How antimonopoly law affects consumer rights

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.