allegation of violating Law No. 5/1999 about prohibition of Monopolistic Practice and Unfair Business Competition (Law No.5/1999) “ PROGRAM OF COMPETITOR EXCLUSION ” in product market of battery done by PT. ABC

Reported Business Actor PT ARTA BOGA CEMERLANG (ABC) The main business of the reported business actor are distributing many kinds of food and non food, including distributing for battery “ABC” which is produced by “PT International Chemical Industrial” and “PT Hari Terang Industrial”.

Background case began from a report received by KPPU stating that assumption of occurrence anti-competitive in promotion program of battery ABC, titling “Program of Competitor Exclusion ” (Program Geser Kompetitor, PGK) during March - June The program activity caused in several grocery shops/semi-grocery in traditional market in area of Java and Bali were bound by ABC through providing discount of 2% if they displayed product of ABC battery and 2% more if they did not sell Panasonic battery. Price discount was given within period of PGK.

Case Handling FOLLOW UP EXAMINATION MADE COUNCIL OF COMMISSIONERS MADE COUNCIL OF COMMISSIONERS EXAMINE THE REPORTER EXAMINE THE REPORTER EXAMINE THE REPORTED BUSINESS ACTOR EXAMINE THE REPORTED BUSINESS ACTOR EXAMINE 6 WITNESSES FROM REPORTER EXAMINE 6 WITNESSES FROM REPORTER EXTENDED EXAMINATION EXAMINE THE REPORTED BUSINESS ACTOR EXAMINE 6 WITNESSES FROM REPORTED BUSINESS ACTOR PRELIMENARY EXAMINATION MADE TEAM WORK TO INVESTIGATE EXAMINE THE REPORTER EXAMINE THE REPORTED BUSINESS ACTOR

The Business Actors and their position in Related Market Of Battery (Related Market of Battery Manganese AA In June May 2003) 4.5 % PT PGI PT DNR PT ABC/ Reported business actor % 6.6 % 0.2 % PT ETI

Related Market The result of investigation showed that ABC and their product (namely ABC Blue Manganese R6) owned dominant position in battery market of manganese UM-3 or Blue R6 or Blue AA or battery product having quality, function and equal price, in grocery and traditional semi-grocery trade in area of Java and Bali. The dominant position is not a conduct infringing Law No. 5/1999 but if the position exercise abusively by business actor and causing unfair business competition, so the business actor has potency to violate Law No.5/1999.

TREND SALES RATIO BATTERRY R6 BLUE OR AA BLUE ABC AND PANASONIC FOR YEAR

Terms and Conditions of Program of Competitor Exclusion Term and condition of Program of Competitor Exclusion as follows: The grocery shops/semi-grocery have to displayed Battery ABC for 3 month consecutively, and they will get additional discount amount of 2%, with term and condition: a. the grocery shops/semi-grocery has minimum 0,5 x 1 mtr space/ABC’s battery display; b. Willing/Able to display ABC Battery; c. willing to display material of promotion of battery ABC. The grocery shops/semi-grocery committed to not sell battery of Panasonic, for that the grocery shops/semi-grocery will get additional discount 2%, with term and condition as follows: a. the grocery shops/semi-grocery which first sold the battery of b. Panasonic, counted March would not sale the battery Panasonic anymore; c. the grocery shops/semi-grocery only want to sale battery ABC;

Program of Competitor Exclusion... Evidences a. Documents: there are 5 documents of Contracts “Program of Competitor Exclusion” (3 contracts “Program of Competitor Exclusion” not sign yet, and 2 contracts “Program of Competitor Exclusion” already signed by grocery shops/semi-grocery. Found 2 receipt of bonus of “Program of Competitor Exclusion” Explanation from witnesses

Program of Competitor Exclusion... The material of 5 Contracts of Program of Competitor Exclusion are the same. The promotion policies, including Program of Competitor Exclusion, are the central policies. Branch offices, Sales Manager and Sales have no power to make or to do any kind of promotion program including Program Competitor Exclusion. The differential of writing in some evidences documents not lessen the value of proofing itself, because the inconsistence in writing did not express the differential of substance from the documents of Program Competitor Exclusion.

Program of Competitor Exclusion... Even the evidence of documents consist only of 5 document of contracts of Program Competitor Exclusion and 2 (two) document of receipts of Bonus “Program Competitor Exclusion and Not Sale any Product of Competitor”, but those documents are powered by explanation of witnesses, which stated that PT ABC held Program Competitor Exclusion.

Article 15 sub-section (3) letter b Closed Agreements (3) Business actor shall be prohibited to make agreement concerning prices or certain price discount for goods and/or services, containing provisions that the business actor receiving goofs and/or services from the supplying business actor: … b. shall not buy same or similar goods and/or services from other business actors who are competitors of the supplying business actor.

Article 19 (a) A business actor shall be prohibited to conduct any activities, either individually or jointly with other business avtors, which could result in the occurrence of monopolistic practices and/or unhealthy business competition in the following firms: a. refuse and/or prevent certain other business actors from conducting the same business activities in the relevant market; or …

Article 25 sub-section (1) letter (a) jo. Sub-section (2) letter (a) Dominant Position (1) A business actor shall be prohibited to use a dominant position either directly or indirectly to: (a) determine the trade condition with the purpose of preventing and/or restraining consumers from obtaining competitive goods and/or services, either in the point of view of price and/or quality; … (2) A business actor shall have a dominant position as referred to in paragraph (1) if: (a) one business actor or a group of business actors control 50% (fifty percent) or more of the market share of a certain type of goods or services;

FACTS PT ABC with market share as 88.73% in battery market of Manganese AA Blue nationally, having intention to exclude or at least make a difficulty for other business actors, in the respect of PT Panasonic Gobel Indonesia (PGI) which markets battery product of Panasonic in market dominated by ABC. PT ABC had determined the trade conditions in Program of Competitor Exclusion with the purpose of preventing and/or restraining consumers of other battery which compete with ABC (price and quality) in The grocery shops/semi-grocery whose joining the program. Furthermore, some founded facts were ABC also prohibited grocery shops or semi-grocery to buy Panasonic battery. It resulted volume decreases in selling battery of Manganese AA Blue owned by PGI, the emergence of potency curtailing competition level which is at the end it will decrease choices for customers to choose battery product as their preference. Those facts became basis of the Commission to view that PGK was an effort of ABC in conducting unfair business practices against other business actors.

Proven ABC was proven validly and convincingly violating Article 15 sub-section (3) letter b, Article 19 letter a, and Article 25 sub-section (1) letter a jo. Sub-section (2) letter a. Related to the violence, the Commission Council cancelled “Program of Competitor Exclusion ” (Program Geser Kompetitor, PGK) developed by ABC with grocery and semi- grocery shops and instructed ABC to halt and not re- developing promotion activity such as PGK or sort of activities.