In association with
Competition Law Update
January 2011
Indonesia’s M&A notification regime
further updated
Government and KPPU regulations issued to further implement notification
of mergers, consolidations and acquisitions in Indonesia
In November 2009 we issued an Asia Pacific Legal Update
(which can be accessed on www.oentoengsuria.com)
covering the release of Regulation of the Business
Competition Supervisory Commission (KPPU)
Number 1 of 2009 regarding Pre-Notification of Mergers,
Consolidations and Acquisitions (Regulation 1 / 2009).
This was a long overdue implementation of the notification
regime for mergers, consolidations and acquisitions
in Indonesia. The voluntary pre-notification regime
introduced under Regulation 1 / 2009 was, however,
revoked in August 2010 by another KPPU Regulation
(Number 11 of 2010).
In July 2010 a Government Regulation (legislation
ranking above a KPPU regulation) was passed
specifically addressing mandatory post merger
notifications (GR 57 / 2010). GR 57 / 2010 does not
provide for a formal pre-notification procedure in
the same way as Regulation 1 / 2009 did, instead there
are provisions dealing with consultation with the
KPPU before the transaction consummates.
In October 2010, the KPPU issued Regulation Number
13 of 2010 regarding Guidance on the Implementation
of Mergers, Consolidations and Acquisitions Which
May Result in Monopolistic Practices and Unhealthy
Business Competition (Regulation 13 / 2010).
In view of the changes brought about by GR 57 / 2010
and Regulation 13 / 2010, we set out in this update the
new notification regime and the relevant thresholds to
which it applies.
Basis for notification thresholds
Articles 28 and 29 of Law Number 5 of 1999 regarding
the Prohibition of Monopolistic Practices and Unfair
Business Competition (the Anti Monopoly Law)
provide the basis for the notification of potentially
monopolistic or unhealthy / unfair mergers, consolidations
or acquisitions.
Article 28 sets out the basic position that business
actors are prohibited from conducting:
• mergers and consolidations that may result in
monopolistic practices and / or unfair competition; or
• acquisitions that may result in monopolistic
practices and / or unfair competition.
Article 29(1) states that the KPPU must be notified
(within 30 days from the date of such merger,
consolidation or acquisition) of mergers, consolidations
and acquisitions as intended in Article 28 where the
resulting combined assets value and / or the sales value
of the parties involved exceeds certain thresholds.
 Notification Thresholds
The following notification thresholds have been stipulated by both the Indonesian Government and the KPPU
respectively in GR 57 / 2010 and Regulation 13 / 2010.

Variable Sector

Non Banking Banking

Total combined assets > 2.5 trillion Rupiah > 20 trillion Rupiah
in Indonesia (approx USD 280 million) (approx USD 2.23 billion)

Total combined sales turnover > 5 trillion Rupiah

in Indonesia (approx USD 560 million)

The thresholds differentiate between those transactions
involving non-banking and banking business entities,
with thresholds for the banking sector understandably
set considerably higher. No threshold is prescribed for
the total combined sales turnover for banking sector
transactions. The former distinction between transactions
in the financial services sector (as existed under Regulation
1 / 2009) has been dispensed with. Regulation 1 / 2009
also contained an additional notification variable,
which was where the combined entity (for a merger
or consolidation) or the acquiring entity (in the case
of an acquisition) had a greater than 50 % market
share post transaction. Even without this notification
threshold, one expects that a small (non-notifiable)
transaction on a value basis but one which concentrates
competition could nevertheless fall within the purview
of the prohibition in Article 28.
The above thresholds are to be calculated based on
the total assets and sales turnover of the entities
conducting the transaction including the entities
which directly or indirectly control or are controlled
by the business entity which results from the merger
or consolidation, or the entities which directly or
indirectly control or are controlled by the acquiring
company and the target company in an acquisition,
in each case based on the audited financial statements
of those entities one year prior to the merger,
consolidation or acquisition (as the case may be).
Regulation 13 / 2010 provides that “control” will exist
where a business entity:
• holds more than 50 % of the shares or voting rights
in another business entity; or
• holds 50 % or less of the shares or voting rights, but has
the ability to influence and determine the management
policy of a business entity and / or influence and
determine the management of a business entity.
Transactions between “affiliated companies” are exempt
from the obligation to notify the KPPU. GR 57 / 2010
defines “affiliated companies” as the relationship:
• between companies whereby one, whether directly or
indirectly, controls or is controlled by that other company;
• between two companies being controlled, whether
directly or indirectly by the same party; or
• between a company and its majority shareholder.
Who should notify?
In the case of mergers and consolidations, each party
involved shall collectively notify the KPPU and all
parties must submit the necessary documents. In the
case of an acquisition, only the acquirer is obliged to
notify the KPPU.
The notification guidelines also apply to “foreign
mergers”. A “foreign merger” is one that meets the
following criteria:
• the transaction is undertaken outside the territory
of the Republic of Indonesia;

Page 2 Competition Law Update – January 2011

• the transaction will have a direct impact on the
Indonesian market, in that:
–– all parties undertaking the transaction operate
directly or indirectly through a company which
they control in Indonesia; or
–– one party to the transaction operates in Indonesia
and the other party has sales into Indonesia;
• the merger satisfies the asset or sales turnover
thresholds; and
• the transaction is between non-affiliated companies.
When to notify?
Notification of a merger, consolidation or acquisition
which triggers one or more of thresholds must be
notified to the KPPU within 30 days after the date
such merger, consolidation or acquisition has become
legally effective. Pursuant to Regulation 13 / 2010 a
merger, consolidation or acquisition becomes “legally
effective” where:
• an approval from the Ministry of Law and Human
Rights (MoLHR) for the amendment to the Articles
of Association (of the merged or acquired entity) has
been obtained;
• a notification has been received by MoLHR where
amendments to the Articles of Association require
notification but do not require MoLHR’s approval; or
• ratification from MoLHR for a consolidation has
been obtained.
Assessment by KPPU
The KPPU will assess the transaction after the transaction
has occurred under the mandatory notification
obligation and also prior to the transaction proceeding if
the relevant parties seek to consult with KPPU in advance.
Pre-completion consultation
The pre-completion assessments entail the following:
• a preliminary assessment to be based on the change
of the market concentration level before and after the
merger calculated in accordance with the Hirschman-
Herfindahl Index (HHI) spectrum for horizontal
transactions and the existence of market dominance
for vertical transactions. The preliminary assessment
must be conducted within 30 days of the KPPU
acknowledging that the documents submitted to it
for review are complete and have satisfied KPPU’s
administrative requirements; and
• a comprehensive assessment to be conducted
within a further 60 days (to start from the end of the
preliminary assessment period) if the KPPU, in its
preliminary assessment finds that the HHI is above
1800 and has increased by more than 150.
If the preliminary assessment indicates an HHI:
• of below 1800;
• of above 1800 but with a change of less than 150; or
• there is no dominant position of a party to a
vertical merger,
the KPPU will issue a “no indication” opinion to the
effect that it does not consider there to be any monopolistic
practices or unhealthy business competition resulting
from the transaction.
Following a full pre-completion assessment, the KPPU
shall issue one of the following opinions with respect to
the existence of possible monopolistic or unhealthy
business competition:
• “No Indication”;
• “Indications”; or
• “No Indication” – with certain advice and / or guidance
which must be satisfied by the transacting parties
prior to completing the transaction.
If the relevant parties have consulted with the KPPU
in advance of the proposed transaction and have
obtained a “No Indication” opinion, the obligation to
submit a post-merger notification to KPPU still applies
(under Article 29 of the Anti Monopoly Law). Under
Regulation 13 / 2010, the KPPU will not, however,
re-open a previous assessment where there has been
no material changes to the data submitted or to market
conditions (GR 57 / 2010 provides further details on
what changes would be considered “material”).
Competition Law Update – January 2011 Page 3
Post-completion notification
Transactions which have not gone through the consultation
process, will be fully assessed by the KPPU following
which the KPPU will issue an opinion with respect to
the transaction, within 90 days stating that either:
• there is an indication of monopolistic practices or
unhealthy business competition (“objection” letter); or
• there is no indication of monopolistic practices or
unhealthy business competition (“no objection” letter).
The post-completion assessment will involve
consideration of five primary elements, namely:
• market concentration;
• barriers to entry;
• potential anti-competitive behaviour;
• efficiency achievement; and
• possibility of business entities exiting the market
without implementing a merger, consolidation or
acquisition (insolvency).
Sanctions
Non-submission of the mandatory notification report
to KPPU may be sanctioned with an administrative
fine amounting to Rp 1,000,000,000 (USD 111,000 at
an exchange rate of USD 1: Rp 9,000) per day of delay
capped at Rp 25,000,000,000 (USD 2.77 million). With
respect to notifiable foreign mergers, the fine for late
reporting will be imposed on that relevant business
entity / group in Indonesia.
A violation of Article 28 of the Anti Monopoly Law,
may result in the following possible sanctions:
• criminal fine of a minimum Rp 25,000,000,000
(USD 2.77 million) capped at Rp 100,000,000,000
(USD 11.1 million); and / or
• cancellation of the merger, consolidation or
acquisition; and / or
• a non-criminal fine of a minimum of
Rp 1,000,000,000 (USD 111,000) and capped
at Rp 25,000,000,000 (USD 2.77 million).

Comment
The merger and acquisition notification regime has been revised and clarified through the introduction of
GR 57  /  2010 and the implementation guidelines laid out in Regulation 13  /  2010. The formalisation of the notification
regime and notification thresholds will be relevant to high value mergers, consolidations and acquisitions
involving substantial Indonesian businesses.

Oentoeng Suria Greg Terry

& Partners
contact details
Senior Foreign Legal Consultant greg.terry@oentoengsuria.com
Level 37, Equity Tower Toby Grainger
Jalan Jenderal Sudirman Kav 52-53 Foreign Legal Consultant toby.grainger@oentoengsuria.com
Jakarta Selatan 12190, Indonesia Alwin Redfordi
t 62 21 2996 9200 Associate Lawyer alwin.redfordi@oentoengsuria.com
f 62 21 2903 5360

blake dawson Associated Office Jakarta Noor Meurling, Greg Terry,

contact details Toby Grainger 62 21 2996 9200
Sydney 61 2 9258 6000
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Tokyo 81 3 5293 8228

This publication is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to render legal advice.
No reader should act on the basis of any matter contained in this publication without first obtaining specific professional advice.

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