Hints of unfair practices found in Indomaret operation

JAKARTA (JP): The Indonesian antimonopoly watchdog said on Tuesday it had found indications of unfair business practices by retail chain Indomaret.

Didik J. Rachbini, a member of the Business Competition Supervisory Commission (KPPU), said that after conducting a thorough three-month investigation, the commission had found indications that Indomaret had forced other small retailers out of business.

Indomaret has been accused, among other things, of controlling more than 50 percent of the small retail market and killing off similar retailers in the process. It also has been accused of solely marketing products from its parent company, publicly listed PT Indofood Sukses Makmur.

Indofood's control of upstream and downstream industries through Indomaret is not the real issue, Didik said, explaining that this type of practice is not a major facet of the Indonesian antimonopoly law.

"Indomaret's problem is really with competition at the retail level," he said.

Didik explained that the retail industry was a highly competitive industry where companies competed head to head.

"So the problem is more about policies; it's a social problem, which the KPPU has no jurisdiction over," he said.

Paper

Didik was speaking on the sidelines of KPPU's initial hearing with representatives of the Indonesian pulp and paper industry.

The commission has received reports of unfair business practices by the pulp and paper industry, including price-fixing.

The commission's newly appointed vice chairman, Pande Radja Silalahi, said the initial hearing was needed to gather information about the alleged unfair business practices.

"We need to know whether there is vertical integration, the share compositions (of companies in the industry), whether there is cross-ownership within the same business," he said, explaining that such practices demanded closer scrutiny as they often indicated unfair business practices.

Pande said, however, that controlling both the upstream and downstream industries, or vertical integration, was not in itself a crime, as long as it did not cause to unfair business practices and did not harm the interests of consumers.

Pande was appointed vice chairman for the 2001-2002 period, replacing Syamsul Maarif. Mohammad Iqbal replaced Bambang Adiwiyoto as the commission's chairman.

The newly appointed chairman said that from the initial hearing the commission would decide whether there was a need for further investigation.

Iqbal also said the commission would examine allegations of unfair business practices by the Sinar Mas Group and indications of price-fixing by the Indonesian Pulp and Paper Association.

The president of PT Royal Standard, Untung Sastrawijaya, which produces continuous computer paper, has alleged that the Sinar Mas Group sells its pulp products at a lower price to its subsidiaries than to other companies.

Untung said Sinar Mas sold continuous computer paper to its subsidiaries for Rp 104,400 (about US$9) a box, only 4.5 percent higher than the price it charged other companies for the equivalent raw materials.

"This is quite impossible, considering the cost of production," he said, adding that Royal sells its continuous computer paper for Rp 123,000 a box.

However, Sinar Mas vice director Hugeng Haryantho denied any wrongdoing.

"Why would we sell at a loss? Even to our own subsidiaries? Why have a subsidiary at all if we have to continue to subsidize it?" he said.

Hugeng questioned the motive behind Royal's allegations, saying that before Sinar Mas began to produce computer paper, Royal enjoyed vast profits through its majority share of the market.

"When we entered (the market), of course its market share contracted, that's why they are upset," he said. (tnt)