Indonesia – New KPPU Guidelines On Imposition Of Sanction For Violation Of Monopoly Practices And Unfair Business Competition.

 

20 July 2021

 

 

Following the reformation in the Indonesian Competition Law regime through the issuance of Law Number 11 of 2020 on Job Creation Law and Government Regulation No. 44 of 2021 on Implementation of Prohibition of Monopolistic Practices and Unfair Business Competition (PP 44), the Indonesia Competition Commission (KPPU) issued KPPU Regulation Number 2 of 2021 on Guidelines for the Imposition of Sanctions for the Violation of Monopoly Practices and Unfair Business Competition (Reg 2).  This regulation was issued and effective on 31 May 2021.
 

In short, we can conclude that this Reg 2 further elaborates the contents that have been previously regulated in PP 44, especially on the calculation of fines, payment of guarantee, and payment collection and leniency to the undertakings. This publication will discuss these issues in more detail. 
 

Calculation of Fines
 

Reg 2 regulates that the ICL can impose a minimum fine of IDR 1 billion (approx. USD 70,000) which will be considered as the base amount of the sanction. The ICL then will adjust the base calculation by considering:
 

1. The negative impact caused by the violation, that will be analyzed by the decrease or loss of competition,

 

2. The duration of the violation, 
    

If the violation lasted fewer than six (6) months, the period of violation will be rounded up to half a year. If the violation lasted more than six (6) months but less than a year, the period of violation will be rounded up to one (1) year. In addition, the regulation also opens an opportunity for the KPPU to use certain coefficients in determining the period of the violation per month.

 

3. The mitigating factors, 

 

• The undertaking demonstrates compliance to principles of fair business competition, which include the adoption of code of conduct, training, counseling, dissemination, and the like;

 

• The undertaking voluntarily ceased the anti-competitive behavior once the case occurs;

 

• The undertaking has never committed the same or similar monopolistic practice or unfair business competition which constitutes as a violation under the prevailing laws and regulations;

 

• The undertaking did not intentionally commit the violation;

 

• The undertaking was not the leader or initiator of the violation; and/or

 

• The impact of the violation is not significant.

 

4. The aggravating factors, and/or 
    

5. The undertaking has committed the same or similar violation under the prevailing laws and regulations within less than eight (8) years according to a final and binding decision; and or

 

• The undertaking was the initiator of the violation;

 

5. The ability of the undertakings to pay the fines that may have an impact on the ability of the undertaking to continue its operation. 
    

The maximum fines that can be imposed on the violators will be based on profit and revenue-based calculation method, as follow:
 

• a maximum of 50% of net profit earned by an undertaking in the relevant market during the period of the violation. Net profits are the amount earned by an undertaking after being deducted with taxes and levies as well as operating costs, as evidenced by a financial statement and some other supporting documents of the undertaking; or

 

• a maximum of 10% of total revenues from the relevant market during the period of the violation. Revenues are the amount earned by an undertaking before being deducted with taxes and levies that are directly related to sales of goods/services in the relevant market. Reg 2 provides guidance that the revenues will be calculated from among others the financial statement, bank statement, sales volume, market value, offer value and other supporting documents of the undertaking.

 

Payment of Guarantee
 

As also regulated in PP 4, Reg 2 stipulates that if the undertaking plans to file an objection to the KPPU’s Decision to the Commercial Court or the Supreme Court, it must submit a bank guarantee at a maximum of 20% of the total fines imposed, within 14 business days after the KPPU’s Decision is announced. The purpose of this is to ensure payment of the imposed fines. Reg 2 regulates that if the undertaking does not submit the bank guarantee within the stipulated deadline, then the KPPU assumes that the undertaking does not file any objection to the KPPU’s Decision. 
 

Payment Collection and Leniency
 

Fines imposed under a final and binding KPPU’s Decision are deemed as state receivables. If the undertaking does not plan to file an objection to the KPPU’s Decision, they must pay the fines within 30 business days as the undertaking receive notification of the decision from the KPPU. On the other hand, if the undertaking plans to file an objection, the regulation on the guarantee’s payment will apply. 

 

If the convicted undertaking fails to voluntarily pay the fines imposed under a final and binding KPPU’s Decision, the KPPU will coordinate with government agencies that handle state receivables and/or law enforcers.
 

Notwithstanding the above, Reg 2 regulates that the KPPU may provide leniency to the undertaking on the payment upon request by the convicted undertaking. To request this leniency, the undertaking must submit a written application to the KPPU within 14 business days as the decision becomes valid and binding. The application must be supported by financial statements of the undertaking that consist of (a) the undertaking’s cash flow and the description of (i) how the cashflow will be effected with the fine’s payment and (ii) how the undertaking plan to pay for the fines based on the cash flow prediction, and (b) written description on the proposed payment plan. 
 

The leniency given by the KPPU can be in the form of payment of fines on a phased basis or payment within a certain period. Reg 2 further stipulates that the maximum length of the leniency is 36 months. To apply this leniency, the convicted undertaking must also provide a guarantee in the form of insurance, bank guarantee, surety bond, or other collateral.

 

For further information, please contact:
 

Freddy Karyadi, Partner, ABNR

+62 818 103 949

fkaryadi@abnrlaw.com
 

Anastasia Irawati, Senior Associate, ABNR

airawati@abnrlaw.com

*Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect and/or represent the views, opinions, or positions of Ali Budiardjo Nugroho Reksodiputro (ABNR) whatsoever.