Modernising Indonesia’s Competition Law

Healthy business competition is not merely a matter for regulators and businesses. It determines how many choices are available to consumers, how much opportunity new companies have to enter the market, and how efficiently economic resources are used.

Its impact can be seen in policies that affect everyday life. The question is not whether the state may set strategic policies. Of course it may. The question is how to ensure those policies achieve their aims without imposing unnecessary restrictions on competition.

This question should also inform the reform of Indonesia’s competition law. The opportunity is now presented by two processes unfolding in parallel: discussions on amendments to Law No. 5 of 1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition (the Anti-Monopoly Law), and Indonesia’s accession process to the Organisation for Economic Co-operation and Development (OECD).

Reform the law, not just its wording

Law No. 5 of 1999 was enacted in an economic context very different from today’s. Since then, business models have evolved, commercial activity has become increasingly integrated across borders, and the digital economy has changed how companies compete.

Digital platforms, the use of data and the integration of various services into a single ecosystem raise issues that cannot always be resolved by a legal framework designed more than two decades ago. The partial changes made through the 2020 Job Creation Law have not met all the needs for reform.

Discussions on revising the Anti-Monopoly Law have continued for years and returned to the priority legislative agenda in 2025. In September 2026, the Business Competition Supervisory Commission (KPPU) again stressed the need to modernise the competition-law framework to respond to developments in the digital economy.

This is where the OECD accession process becomes relevant. The OECD Council adopted Indonesia’s accession roadmap in March 2024. Through the process, OECD technical committees will assess the alignment of Indonesia’s regulations, policies and practices with relevant standards.

The OECD describes accession as one of the drivers of long-term domestic reform. However, it has set no deadline for completing the process; the time required depends on progress in aligning with standards and the findings of technical reviews.

The roadmap is therefore more than a list of requirements for membership. It can provide an opportunity to test whether Indonesia’s competition law is effective enough, whether its enforcement procedures are reliable, and whether public policies take their impact on competition into account.

There are at least three areas that merit attention in amending the Anti-Monopoly Law.

First, public policy and SOE mandates should take competition impacts into account

Competition is influenced not only by companies’ conduct. Government policy can also determine who has access to markets, who receives certain advantages, and how easily new competitors can enter.

Modernising the Anti-Monopoly Law should therefore take account of the relationship between the state’s mandate, the role of state-owned enterprises (SOEs) and the principles of fair competition. Article 86M of the 2025 SOE Law, for example, provides for the possibility of granting an SOE or its subsidiary monopoly rights to produce and/or market particular goods or services in the national interest and/or for other purposes.

The grounds for granting such rights, and their limits, should be reviewed to ensure that their application is governed by clear parameters. In its book 25 Years of Competition Law, the KPPU identified reform of sectoral policies to ensure they take business competition into account as one of its competition-policy recommendations.

In 2025, the KPPU also assessed that restrictions on imports of non-subsidised petrol affected the continued operations of private operators, reduced consumer choice and strengthened Pertamina’s dominance. It also highlighted Pertamina’s fuel-station digitalisation project, worth around Rp3.6 trillion, investigating suspected discriminatory practices in the selection of a provider through a direct appointment of another SOE.

The OECD offers guidance through its 2021 Recommendation of the Council on Competitive Neutrality. The principle of competitive neutrality encourages governments to reduce undue competitive advantages arising from state support or regulations that favour particular businesses.

The aim is not to require SOEs and private companies to be treated identically in every circumstance. Rather, differences in treatment should have justifiable grounds and should not distort competition unnecessarily.

In revising the Anti-Monopoly Law, this principle could be translated into clearer standards for assessing the grant of monopoly or special rights, including an obligation to consider the competitive impact before a policy is adopted.

The KPPU and relevant stakeholders should also have scope to provide input during policy-making, alongside a mechanism to assess the competition impacts of policies already in place.

This approach does not remove public-service mandates or the state’s strategic objectives. Instead, it helps ensure that they are pursued proportionately and do not restrict competition more than necessary.

Ultimately, healthy competition does not conflict with the national interest. It can promote efficiency, innovation, consumer choice and wider opportunities for businesses. Good public policy needs to consider all these effects.

Second, strong powers must be accompanied by fair procedures

Competition-law enforcement requires the ability to obtain adequate information and evidence. Without effective investigative powers, the KPPU may struggle to uncover suspected violations, particularly when important information is in the hands of businesses.

Strengthening the KPPU’s powers is therefore worth considering in the legislative revision. But greater powers do not automatically produce better enforcement. Effectiveness also depends on clear procedures, transparency and a meaningful opportunity for those under investigation to defend themselves.

This principle is reflected in the OECD Recommendation on Transparency and Procedural Fairness in Competition Law Enforcement, adopted on 6 October 2021. It emphasises transparency and procedural certainty; non-discriminatory and proportionate treatment; protection of confidential information; meaningful opportunities for parties to participate; and access to review by an independent body.

The OECD regards fair procedures not as an obstacle to enforcement, but as part of credible and effective enforcement. In Indonesia’s case, the Anti-Monopoly Law should set out more clearly the stages of investigations and hearings, access to relevant evidence, opportunities to respond to allegations, and protection for confidential information.

Businesses must be able to understand the case against them and have an adequate opportunity to present legal and economic arguments. Rules that are too general risk creating uncertainty about the applicable procedures.

If important details depend solely on interpretation or institutional practice, businesses will find it difficult to anticipate their rights and obligations. Fundamental procedural principles should therefore have a clear basis in the law.

Procedural fairness does not mean curtailing the KPPU’s powers or granting businesses immunity. Decisions reached through transparent and reviewable processes are, on the contrary, more likely to earn trust.

Trust generated by procedures that stakeholders respect and that can be held to account will produce genuine effectiveness: voluntary compliance by businesses.

Third, cross-border cooperation needs a clear legal basis

Business activity no longer stops at national borders. A company may produce in one country, sell in another and make commercial decisions that affect markets across several jurisdictions. Anti-competitive conduct can also have cross-border effects. The author has handled a case that illustrates this dimension.

In case No. 16/KPPU-L/2022, the KPPU examined alleged market allocation relating to the supply of air-conditioning systems and components for vehicles, involving markets in Indonesia and Malaysia. The case shows that business conduct attracting the attention of Indonesia’s enforcement authorities may involve commercial activity in more than one country.

Cases of this kind demonstrate the importance of competition authorities’ ability to understand business conduct across jurisdictions. Information, documents or parties relevant to an investigation may not all be located in Indonesia.

In its 2025 book 25 Years of the Business Competition Law, the KPPU also identified stronger regional and international cooperation in competition-law enforcement as one recommendation for future competition policy.

The OECD has provided guidance through its 2014 Recommendation of the Council Concerning International Co-operation on Competition Investigations and Proceedings. The instrument addresses cooperation between authorities, including coordination of investigations and information exchange, subject to applicable legal requirements and safeguards.

The OECD also emphasises trust, confidentiality and the protection of parties’ rights as foundations for effective cooperation. For Indonesia, amendments to the Anti-Monopoly Law should consider establishing a clear legal basis and procedures to support such cooperation.

This includes mechanisms for assistance in obtaining information, the exchange of confidential information with appropriate safeguards, and protection for information covered by professional privilege, such as lawyer-client communications. Not every aspect of cooperation needs to be regulated in primary legislation.

However, powers affecting businesses’ rights and the exchange of information protected by confidentiality require a sufficiently clear legal basis. Without one, international cooperation may face uncertainty, while authorities in other countries also need confidence that shared information will be handled appropriately.

With an adequate legal framework, the KPPU can strengthen cooperation with foreign competition authorities and deal more effectively with cross-border issues. This is increasingly important as Indonesia becomes closely connected to regional and global supply chains, investment and markets.

A roadmap that must deliver real change

These three areas show how OECD instruments can help clarify the direction of reform to the Anti-Monopoly Law. Investigative powers need to be balanced by transparency and procedural fairness. Cross-border enforcement requires a clear basis for cooperation. Public policy and the granting of special rights to SOEs, meanwhile, need to take account of their impact on competition.

But the benefits of the OECD roadmap will not materialise simply because Indonesia adopts or refers to international standards. What matters more is how those principles are translated into enforceable legal provisions, workable procedures and policies that produce tangible results.

The government, the House of Representatives, the KPPU, academics, legal practitioners and businesses each have a role in this process. Amending the law remains part of the legislative process, which is the responsibility of the lawmakers.

Meanwhile, enforcement experience, economic analysis and input from a range of stakeholders can help ensure that reform addresses the problems Indonesia actually faces. OECD membership is certainly an important goal for Indonesia.

However, the process towards membership should also bring benefits before membership is achieved. If the roadmap is used substantively, Indonesia can modernise its competition law while strengthening its readiness to meet relevant OECD standards.

The success of reform should not be measured only by how quickly the law is amended, but by how well it works: effectively addressing anti-competitive conduct, protecting the rights of parties, providing certainty for businesses and ensuring that public policy does not restrict competition without adequate justification.

That is the opportunity offered by the OECD roadmap: not merely a path to membership, but a moment to build a more modern and credible competition-law ecosystem that benefits Indonesia.