KPPU’s step to decrease unfair business competition was seen by arranging guideline to support the Implementation of Article 28 and 29 Law Number 5 Year 1999 concerning Mergers, Consolidations, and Acquisitions. The aim of guideline is for giving law enforcement to business actors who will carry out merger.

What is a merger?

According to the Law, a merger includes the following transactions:

• a concentration of control of several previously independent business actors in one business actor or a group of business actors; or
• transfer of control from one previously independent business actor to another, leading to control or market concentration.

Are foreign-to-foreign mergers included?

Foreign mergers are defined as (i) mergers between two foreign business entities where both operate or one of them operates in Indonesia (ii) merger between a foreign business entity operating in Indonesia with an Indonesian legal entity; (iii) merger between a foreign business entity which does not operate in Indonesia with an Indonesian business entity; and (iv) other forms of merger involving foreign elements.

Foreign mergers are included when all the parties conduct business activities in the economic fields in the domestic market. Foreign mergers taking place beyond Indonesian jurisdiction do not become the Commission’s concern insofar the do not have any control direct or individually to Indonesia business entity.

Do mergers need to be notified?

The Law establishes a system of both pre-notification and post-notification.

As to pre-notification, according to Commission Regulation 1/2009 the parties may notify to the KPPU mergers or consolidations of business entities, or acquisitions of shares and assets that meet the following conditions:

• combined asset value of the consolidated or merged business entities exceeding IDR 2.5 trillion [IDR 10 trillion for banking and financial institutions] ; or
• combined sales value (turnover) of the consolidated or merged business entities exceeding IDR 5 trillion [IDR 15 trillion for banking and financial institutions]; or
• post-merger relevant market share exceeding 50%.

Pre-notification is voluntary.

As to post-notification, the Law requires the parties to notify to the KPPU mergers or consolidations of business actors, or acquisitions resulting in asset value or selling price thereof exceeding a certain amount, by no later than 30 days from the date of the merger, consolidation and acquisition. Detailed rules are to be adopted by Government Regulation.

How long does it take for approval?

According to Commission Regulations, the evaluation of mergers foresees a preliminary phase of around 30 (working) days and a second phase of additional 60 (working) days for comprehensive analysis, following which a final opinion is issued within 30 days.

Which mergers are prohibited?

According to the Commission Regulations, mergers, consolidations and acquisitions of shares and assets are prohibited when these operations may result in monopolistic practices or unfair business competition. Several indicators are considered in order to establish whether a merger is prohibited. These will include: analysis on relevant market, market concentration, entry barrier, possible consumer loss, efficiency defence, and possibility of business exit.

In particular, market concentration is assessed on the basis of the Herfindahl-Hirschman Index (HHI), which may lead to the following:

1. HHI below 1800: No-objection letter (automatically);
2. HHI between 1800 and 3000: Overall appraisal needed;
3. HHI between 3000 and 4000: Conditional No Objection Letter;
4. HHI above 4000: Objection Letter (automatically).

Can mergers be exempted/authorised?

Merger can also be authorised under (structural or behavioural) conditions, by way of a conditional no-objection letter. It means mergers, consolidations or acquisitions whose HHI exceeds 1800 and does not exceeds 4000 are authorised when they do not result in monopolistic practices or unfair business competition (based on requirements such as economic efficiencies, failing firm defence etc.).