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The current merger control regime in Indonesia has been in place for eight years. In that time, the Commission for the Supervision of Business Competition (KPPU) has received more than 480 merger notifications from business actors, 69 of them in 2018. While the KPPU continues its efforts to raise awareness of the merger control requirements, some businesses still fail to notify the KPPU of their transactions, and so face fines.
Unlike most jurisdictions, where merger filings must be cleared before the transaction is completed, the merger control regime in Indonesia only requires the merger control notification to be made after the transaction is completed. The post-merger notification must be made to the KPPU no later than 30 business days after the transaction becomes legally effective). Under the regulation, KPPU can impose administrative sanctions for failure to make a required filing, with a fine of IDR1 billion (US$71,000) per day of delay in filing, up to a maximum amount of IDR25 billion (US$1.8 million).
In 2018, there were seven instances of fines being imposed by the KPPU for late notification, for the following acquisition transactions:
- PT Citra Asri Property by PT Plaza Indonesia Realty, Tbk.
- PT Mutiara Mitra Bersama by PT Nirvana Property
- PT Iforte Solusi Infotek by PT Profesional Telekomunikasi Indonesi
- PT Perusahaan Multi Makanan Permai by PT Japfa Comfeed Indonesia Tbk.
- PT Cipta Multi Prima by PT Darma Henwa, Tbk.
- PT Prima Top Boga by PT Nippon Indosari Corpondo, Tbk.
- PT Asuransi Takaful Umum by Koperasi Simpan Pinjam Jasa
These seven cases represent half of all cases since 2010 where the KPPU has imposed fines for late notification. Most of these fines related to submissions made in prior years. After new commissioners were appointed in April 2018, the KPPU has become much stricter in handling such cases.
In addition, the KPPU issued its decision on a late filing by mobile phone importer PT Erajaya Swasembada Tbk. on its acquisition of PT Axioo International Indonesia, a mobile phone manufacturer. Although PT Erajaya Swasembada Tbk. was found to have delayed submitting its merger filing for 145 days, surprisingly, the KPPU did not impose a fine, reasoning that the acquisition was to comply with a Ministry of Trade regulation that requires mobile phone distributors to have a manufacturing facility in Indonesia.
Remedies for transactions with potentially adverse impacts
Where the KPPU has concerns about the market impacts of a transaction, it may require the applicant to implement either structural remedies (through asset or share divestments) or behavioural remedies (by removing barriers to competition). Of the cases published on the KPPU website (http://www.kppu.go.id), we note only one case in 2018 where the KPPU imposed a remedy – the acquisition of Vinythai Public Company Ltd by Asahi Glass Company Ltd. In this case, it appears that the KPPU found a significant structural barrier in the S-PVC market, with no potential efficiency that could lower market prices. As such, the KPPU issued a no-objection opinion with notes for the transaction, requiring the parties to report their production, sales and prices in Indonesia for the next three years, to allow the KPPU to monitor the effect of the transaction on future prices.
Proposed amendment to Indonesian competition law
The Indonesian government has been working for some years on a new competition law. While it is still unclear when the new law will be enacted, the draft law made publicly available in 2018 included the following changes to the merger control regime:
- Merger control regime to include asset acquisitions and establishment of joint ventures;
- Change from post-merger notification to a pre-merger notification regime; and
- Failure to obtain merger control clearance may result in a fine of up to 30% of the transaction value.
Please click here to read our previous e-bulletin on merger control in Indonesia, which summarises key aspects of Indonesian competition and merger control law and practice, and its impact on Indonesia-related M&A transactions.