2017 Merger Control Survey: Indonesia
Luky I Walalangi and Miriam Andreta, Ali Budiardjo Nugroho Reksodiputro
1.1 What is the applicable legislation and who enforces it?
The government agency in charge of merger control in Indonesia is called the Business Competition Supervisory Commission; commonly known as the KPPU.
Merger control in Indonesia is governed under Law No. 5 of 1999 regarding the Prohibition of Monopolistic and Unfair Competition Practices (Antitrust Law), as further implemented by Government Regulation No. 57 of 2010 (GR No. 57). To further implement GR No. 57, KPPU issued Guideline No. 2 of 2013. Guideline No. 2 together with the Antitrust Law and GR No. 57 constitute the merger rules.
It is important to note that, unlike the practice in many other countries, the merger rules apply post-merger notification.
2.1 What types of mergers and joint ventures (JVs) are caught?
Merger, consolidation or acquisition of non-affiliate parties resulting in the assets or sales value exceeding certain thresholds are within the general scope of the merger rules. Specifically in relation to share acquisitions, GR No. 57 limits it only to the one resulting in a change of control. In addition, according to Guideline No. 2, subscription of shares of a company resulting in a change of control is treated as a share acquisition.
Establishment of a fresh or new joint venture company does not fall within the scope of the merger rules.
2.2 What are the thresholds for notification, how clear are they, and are there circumstances in which the authorities may investigate a merger falling outside such thresholds?
The threshold for notification is clear under GR 57: a combined assets value exceeding IDR2.5 trillion Rupiah ($182 million), or in the case of banks IDR20 trillion ($1.45 billion); or sales value exceeding IDR5 trillion ($364 million). Note that the merger rules apply the vertical line-method in calculating the threshold, where the combined assets or sales value are calculated to cover those located in Indonesia of the parties conducting the transaction up to the ultimate shareholders and all their controlled subsidiaries.
Strictly from regulations, a merger below the threshold should not be caught by the merger rules. In this case, Guideline No. 2 provides that if assets or sales of a party were previously exceeding the threshold but then becoming below the threshold when the transaction completes, such party is not required to file the mandatory notification, although it is not automatically immune from the general provisions of the merger rules.
2.3 Are there circumstances in which a foreign-to-foreign merger may require notification, and is a local effect required to give the authority jurisdiction?
Yes, Guideline No. 2 stretches the term merger to also include an offshore merger, consolidation or share acquisition conducted between non-affiliated parties that meets the threshold and has a direct impact to the Indonesian market.
PRE-NOTIFICATION AND FILING
3.1 Is filing mandatory or voluntary and must closing be suspended pending clearance? Are there any sanctions for non-compliance, and are these applied in practice?
A post-merger notification filing is mandatory for any merger transaction meeting the requirements and threshold set out under the merger rules. It must be submitted within 30 business days after the transaction becomes effective. Failing to comply with the requirement may be subject to a penalty in the mount of IDR1 billion per day up to a maximum of IDR25 billion. Moreover, if a transaction is determined by KPPU to result in a monopolistic or unfair competition practice, KPPU is authorised to impose sanctions (ranging from administrative sanctions to the cancellation of the transaction).
As the merger rules adopt the post-merger notification, the filing process should not hold-off the closing of the transaction.
While the regulatory requirement is post-notification, Guideline No. 2 allows parties to conduct a voluntarily pre-merger consultation to KPPU. Note, however, that the voluntary pre-merger consultation does not disregard the mandatory post-merger notification.
3.2 Who is responsible for filing and what, if any filing fee applies?
For merger and consolidation, notification should be made by the surviving or consolidated company. For share acquisitions, there are some inconsistencies in the merger rules but, in practice, the notification is normally filled by the target company. No filing fee applies.
3.3 What are the filing requirements and how onerous are these?
Filing must be submitted using a certain prescribed form along with certain supporting documents including, among others, the company's profile of the parties; a summary of the transaction and the relevant documents; audited financial statements for the past three years of the parties; documents relating to business plans reflecting the parties' business policies for the next three years; and industrial conditions of the parties as a group.
3.4 Are pre-notification contacts available, encouraged or required? How long does this process take and what steps does it involve?
Pre-merger consultation is available but not a regulatory requirement. While the process is encouraged by KPPU, since the mandatory requirement is post-merger notification, there is no guarantee that KPPU will not re-asses the merger after the transaction completes. Under Guideline No. 2 a pre-merger consultation process is set to complete within 30-90 business days.
4.1 What is the standard timetable for clearance and is there a fast-track process? Can the authority extend or delay this process?
The merger rules require assessment on merger, consolidation or acquisition transactions to be completed within 90 business days of receipt of the complete notification form and supporting documents. KPPU has the right to request additional documents as it deems necessary.
The merger rules are silent on whether KPPU can extend the assessment period but, in practice, we have seen a merger assessment completed by KPPU one year after the filing was made. There is no fast-track process for merger notification under the merger rules.
4.2 What is the substantive test for clearance, and to what extent does the authority consider efficiencies arguments or non-competition factors such as industrial policy or the public interest in reaching its decisions?
In assessing a merger, consolidation or acquisition, KPPU uses the following as the basis of their analysis. These factors are not cumulative and need not be assessed by KPPU in any particular order:
Market entering barriers.
Potential anti-competitive behaviour – this particular analysis will focus on the question of whether a dominant position is created as a result of the merger, consolidation or acquisition transaction, and whether such dominant position might cause the business entity to abuse its dominant position to raise profits and charge customers higher prices.
Efficiency – KPPU will analyse whether the proposed merger, consolidation or acquisition will create greater efficiency, and whether such efficiency will have any positive impact on customers in the market.
Bankruptcy – If the proposed merger, consolidation or acquisition is being conducted in order to avoid the bankruptcy of the related companies, then it must be determined whether the impact of the transaction will be greater than the losses that might be incurred by the customers had the transaction not proceeded.
4.3 Are remedies available to alleviate competition concerns? Please comment on the authority's approach to acceptance and implementation of remedies.
If during the notification assessment process KPPU foresees a potential of monopolistic or unfair competition practice resulting from the transaction being assessed, KPPU may give an opportunity to the parties to submit a remedies proposal. Types of remedies that may be acceptable to KPPU include: structural remedies (such as divestment of assets/shares) or behaviour remedies (such as grant of intellectual property licence, creating competition by eliminating the barriers). If the remedies proposal is acceptable to KPPU, KPPU will then render its clearance.
RIGHTS OF APPEAL
5.1 Please describe the parties' ability to appeal merger control decisions – how successful have such challenges been?
There is no official appeal for merger notification assessment result rendered by KPPU.
The only appeal process provided by the law is against KPPU's decisions (after KPPU initiates an antitrust law case) to the District Court and, subsequently, to the Supreme Court. Specifically relating to merger control cases, to date we have seen only one successful objection submitted by PT Carrefour Indonesia, where the District Court accepted the objection and nullified KPPU's decision. The District Court decision was then strengthened by the Supreme Court
6.1 Outline any merger control regulatory trends in your jurisdiction.Recently, KPPU introduced a revised draft amendment of the Antitrust Law. In relation to the merger rules, KPPU proposed to change the requirement from post-notification to 'prior approval'; and to expand the scope of merger control to include the establishment of a joint venture company and assets acquisition. The revised draft amendment will also impose additional authority to KPPU, in terms of merger control, which is to reject or to set terms and conditions for the proposed merger, acquisition, consolidations, acquisition of assets and establishment of a joint venture company. The proposed draft also amends the definition of business actor to also include those conducting business outside Indonesia but affecting the Indonesian market. We understand that the draft amendment is still under discussion.
In practice, KPPU seems now to be actively pursuing companies to conduct a voluntarily consultation as early as possible.
About the author
Luky I Walalangi
Partner, Ali Budiardjo Nugroho Reksodiputro
T: +62212505125 / 5136
F: +62212505001 / 5121
Luky I Walalangi joined ABNR in 2001 and became a partner in 2009. He graduated from the Faculty of Law, Parahyangan Catholic University and earned his LLM degree in the Netherlands in 2000. Walalangi has been involved in a number of major investment and real property projects, including representing the following Japanese companies: Mitsui, Mitsubishi, Mitsubishi Heavy Industries, Nippon Steel Sumitomo Metal, Osaka Steel, Toyota Tsusho, Itochu, Marubeni, JICA, and JACCS. He has also been involved in electricity projects in Indonesia, including the Cirebon project, the Paiton projects, Sengkang, Tanjung Jati, the Central Java project and Jawa Power. He has also been involved in a number of major financings, including PT Pertamina’s $1.5 billion, $2.5 billion and $5 billion bond issuances. His expertise also covers anti-monopoly issues, corporate restructuring, project and debt financing, and land/property, investment, and oil and gas projects.
About the author
Senior associate, Ali Budiardjo Nugroho Reksodiputro
T: +62212505125 / 5136
F: +62212505001 / 5121
Miriam Andreta joined ABNR as an associate in 2007. She graduated in 2006 from the Faculty of Law, University of Gadjah Mada, majoring in civil law. At ABNR, she has been involved in major transactions relating to financing, including PT Pertamina's $1.5 billion and $2.5 billion bond issuances and the PT Elnusa bond issuance; M&A, including representing the Bakrie Group in acquiring a number of Indonesian plantation companies; antitrust matters; oil and gas; infrastructure projects; project financing; corporate matters; investment; and, banking and debt restructuring.