Luky I Walalangi and Miriam Andreta of Ali Budiardjo Nugroho Reksodiputro review the merger control regime in Indonesia
1. Regulatory framework
1.1 What is the applicable legislation and who enforces it?
The government agency in charge of merger control in Indonesia is the Business Competition Supervisory Commission, commonly known as the KPPU.
Merger control in Indonesia is governed under Law number 5 of 1999 on the prohibition of monopolistic and unfair competition practices (Antitrust Law), as further implemented by government regulation number 57 of 2010 (GR No 57). To further implement GR No 57, the KPPU issued guideline number 2 of 2013 (guideline no 2). In these guidance notes, we refer to the above three pieces of legislation combined as the merger rules.
It is important to note that, unlike the practice in many other countries, the merger rules apply to post-merger notification.
1.2 What types of mergers and joint ventures (JVs) are caught?
Mergers, consolidations and/or acquisitions of non-affiliate parties that result in an asset and/or sale value exceeding certain thresholds all fall within the general scope of the merger rules. Specifically in relation to share acquisitions, GR No 57 applies only to transactions resulting in a change of control. In addition, under guideline no 2, the subscription of shares of a company resulting in a change of control is treated as a share acquisition.
The establishment of an entirely new joint venture company does not fall within the scope of the merger rules.
2.1 What are the thresholds for notification, how clear are they, and are there circumstances in which the authorities may investigate a merger falling outside such thresholds?
The threshold for notification is clear under GR 57: the combined (a) asset value exceeds 2.5 trillion rupiah ($181 million), or in the case of banks 20 trillion rupiah; and/or, (b) sale value exceeds 5 trillion rupiah. Note that the merger rules apply the vertical line method in calculating the threshold, with the combined assets and/or sale values calculated based on the assets located in and/or sales value obtained from Indonesia, of the parties that are conducting the transaction, up to the ultimate shareholders and all their controlled subsidiaries.
Strictly speaking, under the regulations, a merger below the threshold should not be caught by the merger rules. In this regard, guideline no 2 provides that if assets/sales of a party previously exceeded the threshold but then fell below the threshold once the transaction completed, that party would not be required to file the mandatory notification. However, it would not automatically be immune from the general provisions of the merger rules.
2.2 Are there circumstances in which a foreign-to-foreign merger may require notification, and is a local effect required to give the authority jurisdiction?
Yes, guideline no 2 stretches the term 'merger' to also include offshore mergers, consolidations or share acquisitions conducted between non-affiliated parties that both meet the threshold and have a direct impact on the Indonesian market.
2.3 Is filing mandatory or voluntary and must closing be suspended pending clearance? Are there any sanctions for non-compliance, and are these applied in practice?
A post-merger notification filing is mandatory for any merger transaction meeting the requirements and thresholds set out under the merger rules. The notification must be submitted within 30 business days after the transaction becomes effective. Failing to comply with the requirement may be subject to a penalty of 1 billion rupiah per day, up to a maximum of 25 billion rupiah. Moreover, if a transaction is determined by the KPPU to have resulted in monopolistic or unfair competition practice, the KPPU is authorised to impose sanctions. These range from administrative sanctions to the cancellation of the transaction.
As the merger rules adopt the post-merger notification regime, the filing process should not hold off the closing of the transaction.
While the regulatory requirement is for post notification, guideline no 2 allows parties to conduct a voluntary pre-merger consultation with the KPPU. Note, however, that the voluntary pre-merger consultation does not replace the need for the mandatory post-merger notification.
2.4 Who is responsible for filing and what, if any filing fee applies? What are the filing requirements and how onerous are these?
For mergers and consolidations, the notification should be filed by the surviving/consolidated company. For share acquisitions, there are some inconsistencies in the merger rules but, in practice, the notification is normally filed by the target company. The filing must be submitted using certain prescribed forms along with certain supporting documents. These include, among other things, the company profile of the parties involved, a summary of the transaction and the relevant documents, audited financial statements for the previous three years of the parties involved, documents relating to the parties' business plans reflecting their business policies for the next three years, and the industrial conditions of the parties as a group.
3.1 What is the standard timetable for clearance and is there a fast-track process? Can the authority extend or delay this process?
The merger rules require an assessment on merger, consolidation or acquisition transactions to be completed within 90 business days of receipt of the complete notification form and supporting documents.
The KPPU has the right to request additional documents as it deems necessary.
The merger rules are silent on whether the KPPU can extend the assessment period but, in practice, we have seen a merger assessment completed by the KPPU a year after the filing was made. There is no fast-track process for merger notification under the merger rules.
3.2 What is the substantive test for clearance, and to what extent does the authority consider efficiencies arguments or non-competition factors such as industrial policy or the public interest in reaching its decisions?
In assessing a merger, consolidation or acquisition, the KPPU uses the following as the basis for its analysis. These factors are not cumulative and will not be assessed by the KPPU in any particular order:
3.3 Are remedies available to alleviate competition concerns? Please comment on the authority's approach to acceptance and implementation of remedies.
If during the notification assessment process the KPPU foresees a potential for monopolistic or unfair competition practices resulting from the transaction being assessed, the KPPU may offer the parties the opportunity to submit a proposal for remedies. Types of remedies that may be acceptable to the KPPU include: structural remedies, such as divestment of assets/shares, or behavioural remedies, such as granting intellectual property licences or creating competition by eliminating barriers. If the remedies proposal is acceptable to the KPPU, the KPPU will clear the transaction.
4. Rights of appeal
4.1. Please describe the parties' ability to appeal merger control decisions – how successful have such challenges been?
There is no official appeal to a merger notification assessment result rendered by the KPPU.
The only appeal process provided by the law against KPPU's decisions as a result of the KPPU initiating an antitrust law case, which is to be submitted to the district court and, subsequently, to the Supreme Court. In merger control cases specifically, to date, we have seen only one successful objection submitted – by PT Carrefour Indonesia – where the District Court accepted the objection and nullified the KPPU's decision. The District Court decision was then confirmed by the Supreme Court.
5. Your jurisdiction
5.1. In no more than 200 words outline any merger control regulatory trends in your jurisdiction.
In 2014 the KPPU introduced a draft amendment of the Antitrust Law. In relation to the merger rules, the KPPU proposed (i) changing the requirement for a post-notification to a pre-notification and, (ii) amending the definition of 'business actor' to also include parties conducting business outside Indonesia but affecting the Indonesian market. The draft amendment is still under discussion.
It would appear that the KPPU is now actively pursuing companies to conduct a voluntary consultation as early as possible.
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Luky I Walalangi
Ali Budiardjo Nugroho Reksodiputro
About the author
Luky I Walalangi joined ABNR in 2001 and became a partner in 2009. He graduated from the Faculty of Law, Parahyangan Catholic University and earned his LLM degree in the Netherlands in 2000. Walalangi has been involved in a number of major investment and real property projects, including representing the following Japanese companies: Mitsui, Mitsubishi Corporation, Mitsubishi Heavy Industries, Nippon Steel Sumitomo Metal Corporation, Osaka Steel Corporation, Toyota Tsusho Corporation, Itochu Corporation, Marubeni Corporation, JICA, and JACCS Corporation. He has also been involved in electricity projects in Indonesia, including the Cirebon project, the Paiton projects, Sengkang, Tanjung Jati, the Central Java project and Jawa Power. He has also been involved in a number of major financings, including PT Pertamina's $1.5 billion, $2.5 billion and $5 billion bond issuances. His expertise also covers anti-monopoly issues, corporate restructuring, project and debt financing, and land/property, investment, and oil and gas projects
Ali Budiardjo Nugroho Reksodiputro
About the author
Miriam Andreta joined ABNR as an associate in 2007. She graduated in 2006 from the Faculty of Law, University of Gadjah Mada, majoring in civil law. At ABNR, she has been involved in major transactions relating to financing, including PT Pertamina's $1.5 billion and $2.5 billion bond issuances and the PT Elnusa bond issuance; M&A, including representing the Bakrie Group in acquiring a number of Indonesian plantation companies; antitrust matters; oil and gas; infrastructure projects; project financing; corporate matters; investment; and, banking and debt restructuring.