The impact of antitrust law
The impact of antitrust law
By Destivano Wibowo
JAKARTA (JP): The 1999 law on monopoly and unfair business
competition is now effective, and will mostly affect the trade
and industry sectors.
Relations between manufacturers and distributors, and that
between distributors and retailers in Indonesia, will also be
greatly influenced.
Most manufacturers and distributors in Indonesia often wish to
restrict resale methods, but these restrictions raise some major
issues under the law. Current practices here show frequent
practices now banned under the law among manufacturing companies,
such as territorial or geographical restrictions.
Such restrictions from a manufacturer limits the area in which
the distributor can sell. The manufacturers usually demand that
each distributor develops and satisfies demand for its products
only in a certain location and its distributor is banned from
selling its products outside of the area.
The aim is to protect small distributors' market -- which
sounds harmless except that it contains potential antitrust risk,
as it negates competition among distributors selling the same
brand from the same manufactures.
Such an arrangement is now banned under Article 15 of the law.
But any manufacturer wishing to avoid this restriction can still
have some sort of "geographical" arrangement by imposing "areas
of primary responsibility".
Under this concept, the distributor is required to do his best
in satisfying consumer demand for the manufacturer's products in
the area of primary responsibility, but distributors can still
sell the products outside the area.
The second common type in distributor arrangements is the tie-
in arrangement. Manufactures producing more than one product may
seek to tie the sales of one product with that of another.
This practice is common among manufacturers with sufficient
market power, forcing the buyer to take a second product as a
condition of obtaining the desired goods. This aims to boost the
sale of slower-moving items.
But in some cases, consumers find themselves stuck with goods
they do not need. This could reduce competition, and is thus also
banned under Article 15.
The third common type of distributor agreements is vertical
price fixing. This is an agreement whereby a seller and a buyer
agree with respect to the price at which the buyer will resell.
Price fixing can also involve discounted prices and is also
banned if tied to the following conditions: (a) that the party
receiving goods must agree to buy other goods from the supplying
business actor; or (b) that party shall not buy the same or
similar goods from competing business actors.
Meanwhile a "suggested retail price" or "recommended retail
price" from manufacturers is not considered price fixing as it
does not entail obligations to comply.
Can a manufacture order its distributor against selling other
products made by its competitor? Yes, as long as the manufacturer
does not require the distributor to resell at a specified price
level or give discounts.
But if the manufacturer requests the distributor to sell at a
certain price level, then the distributor cannot be banned from
selling other manufacturer's competitor products.
These alternative solutions, however, can create problems if
the seller or manufacturer is dominant or has a significant
market share.
In such cases Article 19 of the law would apply; such
arrangements would be subject to review by the Business
Competition Supervisory Commission.
Distributor arrangements can create problems if the business
actors are insensitive to the issues of antitrust laws. Business
parties dealing in the above arrangements should restructure
their activities in line with the law. By identifying the legal
restrictions, problems can be avoided.
The writer is the secretary-general of the Association of Anti
Trust Lawyers and works with the Lubis Ganie Surowidjojo law firm
in Jakarta.