International. Law Enforcement Price Fixing Allegations on Taxi Service in Four Cities in Central Java Province

Transcription

1 vol. 07/2010 Newsletter on Indonesian competition law and policy What s New? The Series of Events to Celebrate a Decade of KPPU Competition Advocacy One Decade of KPPU to Build National Competition Policy (KPPU National Seminar) Law Enforcement Price Fixing Allegations on Taxi Service in Four Cities in Central Java Province International Indonesian Conference on Competition Law and Policy

2 Table of Contents What s New? The Series of Events to Celebrate a Decade of KPPU 3 Law Enforcement Regional Owned Enterprise and six Business Actors in Batam Conducted Discriminatory Practices on Sales of Insurance Services in Port Batam Unilever Made Notification to Acquired PT. Sara Lee Body Care Price Fixing Allegations on Taxi Service in Four Cities in Central Java Province Bid Rigging on the Construction of School Buildings and Clinic in Nias Regency Competition Advocacy One Decade of KPPU to Build National Competition Policy (KPPU National Seminar) 8 International Indonesian Conference on Competition Law and Policy 10 2 kompetisia vol 07/2010

3 The Series of Events to Celebrate a Decade of KPPU Law Enforcement In order to celebrate one d e c a d e o f K P P U establishment on June 7, 2010, the Commission for Supervision of Business Competition (KPPU) Republic of Indonesia conducted a series of discussion forums in its 5 (five) Regional Office which located in the Medan, B a t a m, S u r a b a y a, Balikpapan, and Makasar, with topic Fair Competition in the Retail Industry. While on June 7, 2010, coincide with its anniversary day, KPPU held a national seminar in Jakarta with the theme KPPU and C o m p e t i t i o n P o l i c y i n I n d o n e s i a s E c o n o m i c System by presenting panelist from the Coordinating Ministry for Economic Affairs, Ministry of Commerce, KPPU, Indonesia Chamber of Commerce (KADIN), and National Economic Observer. On June, 9-10, 2010, KPPU held another seminar for International level namely The Indonesian Conference on Competition Law and Policy. The seminar attended by delegates from international competition agency, which actively participated in the seminar both as panelist and as participant. Participants were representatives from governments or institutions of competition from ASEAN (Cambodia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam), Australia, Taiwan, Japan, Korea, Kenya, Germany, India, and America. There were also representatives of international organizations and donors such as ASEAN Secretariat, UNCTAD, JICA, GTZ and Inwent. In addition to international participants, the seminar also attended by representatives from Indonesian government, namely from the national Planning Agency, INTRAC, the Ministry of Commerce, Ministry of Interior, Ministry of Finance, Ministry of Industry, Coordinating Ministry for Economic Affair, Bank Indonesia, the National Police, the Corruption Eradication Commission, Cabinet Secretariat, and academicians. This seminar became a tool to share experiences among the international competition authorities on best practices of competition law and policy implementation in their respective countries. The topics discussed include economic integration and competition policy, competition policy and national competitiveness, challenges and applied strategies for competition advocacy, the integrated institutional and information system and the significant of financial statement data for competition law enforcement. KPPU expect the implementation of several seminars in order to celebrate KPPU s anniversary can provide advocacy to the public about the importance of competition law and policy to contribute to society through increased welfare. kompetisia vol 07/2010 3

4 Law Enforcement Regional Owned Enterprise and six Business Actors in Batam Conducted Discriminatory Practices on Sales of Insurance Services in Port Batam 4 On June 23, 2010, Commission for the Supervision of Business Competition (KPPU) read the decision of case No.32/KPPU-L/2009 of alleged violations of Article 17 paragraph (1) and article 19 point (d) Law No 5/1999 in the sale of insurance services applied to the Ferry passenger destination Batam-Singapore and Batam-Malaysia in the port of Batam. In this case, KPPU determined 7 reported parties, consisted of Batam Exploitation Agency (formerly the industrial development Authority Batam Island), 3 insurance companies and 3 companies managing the International Ferry Terminal at port of Batam Centre, Sekupang and Teluk Senimba. The case began in 1997 when chief executive of unit industrial development authority Batam Island of Indonesia issued a letter No. B/301/KA/V/1997 to the Head of Jasa Rahaja Batam (insurance company) which established accident insurance premiums of sin $1 (one dollar Singapore) to be paid by passenger to Singapore/ Malaysia, which coverage in case of accident during the visit about 7 days. Based on the letter, the manager of the International Ferry Terminal in the Sekupang and Teluk Senimba made an agreement with PT. Asuransi Jasa Rahaja Putera, while the International Ferry Terminal Manager Batam Centre make an agreement with PT. Asuransi Jasa Indonesia (Persero) to set insurance premiums in accordance with the contents of the letter. kompetisia vol 07/2010 KPPU suspect a violation of Article 9 of the division of territory, article 15, paragraph (2) of the close agreement, article 17 of the monopoly, and article 19 letter of discrimination in handling the case. Furthermore, based on a series of examination conducted by the investigation team, the Commission Council considered that the agreement made by insurance companies, facilitated by BP Batam was not an agreement to divide the area of insurance marketing at the port of Batam Centre, Teluk Senimba and Sekupang. However, the agreement between Managers of the Ferry Terminal with the insurance companies has led to concentration of economic power, which made the other business actors could not enter the market. KPPU also found that since BP Batam established the personal accident insurance requirement for passenger/ traveler, there was no business actor in insurance business had enter the market, aside from the three insurance companies, since there was no information available about the implementation of personal accident insurance for passengers / tourists. During the further investigation process, all reported parties conducted behavioral change. BP Batam published a letter No.B/58/KP- BP/6/2010 dated June 10, 2010, which s u b s t a n t i a l l y r e v o k e d t h e l e t t e r No.B/301/KA/V/1997 including any other letter

5 Law Enforcement and documents relating to the determination of insurance premiums. The manager of Ferry Terminal also has terminated their agreement with each insurance company and conducted a fair tender to find the insurance provider for Ferry passenger/ tourist accident. Based on the evidence and facts gathered during the investigation process, the Commission Council determined that the seven reported parties was not proven violating Article 9 and Article 15 paragraph (2), however, they were legally proven violating article 17 and article 19 point ( d). KPPU imposed administrative sanction to BP Batam in amount of IDR 1 billion, and to the other six business actors with fines that varies from IDR 250 million to IDR 1,5 billion. Unilever Made Notification to Acquired PT. Sara Lee Body Care starting on May 27 to July 9, At this initial assessment, the team has collected relevant data and will hold a meeting confirmation with both PT. Unilever Indonesia and PT. Sara Lee Body Care, Tbk. On May 19, 2010, Commission for the Supervision of Business Competition (KPPU) has received notification of acquisition plan of Unilever Indonesia Holding, B.V to PT. Sara Lee Body Care, Tbk. This acquisition was part of the global acquisition of its holding company in the international level on May 19, After evaluated the completeness of the documents, KPPU will conduct an initial assessment which will last for 30 working days During the initial assessment, KPPU will assess the 2 (two) things, namely: (i) Whether the reporting in the notification included in business actors threshold who need notification on the KPPU, and (ii) View that market concentration will be formed before and after the acquisition takes place, where market concentration is formed <1800 HHI, KPPU will declare no objection. Meanwhile, if concentrations are formed >1800 HHI, KPPU will conduct a thorough examination. Thorough examination includes examining on calculation efficiency, barriers to business, the argument of potential losses, and the potential for unfair competition behavior. This Pre-notification became the fourth notification since the implementation of Commission Regulation Number 01 year 2009 on Pre-notification on Merger, Consolidation, and Acquisition enacted on May 13, Even though the pre-notification is voluntary, but until June 2010 KPPU already received 38 business consultation concerning merger plan. This condition shows the business actors awareness about the importance of legal certainty on corporate acquisition action plan. kompetisia vol 07/2010 5

6 Law Enforcement Price Fixing Allegations on Taxi Service in Four Cities in Central Java Province KPPU has been suspected price fixing practice conducted by 23 business actors on taxi service in 4 cities in Central Java Province. Business actors who allegedly infringing the competition law consisted of business actors on taxi service, taxi cooperative and Regional Office of the National Employers Organization on the Road Motor Transport (abbreviated as Organda). Based on investigation conducted by the investigation team of KPPU, it was known that taxi tariffs applied in the 4 cities was agreed between each taxi entrepreneur in each city, facilitated by the Organda in each city. From the regulation aspect, Article 151 letter (a) law No.22 year 2009 on Road Traffic and Transportation stated, Passenger tariff for public transportation non route using taxi assigned by the Public Transportation Company with approval from government in accordance with their respective authorities based on minimum service standards applied. However, there are no further technical rules from the central or local government to regulate the establishment of taxi tariff. Furthermore, it was note that since March 2010, the Central Java Provincial Government and the Government of Surakarta and Tegal city has issued an approval letter to determine taxi tariff set by the taxi business actors, as mandated by law No.22 year Related to this arrangement, the Commission did not find any price fixing effort that violated the competition law. Considering this matter, the Commission sent advice and recommendation to the central government, particularly the Minister of Transportation, to accelerate the publication of regulations in central government level to be a guidance to set the taxi tariff, as well as to local governments to accelerate the publication of technical rules concerning the implementation of the taxi tariff on each regions. 6 kompetisia vol 07/2010

7 Bid Rigging on the Construction of School Buildings and Clinic in Nias Regency Law Enforcement KPPU affirmed 4 (four) reported parties had proven in violating Article 22 concerning tender conspiracy on the tender of school buildings and clinic construction in Nias Regency. For the violation, KPPU imposed fine in amount of IDR 200 million to PT. Taramulia Setia Pratama Luhur, that became the tender winner. 8 reported parties were involved in this case, consisted of 3 business actors, the tender committee, the tender commitment official (PPK), and head of Nias Rehabilitation and Reconstruction Agency. They had been reported to the commission for allegedly made conspiracy during the tender process in order to win PT. Taramulia Setia Pratama Luhur as tender winner. The allegation proved by the similarity on the administrative documents and similar name on the management among the 3 business actors. KPPU also considered that the tender committee actions that have ignored the similarities in the administrative documents of the three business actors indicated that the committee has helped facilitate the tender conspiracy. Based on the facts and evidence, the Commission Council decided the three business actors and the tender committee proven in violating article 22 Law No.5 Year While the two other reported party has not proven to violate the law. In addition to the administrative fine imposed to PT. Taramulia Setia Pratama Luhur, the Commission Council also forbade the two business actors to participate in any tender held in North Sumatera Province for 1 (one) year since this decision have permanent legal force. The Commission Council also sent recommendation to the Bid Committee supervisor to give administrative sanctions to the Bid Committee for his violation in breached article 22 law No.5 year kompetisia vol 07/2010 7

8 Competition Advocacy One Decade of KPPU to Build National Competition Policy (KPPU National Seminar) June 7, 2010 was the date on which KPPU established for 10 years as a State Commission to supervise the business competition based on Law No.5/1999 regarding Prohibition of Monopolistic Practices and Unfair Business Competition. KPPU and Law No.5/ 1999, cannot be separated from the nation reformation effort to implement fair business competition as part of economic reform in order to revise the business pattern after the reformation. In addition to commemorate one decade of KPPU, KPPU held a national seminar with theme KPPU and Competition Policy in the National Economic System as a forum for reflection and identification of future agenda in order to develop better competition policy. The panelists who attended the seminar were Deputy Minister for Trade, Senior Advisor of Business Competition from Coordinating Minister for Economy, Economic Observer, Deputy Chairman of the Chamber of Commerce 8 kompetisia vol 07/2010 and Monetary Affairs, Public Policy and fiscal, and KPPU s Commissioners. In general, this seminar discussed on the role of KPPU in Indonesian economy system with various new challenges such as International trade. KPPU faced its own challenges when Indonesia was required to enter the Free Trade Agreement (FTA) era, because Indonesia was still underdeveloped in term of education, infrastructure, technology and business innovation. Therefore, to support the creation of an efficient economy and competitiveness, there should be a synergy between the government as policy maker, and KPPU in the competition law enforcement and competition policy harmonization. In international competition, there were some big threat in the form of cartels, mergers and dominant position. Therefore, any form of

9 Competition Advocacy intervention and protection by government should be ensured in line with the fair competition principles and protect consumers, public, and domestic business actors. In the past 10 years, the effectiveness of advice and recommendations based on the study or decision sent by KPPU to the Government cannot be separated from the important role from Ministry, regulator sectoral, and local government. It seems that the advice was effective because of the willingness from the regulators to consider the fair competition, especially law No.5/ 1999 in every economic policy decision. This is reinforce from the expansion of the power to take part in overseeing the implementation of partnership agreement based on law No.20 year 2008 on Micro, Small, and Medium Enterprises (MsMEs). The seminar also discussed the role of KPPU in developing competition policy into national economic system during the past 10 years, as well as to develop common understanding on public issue concerning 3 main topics, namely : (i) whether the government subsidy was justified in competition law regime, (ii) whether the trade policy system means the government should interference product distribution or determine the fair price for products, and whether the competition policy is identical to the business liberalism. In carrying out its duty to supervise the Law No.5/ 1999, KPPU has the authority to enforce the case handling, to determine sanctions, and to deliver advice and recommendations to the government. Up to now, KPPU already sent 81 advice and recommendations to the government on various strategic sectors, like energy, transportation, retail, harbor, commodity, etc. As many as 60 % or 47 of 81 advise and considerations sent by KPPU have been accepted and followed up by the Government. Based on 10 years of experiences in supervise the competition law, KPPU realized the importance of cooperation and coordination with other law enforcement agencies within the law enforcement framework, as well as cooperation with ministry, regulator and local government within the competition policy framework. In other words, the implementation of KPPU duties was dependent with support of other institution. KPPU also realize that law enforcement is more casuistic and its only effect in improving the business system if it is supported by appropriate competition policies. Through this seminar, KPPU once again emphasized the importance of coordinating between KPPU with regulators, at both national and local government to build fair business competition policy in the national economic system. Within this framework, KPPU expect to develop several objectives, namely: : - The understanding of fair competition policies among policy markers in the national and regional levels - The communication continuity - The coordination with government agencies and regulators - The standard mechanism of cooperation with government institutions and mechanism for competition policy harmonization into government policies. Thereby, the national competition law and policy could be developed not only because its mandated in the act, but also because of the coordination and mutual awareness of the importance of fair competition to strengthen the national economic pillars. Establishing justice is one of the government vision related to fair competition. Fair competition condition will support the creation of investment climate and fair business climate as one of the priorities of national development. kompetisia vol 07/2010 9

10 International Indonesian Conference on Competition Law and Policy H o s s e n f e l d e r (Bundeskartellamt), Sang Min Song (KFTC, Korea), C o m m i s s i o n e r L a w r e n c e L e e (TFTC- Taiwan) and Dr. S. Chakravarthy ( I n d i a ). T h e conference was also attended by representatives of I n t e r n a t i o n a l c o m p e t i t i o n agencies, donor a g e n c i e s, g o v e r n m e n t, academicians, and business actors...i am proud to note that the baby is now growing as an independent and dynamic child. The competition law and policy is developed very rapidly over the past decade. Our intensive and systematic endeavors shows that competition law and policy is an enfitable part of highly competitive national economic development.. (Chairman of KPPU RI, Professor Tresna P. Soemardi) This statement issued by the chairman of the KPPU at the opening ceremony of the Indonesian Conference on Competition Law and Policy held on June 9-10, 2010 in Bali, Indonesia. The international conference was held in order to celebrate one decade of KPPU on June 7, The conference that held within the framework of 10 years of KPPU, attended by international competition experts, namely Commissioner William E. Kovacik (US-FTC), the Commissioner Hamada (JFTC), George Kamencak ( ACCC- Australian), Silke This conference also marked the i m p o r t a n c e o f competition law and p o l i c y implementation in the development of a countrry s economy. Through the competition law, the Indonesian people can have a selection of airlines with competitive price as it is now. Since the Government implemented KPPU s recommendatition, there was a significant tarrif reduction in aviation services industry and there was also a significant increase in variety of services offered. The estimation of savings income in flight services during the advocacy period of KPPU was approximately USD 1,9 trillion per year. In addition, related to the excessive fuel surcharge practice conducted by airlines, KPPU dismiss the consumer loss for at least IDR 5,1 trillion up to 13,8 trillion for period Moreover, after the decision announcement of SMS cartel, KPPU had stopped the price agreement between telecommunications operators, and public in general could felt the direct impact of price reduction in SMS tarrifs by % (from IDR 300 during to IDR 10 kompetisia vol 07/2010

11 International 100 in 2009). This rate reduction provides savings income around IDR 5,5 trillion per year to more than 150 costumer. As for cooking oil commodities, KPPU had stopped the consumer loss in amount of IDR 1,2 trillion for cooking oil containers and IDR 374 for bulk cooking oil. One of the speaker at the Conference was Dr. S. Chakravarthy from India, during the presentation he stressed on the implications of competition law and policy implementation, namely: 1. the price decrease due to fair competition could improve the public s income savings 2. fair competition could improve the opportunities to create business and to create employment opportunities 3. the new employment opportunities could decrease the poverty levels 4. the decrease of poverty levels will effect the economic growth These conditions was parallel with the performance and outcome that has been accomplished by KPPU, where those performance can not be separated from the 3 (three) simultaneous activities conducted by the KPPU, namely: 1. The excellence law enforcement 2. The excellence policy advocacy 3. The sustainable development of KPPU s credibility as institutional and organizational Within the framework of law enforcement, for a decade KPPU has received 3043 reports and handles 237 cases, where 73 % or 24 of 47 KPPU decision that filed an appeal has been upheld by the Supreme Court (MA). It shows that the courts already the same opinion with KPPU regarding the truth of evidence, the examination process which fulfill the due process of law and the dictum of the decision that has been imposed. As for competition advocacy activities, Commissioner William E. Kovacik from US. FTC said that the competition policy institution can provide support and role in policy development through advocacy and education activities. Some important point in this activity was to provide advice and recommendation on the draft of government regulations, and participates in the preparation of a study conducted by the regulator, especially on the competition policy part. On the same occasion, Commissioner Lawrence Lee from TFTC also explained the competition advocacy strategies to raise public awareness, which can be done through: a. educational program of business competition b. guideliness publication c. publication of competition law enforcement issues In line with the opinion of the Commissioner, KPPU itself had issued 81 advice and recommendations to the government where 60 % of the recommendations already got a positive response from the government. In addition, KPPU also published a textbook of Business Competition Law as a reference for competition law curriculum and for business actors, KPPU also issued 10 (ten) guidelines of Law No.5 Year 1999 in order to increase transparancy in the judicial procedure of KPPU case handling procedure. The transparency also impacted on the increasing number pf public access and consultation by 10 % every year which represented the public awareness of competition law. Forum Indonesian Conference of Competition Law and Policy also became the medium to exchange best practices among international competition authorities, which explained that through a combination of competition advocacy and law enforcement that supported by institutional strengthening, competition authorities such as KPPU may conduct its duties in more effectif and efficient way. kompetisia vol 07/

12 Competition is about price, supply, selection and service. It benefits consumers by keeping prices low, avaibility, quality and choice of goods and services high. KPPU-RI Commission for the Supervision of Business Competition Republic of Indonesia KPPU Building, Jl. Ir. H. Juanda No. 36, Central Jakarta Phone , , Fax Regional Representative Offices Surabaya Bumi Mandiri Building, Jl. Basuki Rahmat No Surabaya East Java Phone , Fax kpd_surabaya@kppu.go.id Makassar Menara Makassar 1st Floor, Jl. Nusantara No. 1 Makassar - South Sulawesi Phone , Fax kpd_makassar@kppu.go.id Medan Jl. Ir. H. Juanda No. 9A Medan - North Sumatera Phone , Fax kpd_medan@kppu.go.id Batam Graha Pena Building 3rd A Floor Jl. Raya Batam Center, Teluk Tering, Nongsa Batam Kepulauan Riau Phone , Fax kpd_batam@kppu.go.id Balikpapan BRI Building 8th Floor, Jl. Sudirman No. 37 Balikpapan East Kalimantan Phone , Fax kpd_balikpapan@kppu.go.id