Indonesia is one of jurisdictions that sets out merger control provisions in its Competition Law and regulations. Transactions that are subject to notification will have to be notified to the KPPU[1], after they are completed. Not all transactions are subject to notification; only those that meet certain criteria and thresholds are. Whilst Indonesia adopts post-merger notification, a cross-border project may be put on delay if it constitutes a pre-notifiable concentration in other jurisdictions. In many other jurisdictions, a merger control review must be done before the transaction can conclude, such as South Korea and Poland. At the moment, a draft bill on Competition law is being reviewed and discussed at the House of Representative. We hope to continue to contribute to our next series of articles regarding this topic.
The minimum thresholds for merger control are IDR 2,500,000,000,000 for combined assets and IDR 5,000,000,000,000 for total sales.[2] Different threshold applies if all or one of the parties is a bank institution.[3]
In a shares acquisition which results in the assets or sales value of the acquiring and acquired entities exceeding the minimum thresholds, it must be reported to the Commission no later than 30 days after completion of the transaction.[4] Exception to this rule is only in a case of acquisition within affiliated companies.[5] Calculation is not only done on the assets or turnovers of the acquiring and acquired companies but also the assets or turnovers of all the companies in a vertical relationship with them (or simply put, companies that control or are controlled by the acquiring and acquired companies). “Control” or “controlled” under Government Regulation No. 57/2010 broadly means owning more than 50% of shares or having power to make decisions on the management. Further, the assets calculated must be those located in Indonesia and similarly, the turnovers for sale of goods or services (excluding turnovers from export) must also be located in Indonesia.
The Competition Law applies to all business actors domiciled or having business in Indonesia.[6] However, foreign entities having sales and assets in Indonesia with no corporate presence there must also take proper legal advice on whether or not they need to report their transactions to the Commission. There has been precedent in the past where the Commission enforced the extraterritorial application of the Competition Law and investigated foreign companies with no presence in Indonesia.
The law encourages business actors to consult with the Commission prior to their transactions by filling the prescribed forms and supporting documents.[7] This is a voluntary consultation where business actors can receive comfort from the Commission that their planned transaction would not potentially result in monopolistic practices or unfair business practices. Having said that, the Commission is not bound by its opinion and it may take a different view if, for example, there are material changes to the transaction post-consultation. Therefore, even if a transaction is not caught under merger control provisions, where there is a sequence of actions that constitutes a change of control, the transaction may not necessarily be exempted anymore and further analysis and legal advice will be required.
Where the Commission finds that a notified transaction violates the Competition Law, it may impose certain sanctions. Fines of IDR 1,000,000,000 per day up to IDR 25,000,000,000 may be imposed if transaction parties have failed to meet the deadline.[8] In the acquisition of Woongjin Chemical Co. (WCC) by Toray Advanced Material Korea Inc. (TAMK), the Commission imposed IDR 2,000,000,000 fines on TAMK for submitting the formal notification four days after the deadline.[9]
This article is for general information only and is not intended to provide legal advice
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[1] KPPU is the Indonesian Commission for the supervision of business competition.
[2] Article 5 (2) of GR No. 57/2010.
[3] Article 5 (3) of GR No. 57/2010. The minimum threshold of IDR 20,000.000,000,000 applies if all parties are banks, and IDR 2,500,000,000,000 if only one of the parties is a bank.
[4] Article 29 (1) of Law No. 5/1999 jo. Article 5 (1) GR No. 57/2010.
[5] Article 7 of GR No. 57/2010.
[6] Article 1 (e) of Law No. 5/1999.
[7] Article 10 of GR No. 57/2010.
[8] Article 6 of GR No. 57/2010 jo. Article 12 of KPPU Regulation No. 4/2012.
[9] KPPU Decision No.17/KPPU-M/2015.
