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Notification Requirement to Indonesian Competition Supervisory Commission (KPPU) in M&A Transactions

 
In Indonesia, business actors frequently conduct M&A transactions for efficiency and streamlining the company. M&A is also seen as one of the perfect solutions to strengthen their position in the market in order to be able to compete with the others. The M&A transactions, knowingly or not, will affect a competition among business actors in the relevant market as well as impact to the consumers and community.
 
M&A transaction potentially leads to monopoly practices or unfair competition must be controlled in order not to harm the consumers and community. For that purpose, the Indonesian Competition Supervisory Commission (better known by its Indonesian Acronym “KPPU”) as the independent authority established to supervise the prohibition of monopolistic practice and unfair business competition has issued the Commission Regulations Number 2 Year 2013 (“Regulation 2/2013”) which regulates the guidelines of implementation on  merger or consolidation of business entities and acquisition which may result in the occurrence of monopolistic practices and unfair business competition.
 
With this Regulation 2/2013, an M&A transaction which generate a business entity with the value of asset in excess of IDR 2.5 trillion or with the sales value (turnover) exceeding IDR 5 trillion shall be obliged to give notification to the KPPU. In particular, for M&A transaction conducted by two or more business actors engaged in banking, then such business actors shall be required to give a notification when the asset value of the business entity exceeds IDR 20 trillion. Meanwhile, if one party to the transaction is engaged in banking and other parties are not engaged in banking, then the business actors shall be required to perform the notification when the amount of asset value exceeds IDR 2.5 trillion. The notification requirement also applies to M&A transaction conducted outside the jurisdiction of Indonesia (“Offshore M&A”), when the M&A transaction influence Indonesian domestic market.
 
Business actors who conduct M&A transaction potentially leads to monopoly practices or unfair competition are obliged to submit the notification to KPPU no later than 30 working days as from the date of M&A transaction is legally effective. If notification is not submitted, the business actor can be sanctioned with administrative fines up to the maximum amount of IDR 25 billion. 
 
In April 2014, KPPU issued a ruling that punishes business actor who was late to give notification by condemning the business actor to pay a fine of IDR. 1,249,000,000. With the existence of the ruling, until now KPPU has convicted at least three business actors in relation to the delay in making the notification to KPPU. This also proves that KPPU no longer hesitates to punish business actors proven to have violated the terms of submission notification to KPPU. 
 
In order to avoid the administrative fine, therefore, business actors must be more careful and aware of any M&A transactions that will be concluded, particularly in relation to the notification requirement for M&A transactions potentially leads to monopoly practices or unfair competition.  
 
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