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Indonesian Competition Law: New Regulation on Foreign-to-Foreign Merger Notification

NO&T Asia Legal Review

*Please note that this newsletter is for informational purposes only and does not constitute legal advice. In addition, it is based on information as of its date of publication and does not reflect information after such date. In particular, please also note that preliminary reports in this newsletter may differ from current interpretations and practice depending on the nature of the report.

On 31 March 2023, the Indonesia Competition Commission or Komisi Pengawas Persaingan Usaha (“KPPU”) enacted a new regulation on the Assessment of Merger, Consolidation, or Acquisition of Shares and/or Assets which may Result in Monopolistic Practices and/or Unfair Business Competition (“New Merger Regulation”) which revokes and replaces the previous regulation, KPPU Regulation No. 3 of 2019.

Under the New Merger Regulation, a notification of foreign-to-foreign merger transaction is required to be filled to KPPU only if both parties have assets and/or generate sales in Indonesia. This replaces the previous regulation that mandated notification filling even if only one party to the transaction had assets and/or generated sales in Indonesia. Furthermore, the threshold of assets calculation required for the notification has also been revised from worldwide basis to Indonesia basis only.

Notification Threshold

Business actors must notify KPPU on merger, consolidation, or share/assets acquisition transactions that fulfill certain criteria via electronic system <https://notifikasi.kppu.go.id>. The transaction criteria is as follows:

  • a.  meet the threshold for asset value and/or sales value;
  • b.  transaction results in change of control;
  • c.  it is not a transaction between affiliated business actors; and
  • d.  transaction is between business actors which own assets and/or generate sales in Indonesia.

Under the previous regulation, the notification filing of foreign-to-foreign transaction would be triggered even if only one of the parties had business activities, assets, or sales in/to Indonesia. Therefore, there were an enormous number of foreign-to-foreign transactions that were being notified despite having no impact on the Indonesian market.

The New Merger Regulation imposes stricter local nexus threshold and assets value calculation analysis to be limited to Indonesian located assets instead of worldwide. The asset value and/or sales value threshold is:

  • a.  the asset value of the surviving business actor resulting from the merger, consolidation or shares and/or assets acquisition exceeds IDR 2,500,000,000. The asset value is still determined based on the parties’ combined assets on a group basis, however, unlike the previous regulation, it is limited to assets located in Indonesia; or
  • b.  the sales value of the surviving business actor resulting from the merger, consolidation or shares and/or assets acquisition exceeds IDR 5,000,000,000. The scope of the sales value threshold calculation remains unchanged and will continue to be based on either the Indonesian-wide sales or turnover of the relevant parties.

The New Merger Regulation also stipulates that a foreign-to-foreign transaction will only need to be notified to the KPPU if all parties to the transaction have assets and/or generate sales/turnover in Indonesia, on top of having fulfilled the minimum assets/sales threshold mentioned above. If only one party to the transaction has assets and/or sales in Indonesia, then the transaction is not necessarily required to be notified to KPPU.

Online Filing System and Shortened Documents Completeness Review

Under the New Merger Regulation, the notification must be filed online via KPPU’s website <https://notifikasi.kppu.go.id>. Despite that, the New Merger Regulation clarifies that KPPU can only review the online filing documents on business days and business hours from 9 am to 2 pm West Indonesia Time. The New Merger Regulation also significantly shortens the period for document completeness review, previously from 60 business days to 3 business days after the notification has been uploaded.

From the document completeness review, assuming the documents are complete, KPPU will issue a statement letter containing the registration number of the notification, thus, indicating that the notification has been officially registered. Business actors are responsible for the completeness and accuracy of the information as inaccurate or missing documents could cause the registration to be revoked, resulting in the parties being deemed as having failed in notifying the transaction.

Layered Transaction Assessment

Identical with the previous regulation, the assessment of the transaction will be divided into initial and comprehensive assessment. If the result of initial assessment deems that the transaction leads to a significant change in market concentration, then it will be subject to comprehensive assessment. However, the New Merger Regulation is silent on the parameters as to what constitutes “significant change in market concentration”.

The comprehensive assessment is a test to determine whether the transaction has the potential to result in unfair business practices. If the transaction is deemed to not potentially cause unfair business practices, then KPPU will issue a statement letter that clears the transaction. On the contrary, if the KPPU concludes that there are potential unfair business practices resulting from the transaction, the KPPU will move the case to a commissioner panel hearing. Unlike the previous regulation, the New Merger Regulation also stipulates the proceedings of the commissioner panel hearing and further examination in determining whether the transaction will result in unfair business practices.

The commissioner panel hearing will last for a maximum of 30 business days. After the hearing, the commissioner panel will:

  • a.  determine the conditional approval over such transaction;
  • b.  declare that such transaction will not potentially cause unfair business practices; or
  • c.  declare to proceed to further examination.

If the transaction proceeds to further examination stage, the KPPU investigator must prove that the transaction will result in unfair business practices and the business actors have the chance to defend the transaction and prove otherwise. The process will be similar to a court hearing with examination and cross-examination. The commissioner panel will decide whether the transaction will result in unfair business practices and might even unwind the transaction.

Merger Notification Filing Fee

Not long after the enactment of the New Merger Regulation, on 5 April 2023, the Government of Indonesia enacted Government Regulation No. 20 of 2023 on Types and Tariff of Non-Tax Revenue in KPPU (“GR No. 20/2023”). This regulation is effective from 5 May 2023 and stipulates the fees for the filing of merger, consolidation, or acquisition of shares and/or assets notifications to KPPU.

The formula for calculation of the fee is:

0.004% x the value of assets or sales turnover that crosses the threshold, whichever is the lower

The value of the assets or sales turnover will be calculated based on the total assets or sales of:

  • a.  the surviving entity, or the consolidating entity, or the acquiring entity and the acquired entity; and
  • b.  the entities that are directly or indirectly controlled by the surviving entity resulting from the merger, the consolidating entity, or the acquiring entity and the acquired entity.

If both the asset and sales values fulfil the statutory threshold (as mentioned beforehand), the filing fee will be calculated using whichever value is lower and payable if the KPPU finds the transaction is notifiable. Nevertheless, GR No. 20/2023 limits the maximum fee to IDR150 million or around USD10,000.

The fee can be reduced or fully waived if the transaction fulfills certain considerations, such as:

  • a.  it supports the development of micro, small, and medium enterprises;
  • b.  there are circumstances beyond the capacity of the payer, or a force majeure event has occurred; or
  • c.  government’s policy.

Such partial or full waiver of the filing fee will be further stipulated in a KPPU regulation with prior approval from the Minister of Finance.

This newsletter is given as general information for reference purposes only and therefore does not constitute our firm’s legal advice. Any opinion stated in this newsletter is a personal view of the author(s) and not our firm’s official view. For any specific matter or legal issue, please do not rely on this newsletter but make sure to consult a legal adviser. We would be delighted to answer your questions, if any.

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