Thursday, July 23, 2020

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ICC commences to pre-investigate the alleged setting of the retail selling price of fuel oil (BBM) by 5 (five) business actors in the sector. The allegation stems from the absence of a cut in the price of non-subsidized fuel oil by business actors in the sector since March 2020, although the price of the world fuel oil supply has declined since the beginning of the year. At present ICC has obtained one type of instrument of proof that becomes the basis of such law enforcement. As for the article alleged to be violated is Article 5 concerning prohibition for business actors to collectively set the prices.

It is a known fact that the basic formula of the retail selling price of fuel oil is regulated through Decree of the Minister of Energy and Mineral Resources No. 62.K/12/MEM/2020 regarding the Formula of Basic Price in Calculating the Retail Selling Price of Common Types of Petroleum Fuels in the form of Petrol Fuels and Diesel Fuels that are Distributed Through Gas Stations and/or Filling Stations for Fishermen (Ministerial Decree 62K/2020). The regulation takes effect as of March 1, 2020. ICC values that the Government policy is capable of boosting competition in the sales of non-subsidized Fuel Oil, especially by the elimination of the minimum margin from the formula.

Based on the formula, the competitive price set by the business actors can be linked to the amount of the sales margin since each company should have its own storage and distribution costs, as well as their own sales margin preferences that differentiate their ability to determine the amount of the retail selling price of fuel oil. However, the existing conditions indicate that the price of non-subsidized fuel oil by the business actors tends to stagnate since March 2020 in the average range of IDR9,850 for RON98, IDR9,000 for RON95, and IDR7,650 for RON90. In the meantime, the prices of similar fuel oils in ASEAN, such as in Vietnam and Malaysia, have decreased by 38% since February 2020. ICC conjectures that there is joint coordination among business actors in Indonesia not to reduce the price of non-subsidized fuel oil.

In delving deeply into the alleged coordination of the pricing, ICC also pays attention to the nature of the oligopolistic market structure in the fuel oil sector. With a limited number of business actors, the potential violations of business competition are quite high in the sector. ICC will also take note of if this condition has been caused by the phenomenon of price leadership of Pertamina (State Oil and Natural Gas Mining Company). For the record, Pertamina controls the overall fuel oil sales market up to 98.3%, based on the distribution capability or the number of gas stations it has. This figure is still far if compared to other players that do not reach two percent as a whole.