KPPU Launches New Regulation on Post-Closing Notifications on Mergers, Consolidations, and Acquisitions (Including Asset Transfers)
On October 2, 2019, the Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha or “KPPU”) issued Regulation No. 3 of 2019 on Assessment of Mergers or Consolidations of Business Entities, or Acquisition of Shares of Companies which May Result in Monopolistic Practices and/or Unfair Business Competition (“Regulation 3/2019”). Regulation 3/2019 entered into force as of October 3, 2019.
Regulation 3/2019 replaces KPPU Regulation No. 13 of 2010 dated October 18, 2010 as lastly amended by KPPU Regulation No. 2 of 2013 dated April 5, 2013 (collectively, “Regulation 13/2010”). Regulation 13/2010 was the implementing regulation of Government Regulation No. 57 of 2010 dated July 22, 2010 on Mergers or Consolidations of Business Entities, and Acquisitions of Company Shares Which May Result in Monopolistic Practices and/or Unfair Business Competition (“GR 57/2010”) in terms of post-transaction notifications processes and requirements.
Regulation 3/2019 re-affirms the criteria for mergers, consolidations, and acquisitions of shares transactions that must be notified to KPPU upon its completion and re-stipulate the notification procedures and requirements as stated in KPPU Reg. 2/2013—with notable changes as follows.
- Transfers of Assets under Regulation 3/2019
Asset transfers are not referred to in Law No. 5 of 1999 dated March 5, 1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition (the “Competition Law”) nor GR 57/2010. Thus, it was understood by the market that assets transfers did not fall under the authority of KPPU. The Competition Law and GR 57/2010 only recognize mergers, consolidations, and acquisitions of shares.
Now, Regulation 3/2019 requires an asset transfer that meets the criteria set out thereunder to be notified to KPPU. KPPU then will assess and determine whether such asset transfer constitute any monopolistic practice and/or unfair business competition. Article 5 of Regulation 3/2019 provides that a asset transfer is treated like an acquisition of shares if such asset transfer (i) results in the transfer of the management and control of the asset, and/or (ii) increases the ability of control of a certain market by the acquiring party. The first criterion, in effect, requires all asset transfers to be subject to Regulation 3/2019, subject only to the value noted below.
Asset transfers that must be notified to KPPU are those that result in: (i) a combined assets value of the acquiring party and the target to exceed Rp2,500,000,000,000 (two trillion five hundred billion Rupiah), and/or (ii) a combined sales value of the acquiring party and the target to exceed Rp5,000,000,000,000 (five trillion Rupiah).
- New Requirement on the Asset and/or Sales Value Calculation
Under Regulation 13/2010, in the case that there is a minimum of 30% (thirty percent) gap between the asset and/or sales value owned by one of the acquiring parties calculated from the latest year to the previous year, then the calculation of the asset and/or sales value of such company will be based on the average value between the asset and/or the sales value from the last 3 (three) years. Now in Regulation 3/2019, KPPU introduces a clarification regarding such calculation. The calculation applies only if the asset and/or the sales value of the latest year is lower than the previous year. Moreover, under Regulation 3/2019 if a company runs its business for less than 3 (three) years, then the value of asset and/or shares of such company is calculated based on the average of asset and/or sales value for the last 2 (two) years.
- New Format for Post-Transaction Notification Forms
Regulation 3/2019 provides a new form of the post-transaction notification form, together with a brief guideline to fill such form.
It is to be noted that the information on competitors, consumers, and suppliers (of the parties involved in the said transaction) are categorized as ‘additional information’ which is only required to be filled at the request of KPPU—which indicates that this ‘additional information’ might not be needed by KPPU for its assessment. Previously, KPPU required the information of competitors, consumers, and suppliers to be submitted for every notification submission.
- Use of KPPU’s own Assumption, Data, and Information
While it was a mere practice of KPPU in the past, Regulation 3/2019 now clearly stipulates that KPPU may use assumptions, data, and/or information that it owns or obtains for the purpose of KPPU’s assessment over any post-transaction notification in the case that the notifying party fails to deliver the ‘additional information’ (information on competitors, consumers, and/or suppliers) or any other supporting data/document as might be requested by KPPU.
- Reporting Obligation on Transactions Conducted Outside Indonesia
Prior to Regulation 3/2019, business actors were not required to notify KPPU on any merger, consolidation, and acquisition of shares transactions occurring outside Indonesia that do not have any significance to the domestic competition conditions and market. Now under Regulation 3/2019, KPPU requires all mergers, consolidations, acquisitions of shares, and asset transfers that occur outside Indonesia to be notified to KPPU if all or one of the parties involved in such transactions conduct business activity or sales in Indonesia. Thus, the transactions that are required to be notified to KPPU do not have to directly impact Indonesian market.
Please note that the criteria of combined assets value and/or combined sales value applies to overseas transactions as well.
November 28, 2019
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- November 28, 2019