This essay is separated from the Competition essay series that focusing on the regulation and the implementation of competition law both in Indonesia and Japan by Haekal Makarim. This essay will focusing on specific topic: the introduction of merger control in Indonesia.
Based on article 28 and article 29 of Law №5 of 1999 regarding the Anti-Monopoly Law is the legal basis of the merger control regime in Indonesia. The merger control law has been existence since 1999 but was not implemented until 2010 when the Government of Indonesia finally issued the necessary implementing regulation, the Merger Control Regulation.
The Merger Control Regulation sets out the mandatory post-merger notification procedure required by the KPPU and certain details regarding a voluntary pre-merger consultation procedure. The draft law will provide for pre-merger notification.
The corporate actions are caught by the merger control regime are merger, consolidation and acquisition. For those corporate actions which result in certain assets or sales thresholds being exceeded must be notified to the KPPU.
The merger control regime introduces the procedure for a compulsory post-merger notification requirement for any merger, consolidation or share acquisition (causing a change in control), resulting in the following thresholds being exceeded:
a. the value of an asset of IDR 2.5 trillion; and/or
b. sale value of IDR 5 trillion.
Besides the KPPU approval through the implementation of merger control, Indonesia’s foreign capital investment rules have regulated the approval from Capital Investment coordinating Board (Badan Koordinasi Penanaman Modal) is also required. Under those rules, foreign investment is generally permitted in any business sector in Indonesia, except those either completely closed to foreign investment or
subject to a maximum limitation on foreign ownership, as set out in Presidential regulation 44 of 2016 (commonly known as the negative list).
Transactions in the banking sector are subject to a higher threshold and need only be notified to the KPPU if the value of the relevant assets exceeds IDR 20 trillion.
The thresholds set out above are calculated by reference to the value of the aggregate assets or, as the case may be, the sale value of:
- the entity resulting from the merger or consolidation or (in the case of a share acquisition) the acquirer and the target being acquired; and
- the entities which, directly or indirectly, control or are controlled by the entity resulting from the merger or consolidation or (in the case of a share acquisition) the acquirer and the target being acquired;
When applying this test in the context of an acquisition, the acquirer’s assets or sale values, the target and their respective controlled and controlling entities must be aggregated, even if the relevant controlled and/or controlling entities are not Indonesian entities. The relevant assets value for the purpose of the assets threshold test relates to assets located within Indonesia. Likewise, the relevant sale value for the purpose of the sale threshold test related to sales in Indonesia (excluding exports), irrespective of whether the sale originates from within or outside Indonesia.
The transaction between affiliated parties is exempted from the above notification requirement. It should be noted that the acquisition of assets and the establishment of joint ventures are not captured under the current merger control regime.