House OKs antimonopoly and unfair competition bill

JAKARTA (JP): Individual companies holding more than 50 percent of the domestic market run the risk of maximum Rp 100 billion (US$11.76 million) fines and jail terms for executives under the antimonopoly law passed by the legislature on Thursday.

Designed to promote fair market competition, the law also bans two or three companies from holding 75 percent of the market between them.

"This law is not aimed at stamping out big businesses but to make the market a level playing field," Minister of Trade and Industry Rahardi Ramelan said at the House plenary session which enacted the bill.

The antimonopoly law -- the first piece of legislation proposed at the House's initiative in more than 30 years -- will come into force 18 months after its ratification by President B.J. Habibie.

Also declared illegal is a company holding a market share of 50 percent when the majority shareholder also controls other firms active in the same sector.

The law prohibits vertical restrictions on competition and any deals or contracts allowing for oligopolies, monopsonies, price fixing, cartels, trusts and geographical designations of markets between suppliers.

Oligopoly occurs when a few large producers of similar products dominate the market; a monopsony is a situation where there is a single consumer of the goods produced.

The law's enforcement will be overseen by the independent Business Competition Supervisory Commission, whose members will be appointed by the President following prior approval from the House.

Rahardi stated the law would not be the sole determinant in deciding whether a company held a monopoly because its practices would also be used as a yardstick.

"Any practices meant to restrict new entries to the market will be considered anticompetitive."

A company would not necessarily be sanctioned if the independent commission determined the 50 percent market share was founded on efficiency and the company did not abuse its dominant position to restrict new market entrants, Rahardi said.

The commission will have the authority to evaluate business agreements and activities for indications of monopolistic practices, and to take action against violators.

"If one company or a group of companies holds a market share of more than 50 percent, then it could be suspect and considered to have a monopoly," Rahardi said. "But the final verdict will depend on the independent commission's investigations of the behavior of these companies."

Under the law, which also regulates mergers and acquisitions, a market share will be determined by sales value rather than volume.

Notably exempt from the law are the production and marketing of goods and services vital to public welfare and state companies.

Rahardi said the law would help create healthy competition in the production sector, enabling consumers to get high quality products at "competitive... prices".

Rambe Kamarul Zaman, head of the House's special commission in charge of deliberating the antimonopoly bill, said the scope of the draft legislation was expanded to cover not only monopolistic or cartel-like practices, but also all other deals that could hamper fair competition. (gis)