B&A News Brief – Prohibition of Monopolistic Practices and Unfair Business Competition

In February 2014, the government published the latest draft of its proposed new law on anti-monopoly and unfair business competition (“draft law”). The draft law is scheduled to replace the existing Law on Monopolistic Practices and Unfair Business Competition, Law No. 5 of 1999 (“Law 5/1999”). The draft law was published following the recent addition of agenda to amend Law 5/1999 to the National Legislation Program of the House of Representative for discussion in 2014.

To alert clients who may wish to provide government with inputs on the draft law, B&A sets out below some observations on the issues that Business Competition Supervisory Commission (“KPPU”) has been discussing and publicizing. Further details of the draft law can be provided on request.

DEFINITION OF ‘ENTREPRENEUR’

The latest version of the draft law is more comprehensive relative to Law 5/1999 and contains almost twice the number of articles – 99 articles compared to 53 articles in Law 5/1999. One of the key changes proposed in the new law is the broadening of the term ‘entrepreneur’ for the purposes of anti-monopoly and unfair business competition. An ‘entrepreneur’ is defined under the draft law as “… an individual person or a company, in the form of legal or non-legal entity established and domiciled or engaged in activities inside or outside the legal territory of the Republic of Indonesia which have an impact on Indonesia’s economy, conducting various kinds of business activities in economic sector through contracts, both individually or collectively” (the changes to the definition are highlighted). The government’s reason for broadening the definition is to accommodate Indonesia’s membership within the ASEAN Economic Community (AEC) which will be established in 2015 to create an integrated free trade market in the region. It is clear that the government would like to take appropriate measures from the perspective of legal framework to prevent new trends of monopoly and unfair business competition practice following the introducing of AEC next year.

PRE-COMPLETION NOTIFICATION

Another key proposed change concerns the notification requirements for merger, consolidation, and share acquisition transactions. Under Law 5/1999, it is mandatory for the entrepreneur to provide notification no later than 30 days after the transaction has been concluded. However, the sanction for failure to comply is unclear, opening the possibility of the view that notification is not mandatory. The draft law now clarifies the situation – notification must be provided before the merger, consolidation, or share acquisition transaction commences, while the sanctions for failing to comply is clearly stated, e.g. objection to the planned transaction and fine sanctions.

The draft law also goes further than Law 5/1999 by making pre-completion notification a requirement for asset acquisition and joint venture transactions as well, the procedural and further details of which must be provided through a government regulation.

BUSINESS COMPETITION SUPERVISORY COMMISSION / KPPU

The draft law extends the powers of the Business Competition Supervisory Commission (KPPU) by giving it the authority to initiate, of its own volition, an investigation into alleged breaches of the anti-monopoly and unfair business competition law. Additionally, the draft law also authorizes KPPU to summon the relevant parties to be questioned in relation to a case under investigation, to conduct investigation on business premises where the alleged anti-monopoly and unfair business competition activities take place, and to obtain the relevant evidence.

Currently, KPPU can only conduct an investigation once in receipt of a report from the public. The current Law 5/1999 does not provide legal mechanism for KPPU to force relevant parties to appear in KPPU Investigation, as well as to investigate an alleged locus of anti-monopoly and unfair business competition practice in order to obtain evidence. KPPU states that such obstacles have hampered many investigations and as result it has lost many cases in court.

The new authorities are expected to resolve some issues in relation to mechanism of examination of alleged anti monopoly and unfair business competition activities that KPPU encounters under the current law.

NEXT STEPS

While the discussion about draft law is expected to be prioritized and be concluded this year along with other draft laws under the Program, there is no assurance that the House will pass the draft law this 2014. It is important, however, to take note and anticipate the changes to ensure compliance of any transaction planned to take place in the near future. Lawyers and business actors may also expect some involvement in the discussion of draft law, especially during public discussion which usually be held by the House and/or the government.

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For further information, please contact: [email protected]

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