Antimonopoly law needs revision

Antimonopoly law needs revision

By Syamsul Maarif

JAKARTA (JP): Indonesia's new antimonopoly law will offer a
better business environment when it takes effect on March 5,
2000.

Law No. 5/1999, which was approved by the House of
Representatives (DPR) on March 5, will prohibit any agreements
resulting in monopolistic practices and unfair competition, such
as oligopoly, price setting, area division, boycotting, cartels,
trusts, oligopsony, vertical integration and closed agreements.

Activities that result in monopolistic practices, including
monopolies, monopsonies, market controls and conspiracies, are
also prohibited. The holding of a dominant market position is
prohibited as well, especially when a business agent uses its
position to block the entry of a new business agent.

The law also deals with management and shareholders of
business agents. Thus, assuming dual position in a company having
the same market is prohibited and owning majority shares in a
number of similar companies is banned. This is particularly true
if such ownership results in controlling over 50 percent of the
market shares.

Moreover, mergers, consolidation and acquisition are also
prohibited if they result in monopolistic practices and unfair
competition. All these are designed to ensure fairness in
Indonesian business.

But will the law be effective? It depends on many things.

One of them is the enforcement mechanism. From this
perspective, the law is not promising. One reason relates to the
role of the Supervisory Commission on Business Competition.

As an institution, the commission could be trusted because it
is independent and accountable to the president and its members
are appointed and discharged by the president at the approval of
the DPR. The involvement of the DPR will guarantee that the
members are free from the influence of the government. The
commission is also designed to be an active institution. It has
the authority to investigate business agents without any written
permission when a violation is believed to have been committed.

The problem is that the commission does not have the authority
to enforce its decision by itself. It needs approval from a
district court in order to enforce its ruling. This could result
in a long process of execution.

Furthermore, the law does not establish any time limit for the
court to pass its decision on a request of execution. The time
limit applies only for examination of a case based on an
objection made by the party involved.

The concern is that things could happen during the process of
approval from the court. The court, for example, might ask the
commission to provide more information before making a decision.
This could make the execution of the commission's ruling a long
process. A more simple process of execution should be
established, especially for the execution of the commission's
decision accepted by the parties.

The second reason relates to investigation. The law stipulates
that a party shall be considered as having accepted the
commission's ruling when it does not file an objection within 14
days after receiving the notification of the ruling. If the party
does not comply with the said ruling, the commission will refer
it to an investigator.

The problem is that Article 44 of the law does not stipulate
how long such an investigation should last. Neither does the
article mention the status of and what to do with the results of
the investigation. These points are not clear.

One should remember that the second investigation is different
from the first investigation. The first investigation is
purported to gather facts for the ruling. The second
investigation, on the other hand, is purported to find out the
failure of the party in complying with the said ruling. The law
does not have any reference to govern the result of the second
investigation. The absence of such a reference encourages the
party involved to delay compliance with or disregard the ruling
of the commission.

The third reason relates to sanctions. Under the current
system, a business agent may avoid severe sanctions especially
penalty measures by accepting the ruling of the commission but
trying to delay compliance with the ruling. This is discouraging
especially because the commission does not have the power to
impose penalty measures. It is merely entitled to impose
administrative measures.

A penalty measure might be imposed only by a district court
and this might occur if the party involved submits an objection
during the permitted time. In the meantime, the commission does
have the authority on its own to submit a report to a district
court.

In other words, an examination by the court might be conducted
only if the party involved submits an objection against the
ruling of the commission. This is unfortunate because tougher
sanctions such as imprisonment and revocation of a business
license fall under the authority of a district court.

Do we need to revoke the law? The answer is no. What we need
is revisions especially on certain aspects of enforcement
mechanisms.

Thus, the commission should have the authority to directly
enforce its ruling, especially the one accepted by the parties
involved. Time limits should be established for the completion of
investigations so that compliance with rulings will not be
delayed.

Finally, we need to provide the commission with the authority
to impose tougher sanctions on business agents violating the law.
Imposing sanctions such as revocation of business licenses should
be in the commission's power. Under the current system, only the
court may revoke a business license.

The writer is an economic and business law analyst based in
Jakarta.