Overview of Post Notification for Merger, Consolidation and Acquisition
On 20 July 2010, The Government has finally issued Government Regulation (Peraturan Pemerintah or “PP”) Number 57 Year 2010 on Merger or Consolidation of Business Entities and Acquisition of Companies which May Cause Monopolistic Practices and Unfair Business Competition (“PP 57/2010“). The aforementioned regulation was the mandate of Article 28 jo. Article 29 of Law No. 5 year 1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition (“Law 5/1999“), where the PP 57/2010 should have been issued concurrently with the enactment of Law 5/1999 ten years ago.
Merger, consolidation and acquisition are corporate actions combining two or more companies, creating the potential to increase market concentration and to further concentrate control over the company. In the business world, the three actions are common. Usually, merger, consolidation and acquisition are carried out during recession, depression or crisis in order to maintain the existence of a company. In normal circumstances, merger, consolidation and acquisition are performed in order to increase efficiency and competitiveness.
Merger or consolidation of business entities and acquisition of companies may cause monopolistic practices and unfair business competition. The monopolistic practices and unfair business competition occurred when the business entities as a result of a merger or consolidation or the business actor that conducts an acquisition, presumingly conduct:
(i)the prohibited agreement; such as oligopolistic practices, price fixing, zoning, boycott, cartel, trust, oligopsonist practices, vertical integration, closed agreements, agreements with foreign parties;
(ii)the prohibited activities; such as monopolistic practices, market control, conspiracy; and/or
(iii)misuse of dominant position; where dominant position is a condition where business actor has no significant competitor in the relevant market in terms where the market is controlled, or business actor has the highest position among his competitors in the relevant market in relation to financial ability, ability access on supply or sales, and ability to adjust the supply or demand of certain goods or services. Meanwhile, misuse of dominant position is such as double title and share ownership.
Merger, consolidation and acquisition which are closely related to business strategies, have an indirect impact on the economic condition of a country. Therefore, it is necessary to exercise control over the activities of merger, consolidation and acquisition having the potential to cause monopoly and unfair business competitions. For example, when a merger, consolidation or acquisition results in more than 50% (fifty percent) of market control, the potential for an unfair business competition becomes probable.
Procedure of Post-Notification
PP 57/2010 regulates a post-notification of the company which will carry out a merger, consolidation or acquisition. Such company must inform the KPPU concerning the corporate action as of the date on which such corporate action becomes formally effective. The procedure of such notification is by submitting a written notification to the KPPU and by no later than 30 business days as of the date on which a merger, consolidation or acquisition becomes effective. The written notification is conducted by filling certain form determined by the KPPU under Article 8 of PP 57/2010. The business actor having the obligation to report the contemplated merger, consolidation or acquisition is a business actor with a consolidated asset value of more than Rp 2.5 trillion or a sales value of more than Rp 5 trillion, and consolidated asset value of more than Rp 20 trillion for banking corporations. This provision confirms the existence of restriction for business actors that are obligated to submit a written notification. However, not all categories of business actors carrying out a merger, consolidation or acquisition are obligated to report to KPPU.
In Article 7 of PP 57/2010, an exception is made on the obligation to report, namely in the event of any merger, consolidation and acquisition carried out among companies which are affiliated. The term “affiliated” means (i) affiliation between companies, either directly or indirectly, controlling or being controlled by such companies; (ii) affiliation between two (2) companies being controlled, either directly and indirectly by such companies; (iii) affiliation between the company with its controlling shareholder .
Evaluation of Post-Notification
Following the submission of such notification, KPPU will issue an evaluation (within a period of no longer than 90 business days as of the receipt of the notification form and documents) on whether or not a violation is existed in a merger, consolidation or acquisition under Article 3 of PP 57/2010. In the event that KPPU finds a monopolistic practices and/or unfair business competition as the result of the evaluation, KPPU would take action in accordance with their competences under the Law 5/1999.
Consultation to KPPU
In addition, as in the Article 11 and 12 PP 57/2010, KPPU also provides verbal or written consultation for business actor who will conduct merger or consolidation, or acquisition that having the value of the consolidated asset and or sales more than certain value as sets forth in Article 5 PP 57/2010. The consultation will be provided by submitting certain form and documents determined by KPPU to the KPPU. Following such submission, KPPU will carry out advices, guidance, or written opinions regarding such corporate action within 90 business days as of the receipt of the certain form and documents. The evaluation of such consultation will not be considered as an approval or refusal of KPPU of such corporate action that will be conducted by the business actor and shall not eliminate KPPU’s competence to do the evaluation after such corporate action is conducted.
Sanction
PP 57/2010 also sets forth a sanction to be imposed on the business actor concerned in the event that it fails to submit a post-notification, namely a sanction in the form of an administrative fine of Rp 1 billion for each day of delay, provided that the maximum amount of the total administrative fine is Rp 25 billion.
