Antitrust and unfair competition in Indonesia are regulated under the Prohibition of Monopolistic Practices and Unfair Competition Law, also referred to as the "Anti-Monopoly Law". The Anti-Monopoly Law generally prohibits anti-competitive agreements, abuse of dominant market positions, and mergers or acquisitions that may substantially lessen competition in a relevant market. It also establishes the Indonesian Competition Commission (Komisi Pengawas Persaingan Usaha or "KPPU") as the primary authority responsible for the enforcement of antitrust and unfair competition infractions. However, as in many countries, the enforcement of regulations in Indonesia can be challenging and the KPPU is frequently criticised for being slow and insufficiently aggressive when pursuing anticompetitive behaviour.

REGULATORY AUTHORITY

The KPPU's level of activity has increased over the years, as evidenced by the number of active investigations and prosecutions of cases of anticompetitive behaviour, including price-fixing and abuse of dominant market positions. The KPPU is an independent body with the authority to investigate alleged violations and impose administrative sanctions.

Under the Anti-Monopoly Law, the KPPU is responsible for:

  1. evaluating agreements that may result in monopolistic practices and/or unfair business competition;
  2. evaluating business activities or actions of business actors that may result in monopolistic practices or unfair business competition;
  3. evaluating the existence or nonexistence of misuse of dominant position, which may result in monopolistic practices or unfair business competition; providing advice and opinions on government policies related to monopolistic practices and unfair business competition;
  4. preparing guidelines and publications related to provisions under the Anti-Monopoly Law; and
  5. submitting periodic reports on the results of the KPPU's work to the President and the Indonesian Parliament.

The KPPU's authorities include:

  1. receiving reports from the public and businesses regarding alleged occurrences of monopolistic practices or unfair business competition;
  2. investigating allegations of business activities or actions by businesses that may result in monopolistic practices or unfair business competition;
  3. investigating or examining cases of alleged monopolistic practices or unfair business competition reported by the public or businesses, or that are discovered by the KPPU as a result of its investigations;
  4. drawing conclusions based on the results of investigations or examinations as to whether monopolistic practices or unfair business competition have taken place;
  5. summoning businesses suspected of violating the provisions of the Anti-Monopoly Law;
  6. summoning and presenting witnesses, expert witnesses, and anyone who is believed to have knowledge of violations of the provisions of the Anti-Monopoly Law;
  7. requesting the assistance of investigators to bring in businesses, witnesses, expert witnesses, or anyone who refuses to comply with the KPPU's summons;
  8. requesting information from government agencies in connection with investigations or examinations into businesses that violate the provisions of the Anti-Monopoly Law;
  9. obtaining, examining, and evaluating letters, documents, and other evidence for the purpose of investigations or examinations;
  10. determining whether there has been any harm to other businesses or the public;
  11. notifying businesses suspected of engaging in monopolistic practices or unfair business competition of the KPPU's decision;
  12. imposing administrative sanctions on businesses that violate the provisions of the Anti-Monopoly Law.

Members of the KPPU are appointed and dismissed by the President of Indonesia, with the approval of the Indonesian Parliament. Structurally, the KPPU consists of at least seven members, including a chairperson and a vice-chairperson. All members serve a term of five years and can be reappointed for one additional term. Based on the Anti-Monopoly Law, the costs for carrying out the KPPU's duties are borne by the State Revenue and Expenditure Budget (Anggaran Pendapatan dan Belanja Negara or "APBN") and other sources permitted by laws and regulations.

FINANCIAL TECHNOLOGY SECTOR AND ANTITRUST

In recent years, the KPPU has increased its efforts to investigate and prosecute cases in the technology sector, including cases related to digital markets, such as e-commerce platforms and ride-hailing services. Fintech in Indonesia has rapidly evolved in recent years, resulting in significant disruption in the financial services sector. At the same time, the Indonesian government has recognised the need to ensure competition in the market is fair and that consumers are protected from anti-competitive behaviour.

The KPPU plays a crucial role in regulating anti-competitive behaviour in the fintech industry, as fintech companies are subject to the same competition rules and regulations as companies in other business sectors.

For example, in 2020, members of the KPPU relayed that certain peer-to-peer ("P2P") fintech companies allegedly violated Article 11 of the Anti-Monopoly Law. This Article prohibits business actors from entering into agreements with competitors with the intention of influencing prices by regulating the production and/or marketing of goods or services, which may result in monopolistic practices or unfair business competition.

In this case, the KPPU suspected that P2P companies were jointly determining a daily interest rate of 0.8%, possibly indicating the presence of cartels and anti-competitive behaviour. However, the KPPU has stated that they are only in the research stage and have yet to launch a formal investigation into this matter.

Additionally, in September 2022, Google and its Indonesian subsidiaries reportedly faced KPPU investigations for suspected anti-competitive behaviour and discriminatory practices in distributing digital applications. The practices referred to were Google's requirement for the use of the Google Pay Billing ("GPB") system, in certain applications, for purchases in the Google Play Store. The KPPU reported that Google charged a service fee between 15% and 30% for these purchases, with GPB required as the transaction method for applications downloaded from the Google Play Store. Content providers and application developers were also required to comply with GPB's provisions. Google allegedly did not allow payment alternatives to GPB, and non-compliance left applications at risk of being removed from the Google Play Store.

Under these circumstances, the KPPU suspected that Google was carrying out various forms of monopolistic practices and unfair business competition, including:

  1. Abuse of Dominant Position: As defined in Article 25 of the Anti-Monopoly Law, abuse of dominant position is understood as controlling 50% or more of the market share for certain goods or services as a single entity, or 75% or more of market share for certain goods or services as multiple entities. The following activities, directly or indirectly involving a dominant position, constitute abuse of dominance under Article 25(1):

    1. determining trading terms for the purpose of preventing or barring consumers from obtaining competing goods or services, whether in price or in quality; or
    2. restricting development of the market or technology; or
    3. obstructing potential competitors from entering the relevant market.

    The rationale behind prohibiting abuse of dominance lies in the potential harm from controlling a majority of market share for certain goods or services. To determine whether a business actor holds a dominant position, Article 1(4) must be read in conjunction with Article 25(2) of the Anti-Monopoly Law, which stipulates that a dominant actor is either:

    1. one business actor or one group of business actors controlling 50% or more of the market share for a certain good or service; or
    2. two or three business actors or groups of business actors controlling 75% or more of the market share for a certain good or service.

  2. Tying: Pursuant to Article 15(2) of the Anti-Monopoly Law, companies are prohibited from requiring their customers to purchase a secondary, unrelated (neither complementary nor substitutive) product on top of the primary product that the customers wish to purchase (in other words bundling/tying the secondary product to the primary product).

  3. Discriminatory Practices: Under Article 19 of the Anti-Monopoly Law, market control that may result in monopolistic practices or unfair competition is prohibited, which includes committing discriminatory practices against certain business actors.

Although several news reports indicated that the Google case had been escalated to a formal KPPU investigation, there have been no further updates and it is unclear if the investigation has been dropped or is ongoing.

FUTURE DEVELOPMENTS

Several KPPU members have spoken at seminars and public events, stressing the importance of fair business competition in fintech activities, stating that the main objective of the KPPU is to improve people's welfare, and affirming that the KPPU will continue to monitor practices that are not pro-competition in the fintech industry.

In addition, on 12 January 2023, the Indonesian Government formally enacted Law No. 4 of 2023 regarding the Development and Strengthening of the Financial Sector (Pengembangan dan Penguatan Sektor Keuangan or "PPSK Law"). This law was issued by the government to develop and advance Indonesia's general welfare through the reform of Indonesia's financial sector by regulating institutions and financial system stability, and encouraging the development and strengthening of the financial industry. Article 228 of the PPSK Law states that consumer protection in the financial sector applies several principles, including healthy competition. The PPSK Law elaborates that "fair competition" is understood as competition between financial sector business actors in carrying out business activities in a manner that is honest, not in violation of laws and regulations, and that does not hinder business competition.

The KPPU has also promoted competition through advocacy efforts, such as providing training and guidance to businesses and government agencies on competition policy and law. While the KPPU has shown interest in the digital economy and the fintech sector, it continues to face criticism for its enforcement efforts. Critics claim that the activities of the KPPU are insufficient to effectively deter anti-competitive behaviour. Nonetheless, it is evident that the KPPU has taken a more active enforcement role, and business actors in Indonesia's technology sector need to be aware of antitrust rules, particularly those for consumer protection.

Originally published by In-House Community Magazine.

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