KPPU launches a notification portal, shortens the review period, and seeks to enforce anticompetitive business combinations

In brief

On Monday 27 March 2023, the Indonesian Competition Commission (Komisi Pengawas Persaingan Usaha, (KPPU)) sought input from stakeholders on its plan to overhaul the current merger control rules. KPPU is proposing to replace KPPU Regulation No. 3 of 2019 on Merger Filing Procedures. Key changes include the introduction of an electronic portal, narrowing the definition of assets for the calculation of asset thresholds to Indonesian assets only, and introducing three exits for transactions without competition concerns. There is, however, some uncertainty as to how much of the proposed amendments will survive given the upcoming KPPU leadership change, if it is not passed before late April.

Introduction of electronic portal

Following the issuance of the new regulation and the launch of the new portal, all notifications are to be made through the portal. The following are some of our observations on the beta version of the new portal:

One email address is limited to making only one filing.
All documents are to be uploaded to the portal, including Indonesian translations (if any original documents are not in Indonesian language), with a file size limitation.
The security of the infrastructure is yet to be confirmed.
The electronic portal is only available in Indonesian language.

KPPU is currently receiving comments and engaging with stakeholders to ensure that the proposed new system will run smoothly.

Reversal of asset threshold calculation method, other tests

When it was first issued, KPPU Regulation No. 3 of 2019 controversially removed the dual local nexus requirement (i.e., both parties to the transaction had to have a connection with Indonesia, not just one of them) and widened the definition of assets for calculating filing threshold to include global assets (not just Indonesian assets), resulting in an explosion of transaction notifications to KPPU. It appears that the anticipated new regulation will reverse these approaches, and following its issuance, it is expected that the dual local nexus test will apply and only assets in Indonesia will be included in calculating the assets thresholds.

Full revamp of procedure

Currently, a review entails a two-step process of (i) 60-working day clarification; and (ii) 90 working day substantive review, resulting in a maximum total of 150 working days. In recent months, KPPU has been experiencing case backlogs resulting in delays issuing final stipulations to the relevant parties.

The proposed new regulation will cut out a significant amount of bureaucracy, remove the research and clarification stages, and introduce a two-phase review:

First phase: All transactions

An administrative review of the supporting documents, which will be completed within three working days. At the end of this review, KPPU will issue a receipt. Alternatively, if the KPPU taskforce assigned to do the administrative review decides that the transaction is exempted from filing, the taskforce will issue a confirmation letter to the same effect.
- It should be noted that under the proposed new regulation, KPPU may revoke its receipt if it turns out later that the submission is incomplete or untrue. That may cause the filing to have to be resubmitted late, making the notifying party liable to pay a fine for late filing (of at least IDR 1 billion).
A first substantive review of the transaction by the taskforce for transactions which are not dismissed on administrative review. If the taskforce is satisfied that the transaction will not have an impact on competition, it will provide a recommendation for the KPPU Deputy of Law Enforcement to issue a confirmation letter to the same effect.
Second (complete) substantive review of the transaction by the taskforce for transactions which are not dismissed in the first two steps. If the taskforce is satisfied that the transaction will not result in anticompetitive conduct, it will provide a recommendation for the KPPU Commissioners to issue a confirmation letter to the same effect.

Under the current regulation, to obtain a stipulation of non-mandatory filing, we would need to wait for the entire 150 working days to lapse. Under the proposed new regulation, the entire first phase will be 3+90 working days.

Second phase: Potentially problematic transactions only

Preliminary examination for transactions that are deemed to potentially have an anticompetitive impact. KPPU will raise a statement of objection in the form of a report of substantive review and the relevant party will be invited to submit a response and present its case before a KPPU Tribunal.

There are three potential outputs from this process, namely:

(i) If the impact is not substantiated, the KPPU Tribunal will issue a stipulation to the same effect.

(ii) If the impact is substantiated, the KPPU Tribunal will offer remedies and if the relevant party accepts that, they will enter the monitoring phase and follow the process of fulfilling the remedies until its conclusion.

(iii) If the impact is substantiated and the KPPU Tribunal offers remedies but the relevant party refuses or if the party accepts but fails to fulfil the remedies, then the matter will move to the further examination (trial) phase.

Further examination can be triggered when a party refuses the remedy offered (as referred to above) or if it fails to fulfil the remedies.

What to look out for

KPPU has mentioned they expect that the new regulation on merger filing procedures will be launched together with the new regulation on procedural law. With the ongoing KPPU leadership change, we should also anticipate a possible new direction on enforcement. There is therefore some uncertainty as to how much of the proposed regulation will survive, if it is not passed before the new leadership takes office in late April.

The introduction of the second phase review under the proposed regulation indicates an appetite for KPPU to start enforcing against anticompetitive business combination (merger, consolidation, acquisition), and not just in relation to late notifications.

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