KPPU, the ideal watchdog for unfair competition

The Jakarta Post ,  Jakarta   |  Mon, 09/10/2007 3:19 PM  |  Opinion

Yuan Yudanda, Jakarta

Observing the recent media coverage of an investigation conducted by the Business Competition Supervisory Commission (KPPU), it is interesting to notice that not all of it has been supportive of the KPPU's efforts to execute its duty as a business competition watchdog.

What began as a demand for the investigation on price-fixing has now turned into a public media circus involving accusations and counter-accusations as well as demands for the KPPU to back down on its probe for various reasons.

For months now, public debates about the allegations of gross violations in business competition practices have been published by the media in numerous articles. Automatically, the KPPU, as the independent supervisory institution overseeing business competition, has also come under the spotlight. Many have reserved criticisms on the KPPU's decision to investigate various allegations of competition malpractice, and some have go so far as to suggest that their decisions were mere formalities due to the fact that they were usually overturned by the court. In addition, critics who questioned the KPPU's actions often cited technicalities as a basis for the KPPU to cease its investigation.

Nevertheless, since early 2007, the KPPU has received a large number of reports from the public, representing businesses and consumers alike. This signifies that the public still regards the commission as having the competency to perform its duties efficiently.

Hopefully, in most cases, public opinion would lean toward the perception that any sort of activity which made it possible for them to have the best options in the market would definitely be the better course of action, that it would be the most beneficial for them in the long run. As such, the bright light turned on the KPPU's investigation should instead fuel a more determined effort in the art of all market stakeholders to ensure a more effective and efficient market.

The public should realize that the form of consumer protection provided by the KPPU is indirect in nature. It is provided through supervising businesses so that effective competition takes place as it should be. Free interaction between supply and demand will set the price equilibrium that will be beneficial to the consumer, so that they have the freedom to choose from a variety of services and products that which suits their purchasing power. Any sort of intervention in that interaction would create a detrimental effect which in the long run will put the consumer at a substantial loss.

Take the allegations directed at Indosat, Telkomsel and Temasek, for instance. It is alleged that through its indirect ownership in the two largest cellular telecommunication companies in Indonesia, Temasek has created a false price equilibrium in which it profited heavily through price fixing. The allegation is of course denied by Temasek, Indosat and Telkomsel. Arguments regarding the government's role in setting tariffs and prices were used in order to deflect the allegations.

However, despite the fact that the government, through its regulations, adopts a certain method or formula for calculating tariffs, it is also important to understand that the same method or formula does not necessarily lead to the same price or tariff for each business. There are other relevant factors in tariff calculation which may cause differences between individual operators. If the tariffs charged by all or some operators are the same in substance without reasonable justifications, there may be an indication of the existence of price fixing.

The Indonesian telecommunications market is an oligopoly as there are only a few players in the market, with high market shares. The possession of a dominant position is not, in itself, unlawful or a violation of the law. However, in an oligopoly, it is entirely possible that businesses will imitate and exercise the sort of power commonly acquired by monopolists. Considering the relatively few players in the market, they can easily reach a common scheme benefiting all players in the market at the expense of their consumers as a whole, such as through price fixing or market allocation. These practices eliminate the very essence of competition and give them a mechanism to charge at the level the monopolist usually charges.

In this case, the KPPU has correctly and carefully decided to expand its investigation of the case. Referring to its internal procedure, the KPPU has the authority to work on a case by its own initiative. Of course, as in most cases, some reported parties were neither cooperative nor willing to provide the KPPU with crucial information. Such a situation can justify the KPPU's decision to extend its investigation. In fact, most of the cases handled by the KPPU were extended before the KPPU could draw a conclusion and render its decision.

The public will find it fair to reserve judgments regarding the case until KPPU concludes its investigation so as to avoid interfering with the process. Those who understand will consider the necessity of maintaining sufficient room for KPPU to examine the case and decide upon it objectively.

Nevertheless, the implementation of a 1999 law by KPPU not only benefits the consumer as had been thought by many. Its implementation could also benefit the many businesses operating in the market themselves, because the elimination of inappropriately placed hindrances against business activities and the prevention of market monopoly made it possible for them to enjoy the free market and encourage economic and industrial growth.

A conducive business climate will make it possible for companies to compete internationally, so as to guarantee employment, and in the end, increase the welfare of the Indonesian public.

The drive to ensure the welfare of Indonesians has prompted the KPPU to take such drastic action in investigating companies which are partly owned by foreign investors. Not to drive away the much needed capital investments, but to ensure that these foreign investors realize that in the end, the interests of the Indonesian public should be put to the forefront.

If to do that they have to undertake an unpopular course of action, then so be it. In any case, if they are successful in creating a market free of unhealthy practices, then the Indonesian market itself would be even more attractive for foreign investors.

The writer is executive director of the Indonesian Telecommunication Observing Society. He can be reached at yuan_yudanda@yahoo.co.id

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