Price Ceiling Setting Can Prevent Market Failure
From the perspective of state administrative law, the government holds constitutional authority to intervene in the market. One of its primary instruments is the setting of prices or tariffs designed to protect consumers and maintain economic stability.
This emerged during a Focus Group Discussion (FGD) titled “Cartels and Government Intervention in Addressing Market Failure: A Study on the Setting of Tariffs and Quotas by the Government and Industry,” organised by the Center for Law and Good Governance Studies at the Faculty of Law, University of Indonesia (CLGS FH UI) on 10 August in Jakarta.
CLGS FH UI Director Hari Prasetiyo asserted that government intervention is a response to market imperfections.
“The market is never perfect because market failure is an inevitability that demands government intervention, both to protect the public and consumers and to maintain the sustainability of the market itself,” Hari said.
Hari explained that government directives regarding price setting cannot automatically be categorised as cartel practices. He highlighted a “gap” between policies approved by government authorities and the assessment of the Business Competition Supervisory Commission (KPPU).
As an example, he cited the case of maximum interest rate caps for online lending (pindar) set by the Indonesian Joint Funding Fintech Association (AFPI). Although AFPI’s move was later adopted by the Financial Services Authority (OJK) as a norm to protect consumers, KPPU assessed it as a cartel practice.
“In fact, what AFPI did was actually approved by the government. The agreement they made was never sanctioned and was never reprimanded by the relevant authority, yet it was later assessed differently by KPPU,” Hari explained.
Hasanuddin University academic Dian Utami Mas Bakar added that government intervention must meet strict legal principles. According to the author of the book Kontrak Publik, the main points of intervention are legality and public interest.
“Intervention must be based on authority and carried out for the sake of legal interest, using adequate legal instruments,” Dian said.
Regarding the online lending case, she stressed the importance of checking whether the action was proportional and had a strong legal basis, even though it initially took the form of a directive that was not yet formal regulation.
As a solution, CLGS FH UI recommended that KPPU be more proactive in providing advice and warnings to other government institutions if regulations are found that potentially conflict with competition rules.
On the other hand, OJK, through a press release on 20 May 2025, maintained its position that the regulation of online lending interest rates is a consumer protection instrument.
Currently, the public is awaiting the appeal ruling at the Central Jakarta District Court to clarify the boundary between government regulatory authority and competition law.
Regulations made by industry associations before the government issues formal regulation cannot automatically be categorised as cartel practices.