Indonesia Competition Law: New Guidelines on the Enforcement of Administrative Fines

The Indonesian Business Competition Supervisory Commission/Komisi Pengawas Persaingan Usaha ("KPPU") has issued a new regulation; KPPU Regulation No. 2 of 2021 on Guidelines for the Enforcement of Fines due to the Violations of Monopoly Practices and Unfair Business Competition ("KPPU Regulation 2/2021"). KPPU Regulation 2/2021 was issued as an implementing regulation to Government Regulation No. 44 of 2021 on the Implementation of the Prohibition of Monopolistic Practices and Unfair Business Competition which was enacted on 2 February 2021.

We note that KPPU Regulation 2/2021 addresses additional guidelines on the enforcement of sanctions in terms of violation of competition laws. This includes calculation of administrative fines, guidelines for filing an appeal, and requesting for payment leniency.

Main Keys of KPPU Regulation 2/2021: Please find below several key points of KPPU Regulation 2/2021.

Calculation of Fines: In general, any violation of monopolistic and unfair business competition will be subject to a base fine of IDR 1 billion (approximately USD69,800). However, such amount might add up based on the result of KPPU internal assessment on the following:

  1. material adverse effect resulting from the violation of Merger Filing obligation;
  2. the duration of the violation;
  3. mitigating factor, such as whether the business has been compliance with fair business practices and is willing to stop their anti-competitive behavior once it has occurred;
  4. aggravating factor, such as whether the relevant business has committed similar violations and if it is the initiator; and/or
  5. the company's ability to pay such applicable fines.

(Art. 2 (1) and (2) of KPPU Regulation 2/2021).

Notwithstanding the above point, KPPU further sets out the ceiling for the final fine enforcement, which are as follows:

  1. maximum of 50% of the relevant net income of the party within the related market throughout the violation; or
  2. maximum of 10% of the total sales generated from the related market throughout the violation.

In addition to the above, KPPU will take into account the company's ability to pay fines based on their financial condition (Art. 8 (1) and (2) of KPPU Regulation 2/2021).

Bank Guarantee and Appeal: KPPU prescribes parties to submit a bank guarantee upon filing an objection or appeal to KPPU's decision on fines. The bank guarantee shall be issued by a commercial bank operating in Indonesia for a maximum of 20% of the imposed fine within 14 (fourteen) business days after the court's decision has been handed down (Art. 11 (1) and (2) of KPPU Regulation 2/2021).

During the appeal, if the Commercial Court and/or Supreme Court upholds KPPU's decision to impose fines to the relevant businesses, KPPU has the authority to call on the relevant bank guarantee. On the contrary, if the final legally binding appeal decision annuls the KPPU decision, KPPU shall return the bank guarantee to the relevant business.

Payment of Fines: The violating party must deposit the payment for the relevant fines within 30 (thirty) business days after receiving the KPPU or court decision of the final appeal. Failure to pay the fines by the deadline will expose the business to additional administrative penalties under the relevant non-tax revenue regulations (Art. 15 (2) and (5) of KPPU Regulation).

Leniency on the Fines Payment: The violating party may submit the request to KPPU to restructure the payment of the fines to be in installments. To apply for such leniency, the party must submit: (i) its financial report; and (ii) adequate guarantee (e.g., insurance, bank guarantee, surety bond, material guarantee, or other guarantees approved by the KPPU) within 14 (fourteen) business days of a final and binding decision.

On a related note, the maximum installment period that the KPPU may approve would be 12 (twelve) months or an extended time period for payment of between 12 (twelve) months and 36 (thirty six) months.

NLP Commentary: The new regulation fills in the gap on administrative fines which was not provided in the previous regime. However, it remains to be seen how this regulation will be implemented. Please do not hesitate to get in touch with us should you have any queries on how the KPPU Regulation 2/2021 may affect your transactions in Indonesia.

The article above was prepared by Marshall S. Situmorang (Partner), Audria Putri (Senior Associate), and Aniendita Rahmawati (Associate)

Disclaimer: The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances.