).
3.3 On what grounds may the enforcement authorities commence an abuse of dominance investigation?
Under CR 1/2019 on the Procedure for Handling Monopolistic Practices and Unfair Competition Cases, an assigned investigator of the Commission for the Supervision of Business Competition (KPPU) may commence the preliminary investigation stage:
- at the KPPU's own initiative;
- following a complaint submitted by:
- an undertaking;
- a consumer;
- another entity; or
- another government agency.
A formal investigation may be initiated if the KPPU finds at least one item of evidence of an alleged violation during the preliminary investigation stage.
3.4 What powers do the enforcement authorities have in conducting their investigation?
Under Article 36 of the Competition Law, the KPPU has the following powers:
- to accept complaints;
- to investigate cartel allegations;
- to investigate summoned parties, witnesses and experts;
- to reach conclusions from its investigations;
- to request statements or clarification from relevant government institutions;
- to determine and state that losses have been suffered by an undertaking or the public; and
- to impose administrative sanctions.
3.5 Is there an opportunity for third parties to participate in the investigation?
CR 1/2019 only allows officials assigned by KPPU to investigate. Participation by third parties is not recognised under the regulation.
3.6 What are the general rights and obligations of the enforcement authorities during the investigation?
CR 1/2019 provides as follows.
Preliminary investigation and investigation stages: Investigators of the KPPU have the following powers:
- to summon the reporting party, reported parties, witnesses and experts;
- to conduct on-site investigations;
- to obtain letters and documents relating to the case;
- to gather data and information relating to the assets and sales values of the reported parties; and
- to assess statements, letters and documents and on-site investigations.
Filing, preliminary and examination stages: Prosecuting investigators of the KPPU have the following powers:
- to review the investigation results report drafted by the KPPU's examining investigators, to be incorporated in an allegation report;
- to read the allegation report;
- to propose any evidence, witnesses or experts for hearings;
- to examine the authenticity of letters and documents in hearings;
- to prove the allegations in a hearing - which may involve summoning factual witnesses and experts and other related parties that are considered to have knowledge of the violation - and to obtain evidence; and
- to submit a conclusion on the examination.
The commission of the KPPU has the following powers:
- to determine the schedule for the preliminary examination;
- to commence and chair hearings;
- to provide the reported parties with an opportunity to propose behavioural remedies during the preliminary examination stage;
- to prepare the preliminary examination result report;
- to summon the reported parties, factual witnesses and experts, and other related parties that are considered to have knowledge of the violation;
- to submit evidence and conclusions;
- to conduct on-site examinations;
- to decide on cases; and
- to impose sanctions on undertakings.
3.7 What are the general rights and obligations of the target company during the investigation? What are the general rights and obligations of individuals targeted during the investigation?
Under Article 19 of CR 1/2019, a reported party must attend an interview or questioning upon being summoned by the KPPU, and provide any information requested by the KPPU. If a reported party refuses to comply with the summons or request, Article 20 of CR 1/2019 allows a KPPU investigator to report it as a violation of Article 41(3) of the Competition Law, for which a criminal sanction can be imposed under the Competition Law. However, under Article 75 of CR 1/2019, a reported party has the right to be accompanied by counsel or a lawyer during the interview or questioning.
3.8 What factors will the enforcement authorities consider in assessing whether an abuse of dominance has taken place?
Under CR 6/2010, the assessment of the abuse of a dominant position first considers whether the dominant position can be determined under Article 25(2) of the Competition Law (see question 2.3). Thereafter, the KPPU will determine whether the dominant position has the following abusive purposes under Article 25(2) of the Competition Law:
- setting terms of trade in order to prevent or hinder consumers from obtaining competitive goods and or services, in terms of both price and quality. This abusive purpose can be determined both directly or indirectly:
- indirectly when consumers' options to obtain competitive products become limited in terms of both price and quality; and
- directly when competitors are eliminated due to their inability to obtain supplies or buyers;
- limiting market and technological development, which may be understood as any restrictions imposed by business actors that could hinder research and innovation - for example:
- exclusive dealing;
- input domination;
- discriminatory pricing and predatory pricing; and
- vertical restraints; and
- hindering other business actors that have the potential to be competitors from entering the relevant market. The economic parameters which are used as indicators of entry barriers are:
- economic scale; and
- economic scope.
3.9 In case of a finding of abuse of dominance, can the company seek to negotiate a settlement or similar resolution? If so, what is the process for doing so?
The Competition Law and regulations do not recognise any negotiation or settlement for monopolistic practices or unfair business competition behaviour, including abuse of dominance.
4.1 What defences are available to companies in response to enforcement?
To respond to enforcement by the Commission for the Supervision of Business Competition (KPPU), the defence provided under Government Regulation 44/2021 is to appeal the KPPU's decision before the Commercial Court within 14 business days of receipt of the notification of the decision.
4.2 Can companies avail of leniency in abuse of dominance cases?
Indonesia does not recognise or provide for leniency.
5. Remedies and sanctions
5.1 What remedies and sanctions may be imposed for abuse of dominance? Can sanctions be imposed on individuals?
Under Commission Regulation (CR) 1/2019, behavioural remedies are provided at the preliminary examination stage. They allow a reported party to plead guilty at the beginning of a hearing and agree to change its behaviour in order to end the examination.
Under the Competition Law and Government Regulation (GR) 44/2021, the Commission for the Supervision of Business Competition (KPPU) can impose the following administrative sanctions:
- cancellation of the agreement;
- an order to terminate vertical integration;
- an order to terminate activities that have been proven to:
- give rise to monopolistic practices;
- cause unfair business competition; or
- harm the public;
- an order to halt the abuse of a dominant position;
- cancellation of the merger or consolidation of business entities and the acquisition of shares;
- payment of compensation; and
- fines of at least IDR 1 billion.
Furthermore, the following fines will be imposed for administrative sanctions:
- a maximum of 50% of the net profit obtained by business actors in the relevant market during the period of the violation; or
- a maximum of 10% of the total sales in the relevant market during the period of the violation.
Sanctions can also be imposed on individuals, since the Competition Law recognises both individuals and business entities as 'business actors'.
5.2 How are the remedies and sanctions in abuse of dominance cases determined?
Under Articles 33(2) and (3) of CR 1/2019, the opportunity for behavioural remedies is given on condition that all reported parties agree to change their behaviour. The opportunity for behavioural remedies must be provided by the KPPU considering the following:
- the type of violation;
- the time of the offence; and
- the losses resulting from the violation.
Under Article 14 of GR 44/2021, the amount of the fine is determined based on the following factors:
- the negative impacts caused;
- appropriate timing;
- mitigating factors;
- aggravating factors; and
- the ability of the business actors to pay.
5.3 Can the enforcement authorities impose remedies and sanctions directly or is court action required?
As the enforcement authority, the KPPU can impose sanctions directly under Article 36 of the Competition Law, so no court action is required.
6.1 Can the defendant company appeal the enforcement authorities' decision? If so, in what forum and what is the process for appeal?
Under the Competition Law and Government Regulation 44/2021, a company can appeal to the Commercial Court against a decision of the Commission for the Supervision of Business Competition (KPPU) decision within 14 business days of receipt of notification of the KPPU's decision. The trial by the Commercial Court must be held within three months and must be concluded within 12 months.
Both the KPPU and the reported parties may submit an appeal to the Supreme Court within 14 business days of receipt of notification of the Commercial Court ruling.
6.2 Can third parties appeal the enforcement authorities' decision, and if so, in what circumstances?
No. Only the reported parties may appeal the KPPU's decision to the Commercial Court; and an appeal against the Commercial Court ruling can be submitted to the Supreme Court by either the reported parties or the KPPU, but not by any third party.
7. Private enforcement
7.1 Are private enforcement actions against abuse of dominance available in your jurisdiction? If so, where can they be brought?
Indonesia does not recognise or regulate private enforcement.
7.2 Are class actions or other forms of collective action available in your jurisdiction?
7.3 What process do private enforcement actions follow?
7.4 What types of relief may be sought and what types of relief are most commonly awarded? How is the relief awarded determined?
7.5 Can the decision in a private enforcement action be appealed? If so, to which reviewing authority?
8. Trends and predictions
8.1 How would you describe the current dominance enforcement landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?
Following the amendment of the Competition Law under the Omnibus Law, Government Regulation (GR) 44/2021 was issued as an implementing regulation of the Competition Law. GR 44/2021 introduced the following innovations:
- It empowers the Commission for the Supervision of Business Competition (KPPU) to impose administrative sanctions;
- It specifies the factors that the KPPU can consider in determining the amounts of fines to be imposed; and
- It requires that objections to a KPPU decision be submitted to the Commercial Court (see question 6.1).
In relation to GR 44/2021, the KPPU has also issued Commission Regulation 2/2021, which further regulates the following matters:
- the general calculation of fines;
- calculation of the penalty limit based on net profit;
- calculation of the penalty limit based on sales;
- bank guarantees as a guarantee for execution of the KPPU's decision (if an objection to the KPPU's decision is filed);
- payment of fines; and
- payment of leniency fines.
9. Tips and traps
9.1 What would be your recommendations to companies to avoid an abuse of dominance charge and what potential pitfalls would you highlight?
To avoid abuse of dominance charges, companies should:
- report any merger, acquisition or consolidation which meets the reporting criteria to Commission for the Supervision of Business Competition (KPPU);
- consult with the KPPU before any merger, acquisition or consolidation; and
- consult local legal consultants on what actions may be considered abuse of a dominant position.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.