How antimonopoly law affects consumer rights

By Stefanus Haryanto

NAGOYA, Batam (JP): The long-awaited antimonopoly law has finally been approved by the Indonesian House of Representatives. However, the new antimonopoly law -- which prohibits a company from holding more than 50 percent of domestic market share -- has already been criticized by many people as "unrealistic".

In The Jakarta Post's Feb. 20 edition, Rosalina Lazuardi, an equity analyst in Jakarta, doubted the enforceability of the law with regard to its "efficiency" claims. The antimonopoly law stipulates that a company with more than 50 percent of domestic market share, will be permissible by law, if the company acquires more than 50 percent of the market share through efficient management practices.

As an example, Rosalina said that PT Indo Food Sukses Makmur, which controls 90 percent of the domestic instant noodle market, could be considered efficient in view of its highly professional management and extensive network. However, she pointed out that the efficient company has received special government privileges for quite a long time. In other words, in addition to its efficient management practices, the company has also received "special treatment" from the government that enabled it in the first place to control its domestic market share.

In connection with opinions expressed by numerous individuals in the mass media, one cannot but conclude that the new antimonopoly law has an inherent defect which will hamper its enforceability.

The flaw is related to two main problems. First, the modes of conduct which will be classified as monopolistic ones, have been ill-defined and are, in fact, noteworthy for their distinct absence of information.

Secondly, skepticism continues over the credibility of the Business Competition Supervisory Commission, which will be mandated to enforce the provisions of the antimonopoly law.

As Rosalina aptly remarked, if a judgment by the Business Competition Supervisory Commission forced PT Indofood to immediately reduce its output, shortages would ensue, followed by a price hike and then possibilities of an increased inflation rate.

This situation is clearly disadvantageous for consumers' interests. Moreover, if the Commission abruptly forces big companies to cut production, massive layoffs would occur, which in turn could lead to very serious unemployment-related social problems.

To avoid having an unenforceable antimonopoly law, President Habibie should postpone enactment of the law. If Habibie made this decision, all incertitude about the law could be addressed properly and when it is promulgated in due time, the law would be more effective and enforceable.

To provide a clear definition on the term "monopoly", it is instructive to make a comparison with practices of a neighboring country. In Australia, the antimonopoly law is incorporated into the Federal Trade Practices Act. Under this law, a monopoly is said to exist if a corporation has a sizable degree of market power and uses it to eliminate or substantially damage a competitor, prevent the entry of a person into a market and deter or prevent competitive conduct in a market (Section 46 of the Trade Practices Act).

The Australian Trade Practices Act does not prohibit a corporation from a specific segmentation of market power (that is holding more than 50 percent of domestic market shares), but it prohibits the abuse of market power.

In his book Commercial Law, Andrew Gibson and Douglas Fraser provide an example of an abuse of market power that can be classified as monopolistic conduct. In Queensland Wire Industries versus BHP (1989), the court held that by refusing to supply specific products to Queensland Wire and by setting an excessively high price, BHP had taken advantage of its substantial market power, by deterring or preventing a person or corporation from engaging in competitive conduct in a market.

Applying the Australian law, it is clear that a monopoly exists when a corporation abuses its market power to prevent competitive conduct in the market. This abuse of market power has been proven to deprive consumer rights to obtain certain goods at reasonable prices. In the case of PT Indofood Sukses Makmur, it will be ironical if enforcement of the antimonopoly law forces consumers to pay higher prices.

If it is still possible to amend the approved draft of antimonopoly law, it will be better if it adopts the definition of monopoly as conduct whereby a corporation abuses its market power to prevent fair competition in the market, rather than using the 50 percent market share domination as the criterion. By adopting this definition -- as long as a corporation does not abuse its market power -- the corporation is not considered to have engaged in monopolistic conduct, even if it holds more than 50 percent of the market share.

Moreover, the Commission which will supervise the enforcement of the law, should be equipped with certain parameters to detect conduct classified as monopolistic. For example, transfer pricing or dumping -- solely meant to eliminate new competitors in the market -- should be classified as one of the guidelines of abuse of market power. In determining the parameters, business professionals should be involved since they are the most qualified people to understand these complexities.

In conclusion, it would be preferable if Habibie delays signing the approval bill on the antimonopoly law and orders his subordinates to remedy the inherent defects of the law by taking into consideration all public comment on the matter. After all, it is useless to have legislation that can not be enforced.

The writer is a lawyer at the Law Firm of Hanafiah & Ponggawa's Office in Batam. Opinions expressed in this article are entirely his own.