INDONESIA - OECD.org

1 OECD Reviews of Regulatory ReformINDONESIACOMPETITION LAW AND POLICYS eptember 2012 ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENTThe OECD is a unique forum where governments wor k to gether to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an ageing population. The Organisation pr ovides a setting where govern ments can compare policy experiences, seek answers to common pr oblems, identify good pr actice and work to co-ordinate domestic and international OECD member countries are.

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4 Foreword This background report on Competition Law and policy in INDONESIA analyses the institutional set-up and use of policy instruments in INDONESIA . It was peer reviewed by the Competition Committee on 13 June 2012, with the participation of officials of the government of INDONESIA , and concludes with policy options for consideration by the government of INDONESIA . The OECD Review of Regulatory Reform in INDONESIA is one of a series of country reports carried out under the Regulatory Reform Programme of the OECD, in response to the 1997 mandate by OECD Ministers.

5 Under this programme, the OECD has assessed the regulatory management policies of 24 member countries, as well as Brazil, China and Russia. The reviews aim at assisting governments to improve regulatory quality that is, to reform regulations to foster competition, innovation, economic growth and important social objectives. The review methodology has developed over two decades of peer learning. It draws on and is grounded in a number of OECD instruments including: the 1995 Recommendation of the Council of the OECD on Improving the Quality of Government Regulation; the 2005 Guiding Principles for Regulatory Quality and Performance; the 2009 OECD Recommendation on Competition Assessment; the 2012 OECD Recommendation of the Council on Regulatory policy and Governance; and the 2012 OECD Recommendation for Public Governance of Public-Private Partnerships.

6 This is the first review in this series to be undertaken under the auspices of the OECD Regulatory policy Committee, which was formed in 2009. This background report was drafted by a team from the OECD Competition policy Division including, Nicholas Taylor, Principal Administrator, Jung-Won Song, Senior Project Manager and Hilary Jennings, Head of Global Relations for Competition, together with Rex Deighton-Smith, consultant. It benefited from comments provided by colleagues throughout the OECD Secretariat, as well as close consultations with a wide range of government officials in INDONESIA .

7 All background reports of the OECD Review of Regulatory Reform in INDONESIA are available at OECD 2012. All rights reserved. 3 TABLE OF CONTENTS Introduction .. 4 1. Competition Advocacy Competition reviews of new and existing legislation .. 7 Current KPPU Practice .. 8 A System for Integrating Competition Analysis into National Law Making .. 12 KPPU input into sub-national law making .. 15 Review of existing legislation .. 16 Reforming business licensing .. 17 Improving Competition policy Awareness Throughout Government.

8 20 2. Competition s contributing to connectivity .. 21 KPPU s Work in the Transport Sector .. 21 Priorities for Better Harnessing Competition policy in the Transport Sector .. 22 3. Competition law .. 24 The prohibition of anticompetitive agreements .. 24 The prohibition of abuse of dominance .. 26 Preventing Anticompetitive Mergers .. 29 Other Competition Law Prohibitions .. 31 Investigatory Powers .. 32 Leniency and Immunity Policies .. 34 Decision Making Processes and Appeals .. 36 Remedies .. 38 Redress for Parties who have Suffered Loss from Contraventions of the Competition Law.

9 40 4. Institutional Arrangements for the KPPU .. 43 The Appointment of the Chairman, Deputy Chairman and Members of the KPPU .. 44 Employing KPPU Staff .. 44 KPPU Resourcing .. 45 Appendix 1: Examples of Pro-competitive Legislative Review Programmes in OECD Countries .. 51 Appendix 2: Substantive Provisions of the Indonesian Competition Law .. 55 OECD 2012. All rights reserved. 4 Introduction 1. In 2010 the OECD published an Investment policy Review for INDONESIA . One of the recommendations of that Review was that an in-depth review of INDONESIA s competition policy should be undertaken in cooperation with the OECD.

10 2. Competitive, accessible and efficient markets are centrally important for all free market economies and, in particular, for economies undergoing rapid development. Unless markets are working well, all members of society may not be able to achieve their maximum economic potential, capital and labour resources may not be directed to where the economy most needs them, the nation s wealth cannot grow as rapidly it might otherwise be able to and ultimately consumers will suffer. 3. In general, the OECD and its governments have found that the most effective approach to maximising wealth is that the government should step back and permit markets to determine where and how resources are used and to self-correct when circumstances change.