Transcript Yayasan Dalam Perspektif UU No.16 Tahun 2001

Indonesia’s Economy& Market in Brief:
Its existing legal and institutional framework in relevance
with competition and unfair trade practices
Ningrum Natasya Sirait
University of North Sumatra
Center for Law and Policy (PSHK) Indonesia
Hanoi, 11 March 2011
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Contents:
I. The Indonesian experiences
- Background;
- Changing to Market economy, a choice or a must?
II. Problems and Challenges
- Political economy;
- Industrial policy and competition policy;
- Law enforcements (Commission and the Court)
III. Lesson learnt
IV. Example of an unfair trade practices case
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I. Introduction/Background:
 Each country have different background both in political and historical
when adopting competition law in to their legal system. Some countries
were forced during the economic crisis as part of the bail out program,
while others may enacted voluntarily based on the need to enter global
competition and change to market economy;
 During the era of economic transition, some countries began to be
referred as "emerging economies” instead of developing countries, where
it suggests that these countries no longer have backward economies
characterized with low economic growth rates, inadequate infrastructure
etc, rather these economies are in transition to competitive or market
economy;
 Many laws have been introduced to emerging economies countries as the
tool to improve development, welfare and a sign to participate in global
market competition. Consumer Protection and or Competition Law
among many other laws have been introduced and practiced and
enforced;
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 Prior to the enactment of Law No.5/1999 Concerning the
Prohibition of Monopolistic Practices and Unfair Business
Competition, several other laws have existed such as:
- Article 382 bis Criminal Code
- Article 1365 Civil Code
- Industry Law No 5/1984
- Corporation Law, No 1/1995 superseded by Law No.40/2007
 Article 52 Law No.5/1999 leaves in effect all of laws and
regulations concerning monopolistic practices and unfair business
competition, as long as they are not contradictory to Law No.5
and are not superseded by any new laws;
 Consumer Protection Law is regulated under Law No.8/ 1999
 The two separate bodies of the law pose different approach on
how to enforced competition and consumer protection in
Indonesia;
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 Indonesia has many reasons when adopting Law on Prohibition of
Monopolistic Practice and Unfair Business Competition (Law No.5
year 1999) such as: IMF Letter of Intent, intention to ban the
existence of monopolistic practices & conglomerate problems,
protection of state own companies, companies bankruptcy etc;
 The law consists of heavy influence in both economy and legal
aspects and in the first couple of years of its enforcement, it
encountered various challenges and reviews in the national and
regional level;
 Consumer protection on the other end is was enacted in the same
year but have different sound of enforcement, through BPSK and
the Court;
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II. Problems and challenges;
 Political economy
 Indonesia signed WTO Agreement, joint the AFTA and like many
other Asian countries decided to move to market economy:
 In the early stage of Law No.5/1999 enforcement, the policy was
still not translate well in government industrial or competition
policy. The responses did not seem to be in line and can be seen in
government inconsistency, for example: in regulating or provide
protection for certain industry, special treatment for state owned
enterprises. The condition exacerbated with bureaucracy
inefficiency, law enforcement problems, regional autonomy which
allow local government to issue regulation which may conflict with
competition policy at national level.
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 Earlier, many understood that Law No.5/1999 targeted at big business
or conglomerates and in the same time is assurance for more business
opportunities. Many business practices that took place during the 30
years of New Order regime which have destroyed competition culture
through protection, crony, corruption in doing business has certainly
changed in the last 10 years;
 Best example can be seen in airlines industry which now enjoyed by
consumers, although we can see consequences of airline more
competitive market that hit other business such as land transportation
(buses), ship, trains, hotels, workshops etc;
 Other example: government allowing and open modern retail
competition and the consumers enjoy the benefits. But to some extend,
effects of open market competition in some regions has triggered the
closing of traditional retailers/traditional;
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 Industrial policy and competition policy;
 It is known that many of the past problems have been triggered by the
protection to the State Owned Companies (SOE) which have enjoyed
government protection and privileges. Special treatment have caused
many SOCs unable to compete with private sectors especially with foreign
investment. In the past, another attention can be drawn to special
treatment to few conglomerates group who controlled strategic industries;
 Government was not able to set up priorities whether to liberalized the
market or implementing gradual privatization. For example: no clear
policy whether to focus on the agriculture business or industrial sector;
 Law No.5/1999 also expose some questions such as: exemption under
article 50 & 51 applied for State Owned Companies which means to
include what effectively is known as state action exemption - permitting
monopoly if it is stipulated by the law or activities carried out by SOCs or
institution formed or appointed by the government;
 Exemptions are not yet clearly regulated- most of the time, the Indonesian
Competition Commission found problems with the way government do
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business but without pro-competitive approach;
 Law enforcements (Commission and the Court)
 Law No.5/1999 has certainly introduced a new era and approach in
doing business in Indonesia. The nature of Competition Law and
complexity of its contents are two effects that stakeholders have to
come across.
 Law No.5/1999 itself posses multiple purposes which have caused
confusion in understanding the primary objective of enforcing the
law such as: safeguard the interests of the public and to improve
national economic efficiency as one of the efforts to improve the
people s welfare, ensure the certainty of equal business
opportunities for large, medium, and small-scale business actors, To
prevent monopolistic practices and unfair business competition and
to create effectiveness and efficiency in business activities;
 The introduction of the unique Commission under Indonesian legal
system posed another dilemma. Law No.5 stipulated multifunction
of the Commission duties –
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 Another issue when enforcing the law is dealing with the Court. Court
plays an important role with response to the appeal and execution of the
decisions. In the early phase when appeal to the KPPU decisions came to
the court, only few judges have been familiarized what competition law
is all about, and yet, the final decisions will come from their chamber;
 Judges were sufficiently exposed to the economy aspect of the law which
in turn may causes some problems. Legal and economic approach are
different plus understanding competition policy becoming another
challenge. These facts are common to be found in some of the emerging
economies countries;
 With all of this irregularities, Law No.5/1999 have been enforced for 11
years with over 80 cases decided plus thousands complaint/reports have
been submitted to KPPU. Some questions remain open: Has competition
policy and industrial policy more clear and improve? Has business
behavior changes appropriately? Has market becoming more
competitive? Have consumer’s enjoyed positive impact of competition
thus improve welfare? Has the unfair business practices still exist but in
the different forms?
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 Example of Unfair Business Practices case under Law No.5/1999
 Like many other countries adopting market economy and
entering global competition, Indonesia encountering few
economic dilemmas – one of them is dealing with the issue of
retail business;
 Rapid growth of retail business in Indonesia took place since the
issuance of Presidential Decree No.96/2000 & amended with
Presidential Decree No. 118/2000 on Negative List for Foreign
Investment in Indonesia;
 The Decree provided opportunities for foreign investors to open
business in the area of big retail business such as shopping mall,
supermarket, modern mini market; modern mini market,
department store and big traders (import/export,
wholesaler/distributors);
 As the consequences of the open market, it does give impact on
competition between small/traditional shops/retailers with
hypermarkets but also from other smaller types of modern
market, i.e.: modern mini markets;
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 Small/traditional retailer facing “double squeeze” situation, i.e.
lack of efficiency, innovation in their market niche and pressure
competition from modern retailers;
 For example: Indonesian Traditional Market Retailer Association
(APPSI) stated that under various reasons, over the last 5 years
around 400 traditional market kiosks in Jakarta closed down;
 AC Nielsen survey revealed that market share at traditional
markets in Indonesia was 69,6 % in 2004 down from 78,1 % in 2000
- increase of modern market share from 21, 8 % in 2000 to 30,4 % in
2004;
 The change reflects the question and consequences of Indonesia’s
retail sectors which rests upon fundamental principle of
consumer’s freedom to choose among competitive products/
services, and the opportunity of producers and traders to expand
their business;
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 With the enforcement of Law No.5/1999 Concerning Prohibition of
Monopolistic Practices and Unfair Business Competition, Business
Competition Supervisory Commission (Komisi Pengawas Persaingan
Usaha - KPPU) has decided on 2 cases relates to retail business
competition:
 Decision No : 03/KPPU-L-I/2000 on Indomaret case in 2000: issue of
unfair business competition between modern and traditional markets;
 Decision No: 02/KPPU-L/2005 on Carrefour case in 2005: issue of
relation between wholesalers and producers/suppliers on trading terms
which covers best prices guarantee, fixed rebate, regular discount,
promotion discount, promotion support, opening fee, opening discount,
listing fee, new item discount, volume incentive, damage goods
allowances, carrier bag support, assorted allowances, marketing
fund/advertising support, promotion display, including unfair business
practices for small medium business scale (Usaha Kecil Menengah (UKM);
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Issues on Government Policy Issues:
 It is noted that there are a lot of overlapped policies and ineffective
regulations in regulating retail business such as:
 No clear distinction in determining the function between
wholesalers and retailers. In theory, wholesalers may only sell to
retailers and retailers will eventually sell to end consumers; In
reality, there are few wholesalers who sell directly to the
consumers – doing retailer function;
 The unclear policy arise because of:
a. government is unsure about the relation between wholesalers and
small/traditional retailers;
b. whether wholesalers are predator to the small/traditional
retailers;
c. whether wholesalers provide consumer surplus/welfare;
 On the other side, there are considerable positive impacts given by
wholesalers:
 provide more opportunity for local goods producers - as supplier
to wholesalers;
 provide more working/job opportunities which expectedly will 14
lead to better income;
 Government response is ambiguous, whether to limit the expansion
of wholesalers – however if refer to Negative List for Foreign
Investors – the business are already in the market;
 The most that government did is an effort applying “zoning
system” to allocate designated locations for wholesaler - it seems
that zoning system justified as the best solution;
 If competition does not exist between wholesalers and
small/traditional retailers - relation is complimentary, then zoning
policy become irrelevant;
 This issue can be more complicated in terms of regional autonomy
where regions may regulates its own trading policy. Therefore,
regions/county/city (kabupaten/kota) will play an important role in
determining its retail policy in its own area (including zoning
permit and zoning allocation);
 Permits also maybe conflicting with approval from Office of the
Ministry of Foreign Investment Office in Jakarta – i.e. recent
opening of Carrefour in Tangerang area;
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Few other dilemmas relates to government policy……
Trade regulations found spread sporadically in various level of
regulations, most regulations are in the level of Minister Decree which
conflicting with regional policy;
Most regulations do not define clearly different trading activities such as:
wholesaler, distributors, traditional retailers, small retailers etc and trade
locations such as modern market and traditional market, the term of
modern market use simultaneously/ inconsistently with wholesalers and
this raised ambiguities in determining the policy. KPPU in its decision then
defining the criteria and functions of wet/traditional market,
retailer/wholeseller and the modern market:
Consistent policy and regulations should be inline with Law No.5/1999
concerning Prohibitions of Monopolistic Practices and Unfair Business
Practices which will impact on Consumer Protection and Welfare as well
More clear and consistent government policy on regulations covers
definitions for small/traditional retailers, wholesaler, distributors and
modern market including permit or consent for foreign wholesalers;
More clear and consistent government policy on regulations including
local competition policy which covers zoning system and trading business
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hours;
Lesson learnt
 The market economy required the Indonesian economy to be
more competitive and efficient and this can be achieved and well
guarded through competition law and competition policy plus
consumer protection law which must be supported by consistent
enforcement;
 It is also not easy to measure the relation between enforcement of
Competition Law and acceleration of the country’s economy or
consumer welfare. However the stakeholders who are greatly
affected by enforcing competition law would be:
a. the government: competition and industrial policy;
b. the business: changing of behavior in doing business;
c. the people/consumers: consumer welfare;
 The relevant question remain is after all, have all of this issues
and decisions/verdict have been enforced accordingly which will
effect at the end, consumer welfare as the ultimate goal of the
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economy?;
Terima Kasih
[email protected]
Mobile: + 62 81 161 2296
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