Graphics firms urge House to ban vertical integration
Graphics firms urge House to ban vertical integration
JAKARTA (JP): The Association of Indonesian Graphics Companies
(PPGI) has urged the House of Representatives to prohibit the
practice of vertical integration in the country's industrial
sectors.
The association's chairman Fauzi Lubis urged a House
commission currently deliberating the antimonopoly bill to make
vertical integration unlawful on the grounds that the practice
had eaten up many small downstream businesses.
"There should be a clause which strictly forbids the practice
of dominating an industry from upstream to downstream, be it by a
company or a business group," Fauzi told the commission on
Friday.
He said many producers of paper products, most of which are
small and medium-scale enterprises, had collapsed because they
could no longer compete with large-scale producers working in
upstream and downstream industries.
PT Indah Kiat of the Sinar Mas Group dominates the paper
industry from upstream to downstream, he said.
Indah Kiat owns industrial forests and makes products ranging
from wood pulp to notebooks, envelopes, computer paper, photocopy
paper and other stationery products.
Sinar Mas subsidiaries PT Pindo Deli and PT Paper Onward Utama
currently dominate the tissue paper industry, he added.
The two companies produce their own pulp and have mills which
manufacture toilet paper rolls and facial tissues, he explained.
"The emergence of large players in the industry has placed
small and medium-sized producers at an unfair disadvantage," he
said.
The companies then sell their products to linked companies
operating downstream at prices below those quoted by other
producers.
This makes the group's downstream products cheaper, forcing
competitors out of business.
"The large groups sell at lower prices than small companies
not because they are more efficient, but because they are intent
on wiping out their competitors by using predatory pricing
policies," Fauzi said.
Once the competition is obliterated, prices are quickly
raised, he said, adding: "They are currently not considered
guilty of dumping their products on the market under any domestic
law."
Fauzi said the House should also forbid companies from
exporting upstream products at prices below prevailing domestic
market prices because of the practice's propensity to trigger
unhealthy competition.
He said that small and medium-scale producers were unable to
compete on these terms because their raw material costs were
higher, adding that the end result was that they were squeezed
out of the export market.
Fauzi said the association agreed with the House proposal to
limit market share to 30 percent and to establish a monitoring
commission to evaluate implementation of the antimonopoly law.
The association also agreed that the law should be backed up
with criminal and financial penalties which take affect after a
six months transition period has been observed. (das)