In today’s fast-paced business world, competition is everywhere. Whether you’re a small startup or a large corporation, staying ahead means constantly innovating and adapting. When competition done fairly, it pushes businesses to offer better products, improve services, and lower prices for consumers.
However, not all competition is fair. Some companies use monopoly, cartel, and price-fixing schemes to gain an unfair advantage, ultimately hurting consumers and smaller businesses. That’s why Indonesia has established strong regulations to ensure a level playing field. In this article, we’ll break down everything you need to know about Antirust & Competition in Indonesia—from why it matters to how the government regulates it.
Why Business Competition Matters
Healthy competition benefits businesses and consumers alike. It drives innovation, ensuring continuous improvement in products and services. It also helps keep prices fair, preventing companies from overcharging due to lack of alternatives. A competitive market offers more choices, giving consumers better options suited to their needs. Additionally, competition boosts efficiency, pushing businesses to optimize resources and improve service quality.
Without fair competition, dominant companies could stifle growth, limit innovation, and drive-up prices. To prevent this, Indonesia has implemented strong regulations to ensure a level playing field for all businesses.
The Legal Framework for Antitrust & Competition Law in Indonesia
To keep competition fair, Indonesia has strict laws in place. The key regulations include:
- Law Number 5 of 1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition (“Competition Law”) (as amended by Law Number 6 of 2023 on Job Creation). This law sets the foundation for preventing anti-competitive behavior and ensuring that businesses operate fairly. Competition Law prohibits the following business practices:
- Mergers and acquisitions that lead to unfair competition or monopolistic practices.
- Agreements that result in unfair business competition or monopolistic practices.
- Agreements that require buyers to pay different prices than other buyers for the same goods or services.
- Agreements to fix prices below market prices.
- Agreements to divide marketing territories or allocate the market for goods or services; etc.
- Presidential Decree Number 75 of 1999, which established the Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha – KPPU), later amended by Presidential Decree Number 100 of 2024. This decree formalized the role of KPPU in enforcing Competition Law and overseeing market practices.
These laws are designed to prevent monopoly, ensure fair competition, and protect consumers from unfair practices. They also set the legal framework for penalizing companies that engage in anti-competitive behavior.
Read more our article: Merger in Indonesia: A General Overview for Businesses
Common Types of Unfair Business Competition
While competition is essential, not all competitive strategies are ethical or legal. Here are some common types of unfair business practices that Indonesian law prohibits:
Monopoly (Article 17 of Competition Law)
- A monopoly happens when a single company controls an entire market, making it impossible for others to compete.
- Why is this harmful? Monopoly leads to higher prices, limited product variety, and reduced innovation because the dominant company has no incentive to improve.
- Example: A telecom company being the only provider of internet services in a region, charging excessively high prices because consumers have no alternatives.
Oligopoly (Article 4 of Competition Law)
- This occurs when only a few companies dominate an industry, limiting consumer choices.
- Why is this harmful? It allows a few large companies to control pricing and market conditions, reducing competition.
- Example: A handful of cement manufacturers controlling the industry, allowing them to set high prices without competition.
Cartel Agreements (Article 11 of Competition Law)
- When businesses secretly agree to fix prices, divide markets, or limit production, they create a cartel.
- Why is this harmful? Cartels eliminate competition, leading to artificially high prices and lower product quality.
- Example: Airline companies coordinating to keep ticket prices high instead of competing fairly.
Dumping (Article 20 of Competition Law)
- Selling products in foreign markets at prices lower than domestic prices, sometimes even below production costs, to drive out competitors.
- Why is this harmful? It damages local industries by undercutting prices, forcing domestic businesses to close.
- Example: An Indonesian company selling cheap garment overseas to push local garment producers out of business.
Predatory Pricing (Article 20 of Law Number 5 of 1999)
- Predatory pricing occurs when a company deliberately sets prices below production costs to drive competitors out of the market, then raises prices once competition is eliminated.
- Why is this harmful? It creates short-term benefits for consumers but long-term harm by reducing market diversity and increasing prices once the dominant company controls the market.
- Example: A large retail chain selling essential goods at a loss to force small independent stores to shut down, then raising prices once it has market dominance.
Intellectual Property Theft (Article 10 of Competition Law)
- This involves using another company’s patented designs, trademarks, or copyrights without permission.
- Why is this harmful? It undermines fair competition by allowing companies to profit from stolen ideas.
- Example: A brand copying another company’s logo to deceive customers into thinking they are buying an original product.
Considerations for Companies in Indonesia
For companies operating in Indonesia, understanding and complying with competition laws is crucial. Here are some key considerations:
- Compliance with Regulations: Companies must ensure their business practices align with Law Number 5 of 1999 and other competition regulations to avoid penalties.
- Fair Pricing Strategies: Setting competitive prices while avoiding price-fixing or predatory pricing ensures compliance with the law.
- Market Entry Strategies: New companies should be aware of potential monopolistic barriers and seek legal counsel when entering highly competitive industries.
- Transparent Business Agreements: Contracts, partnerships, and collaborations must be structured to avoid collusion or cartel-like arrangements.
- Corporate Ethics and Training: Educating employees and executives on fair competition practices can prevent unintentional violations.
By following these best practices, companies can thrive while contributing to a fair and competitive marketplace.
Kusuma & Partners assist companies in handling Antitrust & Competition matters in Indonesia, ensuring your legal interests while complying with all legal requirements.
The Role of the Business Competition Supervisory Commission (KPPU)
Indonesia’s Business Competition Supervisory Commission (KPPU) plays a crucial role in ensuring companies follow competition laws. Here’s what they do:
- Issues regulations and guidelines to implement the Competition Law.
- Oversees the implementation of the Competition Law.
- Monitor business agreements to identify potential monopolistic practices.
- Investigate unfair competition and take action against violators.
- Prevent abuse of dominance by big corporations.
- Educate businesses and consumers about their rights and obligations.
- Evaluate mergers, acquisitions, and consolidations that could lead to unfair competition or monopolistic practices.
- Impose fines and sanctions on companies that break the rules.
To carry out these duties, KPPU has the power to:
- Conduct investigations into suspected unfair practices.
- Summon companies, business owners, witnesses, and experts for hearings.
- Impose penalties and fines on companies violating competition laws.
- Make policy recommendations to the government for improving competition regulations.
Case Study: Temasek Holdings and Allegations of Monopolistic Practices in Indonesia’s Telecommunications Sector
In 2007, Indonesia’s Business Competition Supervisory Commission (KPPU) investigated Temasek Holdings, a Singaporean investment company, for alleged monopolistic practices in the country’s telecommunications sector. Temasek held significant stake in two major Indonesian mobile operators: PT Telkomsel and PT Indosat. The KPPU concluded that this dual ownership led to reduced competition and higher prices for consumers. As a result, Temasek was found guilty of unfair behavior and was fined accordingly.
From the above case, it underscores the importance for companies operating in Indonesia to:
- Avoid Cross-Ownership in Competing Companies: Holding significant shares in competing companies can lead to allegations of reduced market competition.
- Ensure Compliance with Local Competition Laws: Understanding and adhering to Indonesia’s antitrust regulations is crucial to prevent legal disputes and penalties.
- Engage in Fair Pricing Strategies: Dominant market positions should not be exploited to impose unfair pricing on consumers.
By maintaining transparent and fair business practices, companies can contribute to a competitive and healthy market environment in Indonesia.
Conclusion
At its core, business competition is about fairness. When companies compete fairly, consumers benefit from better prices, higher-quality products, and more choices. Strengthening competition laws and enforcement will help create a market where everyone has a fair chance to succeed, ultimately leading to a stronger economy and a more innovative business environment in Indonesia.
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“DISCLAIMER: This content is intended for general informational purposes only and should not be treated as legal advice. For professional advice, please consult us.“
