Carrefour Indonesia Antitrust Saga Underlines Regulatory Mess
Concerned investors are asking why two government agencies approved Carrefour’s purchase of subsidiary PT Alfa Retailindo just two years ago if it was clearly in breach of antimonopoly regulations, as the country’s antitrust watchdog claimed this month when it ordered the French retailer to sell the company.
Some blamed overlapping and vague antimonopoly regulations. Others warned companies to look more closely at antimonopoly regulations before making any future acquisitions.
Indra Safitri, a lawyer specializing in mergers and acquisitions, questioned why the country’s antitrust watchdog, the Business Competition Supervisory Commission (KPPU), didn’t rule on proposed mergers and acquisitions before they were completed.
“Laws governing the KPPU and the capital markets need to be harmonized to ensure legal certainty for investments in this country,” he said.
The Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK) and the Indonesian Investment Coordinating Board (BKPM) approved Carrefour’s purchase of a 79 percent stake in local retailer Alfa in 2007. The KPPU, on Nov. 3, ruled that PT Carrefour Indonesia had breached antitrust laws and achieved a dominant and unfair position in the wholesale supplier market, which it used to force unfair trading terms on its suppliers. The KPPU fined the company Rp 25 billion ($2.6 million) and ordered it to sell its stake Alfa.
Carrefour denied the KPPU’s claims, questioned the way its investigation was conducted and said it would appeal the decision.
Indra said the KPPU should also consider capital market regulations when making decisions affecting listed companies. He noted that listed companies were legally required to protect their shareholders, and would invest elsewhere if they felt they weren’t able to do that in Indonesia.
“Investors need legal certainty about their investments in this country,” he said, noting that Carrefour had adhered to all capital market regulations in its acquisition of Alfa.
Indra added that it would not be easy for Carrefour to sell Alfa now, since it had already merged the company into its existing business operations.
“Many other decisions made by the KPPU have also contradicted capital market regulations,” he said.
Indra pointed to the commission’s decision ordering SingTel to sell PT Indosat after being accused of enjoying a monopoly in the cellphone business because of its stake in an Indosat competitor, PT Telekomunikasi Indonesia (Telkom). Singtel sold the Indosat stake, but its parent company, the Singapore government’s sovereign wealth fund Temasek, is still fighting the $3.8 million fine.
Responding to the criticism, Achmad Junaidi, the KPPU’s communications director, said last week that the commission had issued mergers and acquisition guidelines in March, but that the government had not yet issued the required implementing regulations.
He said a company planning an acquisition or merger was now required to notify the KPPU as part of the requirements for receiving a permit from the BKPM.
Under the new guidelines, he said, all companies that were judged to have a post-merger market share of more than 50 percent would also be required to notify the KPPU prior to the acquisition.
Though the KPPU claimed that it had widely promoted its new guidelines on mergers and acquisitions via its Web site and the mass media, several law firms contacted by the Jakarta Globe said they were unaware of the new rules.
“Our office presently has no information about the KPPU’s guidelines on mergers and acquisitions,” said Effendi Saragih, a lawyer from the Burhan law firm, which advises companies on mergers.
Regardless, Chris Kanter, deputy chairman for investment at the Indonesian Chamber of Commerce and Industry (Kadin), said the lesson of the Carrefour debacle was that the onus was on foreign investors to ensure they complied with all government regulations.
“Foreign investors in the future should be better-informed about the investment rules, such as the existing negative investment list and the monopoly law, the tax law and the limited company law,” he said.
Kanter said foreign retailers could prevent any unexpected problems if they knew the “dos and don’ts” for foreign companies in the retail sector.
“The ownership of Carrefour was approved by the Indonesian Investment Coordinating Board when the retail company first registered at the BKPM, and there was also nothing wrong with the acquisition. But later on, there was a problem when the company grew beyond what it was allowed to under the regulations,” Kanter said.
Some blamed overlapping and vague antimonopoly regulations. Others warned companies to look more closely at antimonopoly regulations before making any future acquisitions.
Indra Safitri, a lawyer specializing in mergers and acquisitions, questioned why the country’s antitrust watchdog, the Business Competition Supervisory Commission (KPPU), didn’t rule on proposed mergers and acquisitions before they were completed.
“Laws governing the KPPU and the capital markets need to be harmonized to ensure legal certainty for investments in this country,” he said.
The Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK) and the Indonesian Investment Coordinating Board (BKPM) approved Carrefour’s purchase of a 79 percent stake in local retailer Alfa in 2007. The KPPU, on Nov. 3, ruled that PT Carrefour Indonesia had breached antitrust laws and achieved a dominant and unfair position in the wholesale supplier market, which it used to force unfair trading terms on its suppliers. The KPPU fined the company Rp 25 billion ($2.6 million) and ordered it to sell its stake Alfa.
Carrefour denied the KPPU’s claims, questioned the way its investigation was conducted and said it would appeal the decision.
Indra said the KPPU should also consider capital market regulations when making decisions affecting listed companies. He noted that listed companies were legally required to protect their shareholders, and would invest elsewhere if they felt they weren’t able to do that in Indonesia.
“Investors need legal certainty about their investments in this country,” he said, noting that Carrefour had adhered to all capital market regulations in its acquisition of Alfa.
Indra added that it would not be easy for Carrefour to sell Alfa now, since it had already merged the company into its existing business operations.
“Many other decisions made by the KPPU have also contradicted capital market regulations,” he said.
Indra pointed to the commission’s decision ordering SingTel to sell PT Indosat after being accused of enjoying a monopoly in the cellphone business because of its stake in an Indosat competitor, PT Telekomunikasi Indonesia (Telkom). Singtel sold the Indosat stake, but its parent company, the Singapore government’s sovereign wealth fund Temasek, is still fighting the $3.8 million fine.
Responding to the criticism, Achmad Junaidi, the KPPU’s communications director, said last week that the commission had issued mergers and acquisition guidelines in March, but that the government had not yet issued the required implementing regulations.
He said a company planning an acquisition or merger was now required to notify the KPPU as part of the requirements for receiving a permit from the BKPM.
Under the new guidelines, he said, all companies that were judged to have a post-merger market share of more than 50 percent would also be required to notify the KPPU prior to the acquisition.
Though the KPPU claimed that it had widely promoted its new guidelines on mergers and acquisitions via its Web site and the mass media, several law firms contacted by the Jakarta Globe said they were unaware of the new rules.
“Our office presently has no information about the KPPU’s guidelines on mergers and acquisitions,” said Effendi Saragih, a lawyer from the Burhan law firm, which advises companies on mergers.
Regardless, Chris Kanter, deputy chairman for investment at the Indonesian Chamber of Commerce and Industry (Kadin), said the lesson of the Carrefour debacle was that the onus was on foreign investors to ensure they complied with all government regulations.
“Foreign investors in the future should be better-informed about the investment rules, such as the existing negative investment list and the monopoly law, the tax law and the limited company law,” he said.
Kanter said foreign retailers could prevent any unexpected problems if they knew the “dos and don’ts” for foreign companies in the retail sector.
“The ownership of Carrefour was approved by the Indonesian Investment Coordinating Board when the retail company first registered at the BKPM, and there was also nothing wrong with the acquisition. But later on, there was a problem when the company grew beyond what it was allowed to under the regulations,” Kanter said.