KPPU issued a conditional non-objection opinion on the acquisition of Vinythai Public Company Ltd by Asahi Glass Company Ltd..
Indonesia’s competition authority (KPPU) finished its assessment on the acquisition of 58.77% share of Vinythai Public Company. Ltd. by Asahi Glass Company. Ltd by issuing a conditional non-objection opinion for this acquisition. The acquisition took placed in 22 February 2017 in Thailand.
Asahi Glass Company is a Japan company established in 1907 which focuses its business activities in glass, electronic chemical, and ceramics manufacturing. Asahi conduct their business activities through its subsidiary in Indonesia, including PT. Asahimas Chemical, PT IWAKI Glass Indonesia, and PT Asahimas Flat Glass, Tbk. Vinythai is a Thailand company which produces Poly Vinyl Chloride (PVC) and Epichlorohydrin (ECH) products for plastic industries. They sale some of their PVC products to Indonesia, specifically Suspension-PVC (S-PVC), Emulsion-PVC (E-PVC) dan Epichlorohydrin (ECH).
KPPU assessment focus on relevant market among merging parties, which in this case, S-PVC. PVC is a thermoplastic polymer resulting from a chemical process of chlorine (Cl2) and ethylene (C2H4). While the S-PVC type mostly uses for pipe making, film and sheets, floor, bottle, cable, and many more. The relevant market was defined through the analysis on cross-price elasticity of substitution (Eyx) method. The geographical market for this case is Indonesia, and the assessment is limited to their sales in Indonesia.
During the assessment, KPPU found a significant increase of Hirschman Herfindahl Index (HHI) on S-PVC market, since one of Asahi’s subsidiaries in Indonesia is a market leader in PVC market with more than 50% market share. Even though Vinythai did not have a significant number of sales in Indonesia, this acquisition still passed the threshold of an increased HHI after the acquisition. This makes KPPU has to perform a phase 2 analysis on their transaction.
The phase 2 analysis contains several type of analysis, namely analysis on absolute barrier in trade, structural barrier, unilateral effect, coordinated effect, and efficiency analysis. The unilateral effect conducted though the upward pricing pressure (UPP) method.
Based on the analysis, KPPU found that the structural barrier in this market is significant, but the absolute barrier is minimum since there is no barrier for cross-border purchase of PVC products to Indonesia. Which mean, international price and import can limit their ability to affect price in domestic market. The UPP test concluded that there is a significant pressure to the domestic price caused by this acquisition. The efficiency test found that the potential efficiency from this acquisition may not lead to a price decrease to one of the merging party.
Following this assessment, KPPU issued a conditional non-objection opinion on this acquisition, and requires Asahi Glass Company. Ltd. to regularly report their production, sales, and price of S-PVC in Indonesia, and requires the export and price of S-PVC from Vinythai Public Co. Ltd to Indonesia in quarter for the next 3 (three) years. This remedy aims to monitor the effect of their transaction to the future price of S-PVC in Indonesia.