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30 August, 2019
Indonesia’s Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha or “KPPU”) is seen to be more strictly enforcing fines for companies that are late in notifying the KPPU of a merger or acquisition that meets a certain threshold.
KPPU Notification Requirement
The requirement to notify the KPPU of a merger or acquisition is regulated under Government Regulation Number 57 of 2010 regarding Merger or Consolidation of Business Entities that Effectuates the Occurrence of a Monopoly and Unfair Competition, dated July 20, 2010 (“GR 57/2010”).
Under GR 57/2010, the KPPU must be notified of any merger or acquisition that meets certain asset and/or sales thresholds no later than 30 days from the date on which the merger or acquisition is legally effective.
The asset and/or sales value thresholds that trigger the reporting requirement are as follows:
- The combined value of assets in Indonesia exceeds Rp 2.5 trillion (the asset value threshold is Rp 20 trillion for banks).
- The combined sales turnover in Indonesia exceeds Rp 5 trillion.
GR 57/2010 stipulates that asset and sales value is calculated based on the total combined assets or sales of the acquired and the acquiring company in an acquisition, or the total assets or sales turnover of the company resulting from a merger.
Note that “acquisition” under GR 57/2010 refers to a purchase of shares in a company that effectuates a change of control. The term “control” means that a company holds more than 50% of shares in another company. Therefore, in addition to the asset and/or sales value thresholds, the requirement to notify the KPPU of an acquisition only applies to acquisitions that result in a change of control in a company.
The KPPU will sanction companies that fail to notify the KPPU within the required 30 days from a merger or acquisition that exceeds the above thresholds becoming legally effective. For private companies, a merger or acquisition is considered legally effective upon the acknowledgement of a notification to the Minister of Law and Human Rights that a merger or acquisition has been conducted A merger or acquisition by publicly listed companies is considered legally effective upon the delivery of a report regarding such merger or acquisition to the Financial Services Authority (Otoritas Jasa Keuangan or “OJK”).
The fine for companies that fail to notify the KPPU as required is Rp 1 billion per day from the date notification was due, with a maximum fine of Rp 25 billion.
KPPU Stepping Up Enforcement
The KPPU has been seen recently as being stricter and more active in enforcing the above merger and acquisition reporting requirement, especially with respect to fines for late reporting. This can be seen by the recent action by the KPPU’s law enforcement division in investigating 12 notable acquisitions, with the companies involved facing fines of up to Rp 25 billion due to late notification to the KPPU.
The KPPU’s director of enforcement, Hadi Susanto, as quoted in an article on the KPPU website, “KPPU Naikkan 12 Perkara Merger Tahun Ini,” said the fines faced by the companies involved in the 12 transactions above should be seen as a warning to companies regarding the timely notification to the KPPU of mergers and acquisitions.
Considering the KPPU’s enhanced focus, a strict compliance with the notification requirement should be one of the main focuses for business actors planning to conduct a merger or acquisition.
Conclusion
It is apparent that the KPPU is putting a renewed emphasis on the rigid application of GR 57/2010 with respect to any company that fails to provide a timely notification to the KPPU of any merger or acquisition that meets the stipulate sales and/or asset thresholds. In light of this, business actors should consider the potential consequence of non-compliance with GR 57/2010.
