Recovering From Covid-19: Indonesia’s Business Competition Supervisory Commission Revokes the Relaxation Policy on Monopolistic Practices, Unfair Business Competition and Introduces Business Competition Compliance Program
Indonesia’s Business Competition Supervisory Commission or Komisi Pengawas Persaingan Usaha (the “KPPU”) has revoked the relaxation policy on the Monopolistic Practices, Unfair Business Competition and Supervision of Partnership Agreements after almost two years of relaxation. In a press release dated 6 April 2022, Ukay Karyadi, the Head of the KPPU, mentioned that the revocation was carried out after taking into account that business activities have been able to adapt COVID-19 pandemic conditions through the application of new habits. Therefore, the relaxation within the business scheme is deemed to be no longer necessary. With the revocation of the relaxation policy, the KPPU will re-tighten the supervision of all procurement of goods and/or services, and the deadline for the submission of notifications and responses to written warnings.
Background of relaxation of the KKPU’s supervision and law enforcement roles
With the rampant and continuous spread of COVID-19 in Indonesia causing the loss of life and loss of material goods implicating social, economic and community welfare aspects, the country has suffered considerable negative impact and national economic growth slowdown resulting in declining state revenues, and an increase in state spending and financing. In order to stabilise Indonesia’s financial system during the COVID-19 pandemic period, in May 2020, the Indonesian Government issued Law No. 2 of 2020 on Stipulation of Government Regulation in lieu of Law No. 1 of 2020 on the State Financial Policy and Financial System Stability for Managing the 2019 Corona Virus Disease (Covid-19) Pandemic and/or in Dealing with Threats that Harm the National Economy and/or Financial System Stability (“Law 2/2020”).
Following the issuance of Law 2/2020, in November 2020, the KPPU issued Regulation No. 3 No. 2020 on Relaxation of Law Enforcement on Monopolistic Practices and Unfair Business Competition and Supervision of Partnership Implementation in Support of the National Economic Recovery Program (“KPPU Reg 3/2020”). Under KPPU Reg 3/2020, the relaxation that was provided to business actors includes:
- relaxation of law enforcement on the implementation of the procurement of goods and/or services financed by state revenue and expenditure budget in the context of fulfilling medical needs and/or providing supporting facilities for handling COVID-19 and in the context of distributing social assistance and government social safety nets to the public;
- relaxation of law enforcement on plans for agreements, activities and/or using a dominant position aimed at handling COVID-19 and/or increasing the economic capacity of business actor in running their business;
- relaxation of law enforcement for notification obligations in connection with merger, consolidation, or acquisition of shares and/or company asset by increasing the notification time to 60 days (from previously 30 days); and
- relaxation of law enforcement for written warning in connection with the implementation of partnerships, by increasing the warning time of each written warning to 30 days (from previously 14 days).
End of the KPPU’s relaxation of the supervision and law enforcement activities
With the issuance of KPPU Regulation No. 2 of 2022 on the Revocation of KPPU Reg 3/2020, which came into force on 1 May 2022, business actors will no longer be allowed to apply for relaxation of the planned agreement, activities and/or use of their dominant position. The deadline for submitting notification obligations for merger, consolidation, or acquisition of shares and/or company assets will also refer to the original period of 30 days, and the deadline for responding to business actors on written warnings for partnership enforcement is back to 14 days.
Introduction of Regulation on Business Competition Compliance Program
To improve the compliance by business actors to the prevailing competition laws and regulations, the KPPU also issued Regulation No. 1 of 2022 on the Business Competition Program (“KPPU Reg 1/2022”) which became in force from 24 March 2022.
Through KPPU Reg 1/2022, the KPPU encourages business actors to prepare a compliance program by considering their business activities sector; market structure and power; as well as interaction with their suppliers, competitors, and consumers. The program consists of the following aspects:
- code of ethics (internal policy of the company);
- business competition compliance handbook; and
- implementation of socialisation, counseling, training, and/or other activities in the context of implementing the business competition compliance program in the company.
The compliance program shall be registered to the Head of the KPPU in Bahasa Indonesia and in written form by the authorised representative of the business actors. The compliance program will be valid for five years, and upon its expiry, may be extended. To boost the interest of business actors to register and implement their compliance program, KPPU Reg 1/2022 regulates that business actors who registered their compliance program to the KPPU may receive a reduced fine if it is found to have violated prevailing competition laws and regulations. KPPU Reg 1/2022 is silent on the amount of the reduced fine, by implication such reduction will be determined by the KPPU on a case-by-case basis.
Business actors, especially those who have utilized the relaxation programs provided by the KPPU during the past two years should take note that the relaxation has been revoked effective from 1 May 2022. To avoid the risk of late filings, business actors must take note of the deadline to file for notification for merger, consolidation, or acquisition of shares and/or company assets which has resumed to the period of 30 days.
This alert is for general information only and is not a substitute for legal advice.