Indonesia’s Commission for Business Competition Supervision (Komisi Pengawasan Persaingan Usaha or KPPU) has finally wound up trial proceedings into an alleged beef cartel. The possible existence of such a cartel has been under investigation since 2009 and the KPPU finally rendered judgment on a total of 32 alleged perpetrators accused of engaging in unfair business practices on Friday, 22 April 2016.

The KPPU judge presiding over the case, Chandra Setiawan, found all of the alleged perpetrators guilty of violating Article 11 and Article 19, part (c) of Law No. 5 of 1999 on the Prohibition of Monopoly and Unfair Business Practices (the so-called Anti-Monopoly Law).

According to Article 11 of the Anti-Monopoly Law, businesses are prohibited from entering into agreements with their competitors with the intention of purposely manipulating market prices through the production and/or marketing control of certain goods or services. Moreover, Article 19, part (c) of the Anti-Monopoly Law also stipulates that businesses are prohibited from engaging in either one or any series of activities, either individually or in cooperation with other businesses, with the intention of manipulating market prices through the limitation of sales and/or circulation of certain goods and/or services. These two provisions stipulate that such activities constitute monopoly and/or unfair business practices, both of which are strictly prohibited under the Anti-Monopoly Law.

Mr. Setiawan also revealed that the KPPU’s investigations uncovered an agreement entered into by Indonesian feedlots and the Meat Producers Association (APFINDO). The KPPU’s investigations also turned up evidence of a series of meetings which resulted in uniform actions being taken by the alleged perpetrators, including a rescheduling of sales that constituted a limiting of beef imports to Jakarta, Bogor, Depok, Tangerang and Bekasi (or the greater Jakarta region know as Jabodetabek). Other evidence uncovered by the investigation encompassed a number of marketing arrangements made by the accused parties. These collusive practices ultimately resulted in abnormal price hikes which ended up damaging the public interest.

“The uniform withholding of supply involved the perpetrators not realizing the beef-import quotas set by the Government,” asserted Mr. Setiawan.

The KPPU’s panel of judges also imposed fines ranging from IDR 71. million to IDR 21 billion on the alleged perpetrators. The full list of fines for each of the sentenced parties breaks down as follows: PT AKM  (IDR 1.9 billion), PT APS (IDR 1.2 billion), PT AGP (IDR 4 billion), PT AJK (IDR 6.4 billion), PT AGK (IDR 1.4 billion), PT AS (IDR 8.8 billion), PT BMT (IDR 2.8 billion), PT CABS (IDR 3.8 billion), PT EI (IDR 2.1 billion), PT FMP (IDR 856 million), PT GGL (IDR 9.3 billion), PT LJP (IDR 3.3 billion), PT LMaL (IDR 3.9 billion), PT LMeL (IDR 651 million), PT PT (IDR 4.7 billion), PT RAI (IDR 3.3 billion), PT SaA (IDR 5.4 billion), PT SNI (IDR 1.8 billion), PT SeA (IDR 1.1 billion), PT TUM (IDR 21.3 billion), PT WMP (IDR 5.8 billion), PT KGU (IDR 1.4 billion), PT SGL (IDR 505 million), PT NTF (IDR 3.8 billion), PT KAR (IDR 194.9 billion), PT SCK (IDR 71 million), PT BPS (IDR 803 million), PT CMT (IDR 1.3 billion), PT KLJ (IDR 2 billion), CV MASang (IDR 852 million), CV MASam (IDR 967 million), and PT KAS (IDR 441 million).

Commenting on the result of the case, KPPU Chairman Syarkawi Rauf asserted that the fines have been imposed in accordance with the provisions set out in the Anti-Monopoly Law. Under the Anti-Monopoly Law, any fines levied can range from a minimum of IDR 1 billion up to a maximum of IDR 25 billion. However, these amounts are not set in stone and any sitting KPPU panel of judges is allowed to make its own calculations. In this case the presiding panel of judges determined that the fines imposed on the perpetrators should amount to 30% of the profits that they enjoyed during the period of the price spike.

“Normally, the annual increase in the price [of beef] ranges between 5% and 7%, however, in 2015 the price skyrocketed for no proper reason,” asserted Mr. Rauf.

Mr. Rofik, a KPPU investigator, has also commented on the case and has revealed that the KPPU started investigating fluctuations in the beef price back in 2009. Mr. Rofik has also affirmed that the unnatural 2015 price spike propelled the KPPU to begin more thorough investigations into the matter. In the course of these investigations, the KPPU discovered that several companies were in fact affiliated to each other, while some even had connections who were blood-relatives (i.e. several companies owned or run by members of the same family). The KPPU’s panel of judges also took this into consideration when handing down their decision.

Meanwhile, Rian Hidayat, the lawyer charged with defending a number of the alleged perpetrators (specifically those designated with numbers I, V, XXIX, XXX, and XXXI), has revealed that his clients have already decided to file a formal challenge to the KPPU’s decision. According to Mr. Hidayat, the decision does not conform to the facts and findings revealed during the trial proceedings. By way of example, Mr. Hidayat points to the fact that during the trial, none of the alleged perpetrators admitted to the existence of an agreement which was formulated during a meeting facilitated by APFINDO.

Mr. Hidayat also asserts that the stipulations set out in Articles 11 and 19 of the Anti-Monopoly Law are intended to regulate production, and thus do not apply to the activities which his clients have been prosecuted for engaging in. Moreover, Mr. Hidayat also points to the fact that the panel’s decision makes no mention of any figures regarding the exact beef supply needed by Indonesia. In this context, the argument made by the prosecution that his clients withheld supply has yet to be properly explained. Additionally, Mr. Hidayat also believes that there is no solid evidence regarding the existence of any unlawful APFINDO agreement which had the intention of manipulating market prices.

“Indeed, people will avoid establishing associations such as APFINDO in the future if they fear that merely being affiliated with such an organization could mean that they fall under suspicion of engaging in unfair business practices,” concluded Mr. Hidayat.

Meanwhile, Nurmalita Malik, the lawyer for defendant number XX, who was given the highest fine, has stated her intention to further discuss possible courses of action with her clients first before making any decision as to whether to file a formal challenge or not. However, Mrs. Malik has already stated her firm belief that her clients were not ultimately involved in the alleged beef cartel.

“I will discuss the issue with my clients first,” Mrs. Malik asserted firmly.

The KPPU’s panel of judges has also issued three recommendations to the government, as the panel has determined that several government policies encompassing the determination of beef quotas also contributed to the price spike.

Firstly, the KPPU is demanding that the Ministry of Agriculture formulates a policy which will secure an affordable beef supply. Secondly, the KPPU is demanding that the Ministry of Trade formulates a policy which will involve the granting of imported-beef quota approvals to importers one year in advance, in order to ensure smooth distribution. And thirdly, the KPPU is also demanding that the Ministry of Trade investigates any affiliations which may exist between importers in order to prevent a reoccurance of any unfair business practices.

Source: KPPU Investigation into Beef Cartel Reaches Conclusion