Tue, 23 Mar 1999

Expert claims antimonopoly law has loopholes

JAKARTA (JP): The newly passed antimonopoly law does not go far enough in ensuring healthy and fair business competition, an industrialist and legal experts warned on Monday.

Fransiscus Welirang, a director at food giant PT Indofood Sukses Makmur, said that lack of clear definition for several key terms was resulting in business skepticism.

He emphasized that the law failed to define the terms "market share", "vertical integration" and "efficiency" -- key concepts to determine whether a company is engaging in monopolistic practices.

"It is not clear whether the market share is indicated from sales value or sales volume. It is a crucial point because similar products have different purchasing value depending on quality and market segment," he said at an antimonopoly seminar held by Atmajaya Catholic University's Faculty of Administration Sciences.

As an example he said local cosmetic Viva recorded the biggest sales volume in the country, but its sales value was lower than imported cosmetics such as Lancome or Ultima II.

"The limitation of a market share will be hard to implement because it is next to impossible to measure market shares regularly," Fransiscus said.

The antimonopoly law, passed by the House of Representatives last month, prohibits a company from holding more than 50 percent of the domestic market share.

Companies breaching the law are liable to a maximum fine of Rp 100 billion (US$11.76 million) and six-month jail terms for executives.

The law, however, stipulates that a company will not necessarily be penalized if the independent commission finds that the extended market share is gained through efficiency, and the company does not abuse its dominant position to restrict new market entrants.

The commission -- the Business Competition Supervisory Commission -- will oversee the implementation of the law. Its members will be appointed by the President with the House's approval.

Lawyer Benny K. Harman, director of the Center for Information and Economic Law Studies, said the efficacy of the law would depend largely on the technical competence, integrity and autonomy of commission members.

"But I am very pessimistic on the independency of the commission, as the appointment and retirement of members is largely decided by the President.

"It will be better if the commission is responsible only to the House not to the President, and they should be appointed for life so they will not worry about the possibility of not being reappointed for the next term."

Benny said several articles in the law, especially exemptions granted to various government regulations, increased the likelihood of collusion between officials and businesspeople.

He also said that the government's effort to establish the law was merely a token gesture to comply with an International Monetary Fund requirement, instead of a genuine effort to create a healthy business climate.

Wolfgang Kartte, who led a team of seven German experts hired last year by the government to provide advice on the antimonopoly bill, said the new law had met international standards on antitrust law.

Kartte, who served as president of the German Antimonopoly Board for 16 years, said it would take years to improve the law in order to prevent monopolies and other unfair competition practices.

"However, I congratulate Indonesia for successfully establishing the law because it is badly needed to attract foreign investors to the country," he said. (gis)