Indonesian Merger Control

The term Merger Control can be described as an exercise of oversight/control over merger, acquisition, and consolidation transactions (Business Combinations) of whether such transaction violates the juridical antimonopoly thresholds laid down in the law. The regime of merger control in each jurisdiction may be regulated in different manners, in 1999 Indonesia chooses to promulgate its own Antimonopoly Law contained in Law Numbr 5 year 1999 concerning the Prohibition of Monopolistic and Unfair Business Practices (Antimonopoly Law). In Indonesia the term merger control can be best described by the examination against business combinations which are suspected or considered to have the result (if finalized) of a monopolistic nature. Indonesian merger control is defined in Section 4 Article 28-29 of the Antimonopoly Law, In which KPPU –the Indonesian antitrust watchdog- an abbreviation for Komisi Pengawas Persaingan Usaha (Business Competition Supervisory Comission) under The Antimonopoly regulation has been mandated to exercise authority concerning merger controls.

In reality Merger Control has not been exercised in Indonesia, due to the inavailability of the implementing regulation needed. Under the antimonopoly law a business actor (may be a legal entity or a natural person) has an obligation to report to the authorities inside the period of 30 days after the date of the finalization of the business combinations, which means any merger control examinations are to be conducted ex-post (i.e subsequent to the finalization of a transaction).

Subject to Article 29 of the Antimonopoly Law only business combination transactions which satisfies a certain juridical threshold laid down by Antimonopoly Law are to be reported to the KPPU. For the purpose of setting the benchmark for the antimonopoly law compliance, drafters of the Antimonopoly Law has provided two juridical threshold which are to be considered whether a business combination are to be reported or not, such juridical threshold includes Asset Value and/or Sales Value of the company, however the procedure and mechanism of the test is not yet defined, also due to the inavailability of an implementing regulation needed by the Antimonopoly law.

There is no provision up until this day which gives KPPU the authority to oversee business combinations ex ante. In Indonesia’s case it should be pointed out that it is exceptionally important to introduce this control concept. Due to the inavailability of an ex ante method of control, all business transactions done in the course of completing a merger, consolidation, and acquisition can only be examined by the KPPU only after such transaction has been completed and has the potential to cause unfair business practices. On that basis of that we can immediately consider of two impacts, which are:

1. That conducting examinations regarding an executed and finalized transaction will finally cause the parties to such transaction to suffer considerable loss due to the examination which can include both monetary and time..
2. That such ex post examination method will result in further proceedings, which might reach significant complexity than the examination itself.

Consequently an ex ante examination or a pre merger control of a transaction will help ultimately to reduce these after effects of an ex post method of merger control. Appropriately an ex ante examination should be done by submitting a proposal of any kind of transaction having possibilities of anti trust law or antimonopoly law violation to the KPPU, supposedly this proposal can take the form of submissions containing descriptions of the transactions to be conducted.

Despite the importance of the concept of Merger Control in relation to Monopoly practices, it seemed that so far regulators has been slow in promulgating a regulation which will serve as a guide in the implementation of merger control in Indonesia. Rumor has been spreading that the government is currently discussing and will shortly promulgate two separate regulations implementing the New Company Law and the Antimonopoly Regulation, while KPPU is planning to release a business combination pre-notification regulation however the release date of such regulation is still unclear.