The Indonesian Government, through Indonesian Competition Commission (“KPPU”), issued Regulation No. 3 of 2023 on the Assessment of Mergers, Consolidations or Acquisitions of Shares and/or Assets that may result in Monopolistic Practices and/or Unfair Business Competition Practices (“New Reg”), and Government Regulation No. 20 of 2023 on Tariffs of Non-tax State Revenue Applicable in the KPPU (“Tariff Regulation”). New Reg introduces significant changes to Indonesia’s merger control regime, mandates fewer mergers, consolidations and acquisitions subject to a notification requirement, sets new rules on the notification process, reduces review periods, and introduce online notification submission. New Reg took effect from 31 March 2023. The Tariff Regulation will take effect from 4 May 2023.
Indonesia’s Merger Control Regime
In general, every merger and acquisition transaction which fulfil certain thresholds of assets/sales values is required to carry out notification to KPPU at the latest 30 (thirty) days as of the effective date of the transaction.
Although New Reg replaced the previous KPPU Regulation 3 of 2019 on Assessment of Mergers, Consolidations or Acquisitions of Shares and/or Assets that may result in Monopolistic Practices Competition Practices, the threshold of notification of mergers, consolidations and acquisitions remains the same, namely:
- the combined assets values must exceed IDR2.5 trillion (approx. USD 167,5 million); or
- the combined sales values must exceed IDR5 trillion (approx. USD 335 million).;
Nonetheless, unlike the 2019 regulation, the calculation of the above should be based on assets and sales in Indonesia only. Previously, the asset and sale value was calculated on a global basis (not only the assets in Indonesia), which was obviously easily met by even small foreign-to -foreign transactions, and consequently resulting in a tremendous increase in notifications to KPPU since 2019. By enacting the New Reg, it is expected that the number of transactions that need to be notified to the KPPU will significantly reduce (especially foreign-to-foreign transactions).
In addition to the above, New Reg also incorporates the dual-nexus mechanism, which means that two undertakings involved in the transaction should directly or indirectly (through affiliates) have business in or sales to Indonesia. Previously, even when a transaction involved only one undertaking with business in or sales to Indonesia (single-nexus) could trigger a notification to the KPPU. The dual-nexus mechanism is expected to reduce the foreign-to-foreign transactions that need to be notified to the KPPU.
Online Notification Portal
Prior to the issuance of New Reg, KPPU received notification submission manually or through emails. Now, New Reg mandates the notifications to be submitted through an online portal at https://notifikasi.kppu.go.id. All information and documents uploaded through the Online Notification Portal must be in the Indonesian language or translated into Indonesian language. The correctness of the information and notification documents submitted through the system will be the responsibility of the undertakings, so if an error is found, KPPU may cancel the registration of the notification and/or the results of the assessment.
The implementation of online notification portal seems like the notifications may be submitted to the KPPU at any time, however, in practice, the portal is only accessible between 9 am and 2 pm Jakarta Time. Practically, undertakings must submit the notification before 2 pm on the 30th business day after the transaction becomes effective. Otherwise, the submission would be deemed late and subject to penalties of IDR 1 billion (approx. USD 67,000) per day up to a maximum of IDR 25 billion (approx. USD 1,67 million).
Upon receiving the notification, KPPU will carry out the following process:
- Administrative Stage (review of the completeness of notification documents);
The KPPU will review the completeness of the filing of supporting documents within 3 (three) business days after the notification is submitted. The timeline for the KPPU to review the completeness of the documents is shorter than the 2019 regulation (i.e., 60 business days). If the KPPU decides that the filing of notification documents is complete, then it will issue: (i) a notification registration number, and (ii) an opinion letter stating whether the transaction meets the notification threshold. Alternatively, KPPU may decide that the transaction is exempted from filing obligation if it does not meet the notification threshold by issuing a confirmation letter.
On the other hand, if the filing of notification documents is deemed incomplete, the KKPU will issue a notification through the Online Notification Portal on the list of requested documents that need to be submitted. In practice, we believe that the KPPU will complete this stage after the requested documents are submitted to the KPPU (which may be more than 3 (three) business days). Notwithstanding the foregoing, New Reg does not clearly state so and, accordingly, leaves some unclarity on how long KKPU could extend the review of the completeness of the notification documents.
Unlike the 2019 regulation, under the New Reg, the Commission Secretariat will carry out the entire initial assessment and full assessment. The involvement of the Commission’s Members is required if the results of the full assessment conducted by the Commission Secretariat concludes that the transactions have the potential to result in monopolistic practices and/or unfair business competition. In this case, the a hearing with KPPU Tribunal (Majelis Komisi) will be carried out.
- Assessment Stage (review of transaction merit)
If the transaction meets the notifiable threshold above, KPPU will proceed to review the merit of the notification within the period of 90 (ninety) business days. During this stage (initial assessment stage), a designated task force will assess whether the notified transaction potentially results in a significant change of market concentration from the Indonesian competition perspective. During this initial assessment stage, KPPU may request additional documents and information through the Online Notification Portal. If the task force views any indication of the potential to result in monopolistic practices or unfair business competition from the Indonesian competition law in such transaction, the assessment will advance to the full assessment stage.
During the full assessment stage, a hearing with the KPPU Tribunal (Majelis Komisi) will be held, and KPPU Tribunal may summon the notifying party, and, in parallel, ask for additional information, clarification and/or documents. Upon the hearing, the KPPU Tribunal will issue: (i) a conditional approval on the transaction; (ii) a decision stating that there is no potential for anti-monopoly or unfair competition on the transaction; or (iii) a decision to proceed the transaction to a further investigation.
Merger Filing Fee
Unlike the previous regime that does not require payment for any filing to the KPPU, Tariff Regulation stipulates a certain payment when submitting a notification to the KPPU. The payment is calculated by the following formula:
0.004% x the value of assets or sales in excess of the notification threshold, whichever is lower.
The value of assets or sales is calculated based on the group-wide assets or sales of the relevant parties to the transaction. If both the asset and sales values meet the threshold, the filing fee will be calculated using whichever value is lower and will only be payable if the KPPU finds the transaction is notifiable. Nonetheless, the Tariff Regulation limits the maximum fee to IDR150 million or approximately USD10,000.
As a result of the revised notification criteria, it is expected fewer deals to be notifiable in Indonesia. Unlike the 2019 regulation that caused frustration for international undertakings by obliging them to notify even insignificant impact foreign-to-foreign transactions, the New Reg brings more relaxation with its double-nexus principle. Furthermore, undertakings may appreciate the reduction from 60 (sixty) business days to 3 (three) business days for KPPU to check the completeness of the supporting documents and initial review of the transaction. Nonetheless, it is to be seen how digitalization-optimization and simplifications can be implemented in practice. Undertakings may consider technical strategy details to submit the notification and anticipate the last-minute submission and system breakdown.
For Further Information, Please Contact:
MetaLAW, Legal Consultant, Jakarta, Indonesia