Hints of unfair practices found in Indomaret operation

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)