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.