Monopoly watchdog examines Indofood
Monopoly watchdog examines Indofood
Tony Hotland, Jakarta
Food producer PT Indofood Sukses Makmur has the potential to
hamper fair competition in the domestic instant noodle market due
to its overwhelming dominance, according to a report by a
monopoly watchdog.
The Business Competition Supervisory Agency (KPPU) said
Indofood's enormous production capacity, which allows it to meet
nationwide need for instant noodles, could impede competitors
from effectively responding to growing demand.
"In 2002, Indofood had a 88 percent market share for instant
noodles with over 10 brands and 150 variations. Indofood also has
flour production capacity of about 10,640 tons a day, way beyond
its competitors' 2,800 tons a day," KPPU member Syamsul Maarif
said on Monday.
According to the KPPU, Indofood has the capacity to produce
about 13.7 billion packages of noodles per year, way over the
national output of about 12 billion.
"We are only saying that Indofood has the potential of
becoming a monopoly. We need further investigations and input
from the public and competitors if we want to advance with our
current monitoring activities," said Syamsul.
Another KPPU member, Tadjuddin Noer Said, said that Indofood
was "not guilty" of anything unless it was proven that its market
dominance and business activities prevented competitors from
expanding or even entering the market.
"Besides that, it should first be proven whether Indofood
deprives the market of affordable products or new technology," he
said.
Syamsul said the KPPU had held meetings with Indofood and that
the company had been cooperative in providing the required
information and documents.
"We are now waiting for Indofood's data on its pricing
structure and production costs. We can use that to determine
whether Indofood has been involved in dumping, for example. They
were supposed to provide it two weeks ago," he said.
The KPPU also found that Indofood has at least 31 subsidiaries
in which it owns between 50 percent and 100 percent. These
subsidiaries are in connected sectors such as food ingredients
and flour mills.
"Indofood's dominance of flour production enables Indofood to
curb flour supply, which could cause problems for competitors.
The condition is even worse since there existing regulations make
it more difficult to import the raw materials, forcing parties to
purchase it from Indofood," he said.
Indofood owns major flour producers PT Bogasari Sentra Flour
Mills and PT Intisari Flour Mills.
Syamsul said the KPPU did not have the authority to force
Indofood to limit its production or stop creating new flavors
under Law No. 5/1999 on fair competition.
"We will nonetheless continue the investigation until December
by, of course, cooperating with Indofood and other noodle
producers. We will see if Indofood's activities comprise a
monopoly and/or unfair competition," he said.