Court halts KPPU fines for airlines accused of price fixing

The Central Jakarta District Court revoked on Monday a decision by the Business Competition Supervisory Commission (KPPU) last year to impose fines amounting to Rp 585 billion (US$66.7 million) on nine local airlines for price fixing.

“The court accepted an appeal request filed by the companies and annulled the ruling made by the agency about the price fixing allegations,” the court’s decision read.

In April of last year, the antimonopoly agency found the nine airlines guilty of fixing their fuel surcharges. Fuel surcharges are additional charges imposed on passengers by airlines.

The nine airlines were PT Garuda Indonesia, PT Sriwijaya Air, PT Merpati Nusantara Airlines, PT Mandala Airlines, PT Travel Express Aviation Service, PT Lion Mentari Airlines, PT Wings Airlines, PT Metro Batavia and PT Kartika Airlines. The KPPU determined the airline operators should pay fines and compensation totaling Rp 585 billion for fixing their fees.

Garuda, for example, was required to pay a fine of Rp 25 billion and compensation of Rp 162 billion.

The KPPU said the airlines had intentionally imposed high fuel surcharges so they could reduce ticket prices.

The monopoly watchdog group said the airlines advertised cheap flights but then charged an additional fee termed a “fuel surcharge” that was later added to the ticket price.

Passengers were estimated to have suffered Rp 13.84 trillion in financial losses because of these charges.

Most airlines impose fuel surcharges but the rates are regularly adjusted with fluctuations in
fuel prices.

According to the district court’s panel of judges, many factors could keep the rate high like global oil price rallies and the currency rate. They determined that price fixing was not necessarily involved. The panel also said the airlines purchased fuel from the same supplier, Pertamina, which explained why surcharge rates were relatively similar.

“We can’t say there was price fixing like what is included in the definition of monopoly,” the head of the panel of judges, Yulman, said, as quoted by detikFinance news portal.

Garuda Indonesia’s lawyer Eri Hertiawan praised the court for annulling the commission’s ruling.

“Since the beginning, we’ve been pretty sure we’ve done nothing wrong. Price fixing never occurred, so I think the court’s decision is in line with the country’s prevailing laws,” he said.

Berla Wahyu Prata, the KPPU’s staff for litigation, said he would report the decision to KPPU commissioners.

“I’ll report the decision first and we’ll discuss whether we need to file an appeal to the Supreme Court or not. But, based on the cooking oil cartel case, we’ll probably go ahead with an appeal,” he said.

On Feb. 23, the court annulled the KPPU’s ruling on the cooking oil cartel, voting in favor of the appeal filed by 22 cooking oil companies. As a result, those companies were not required to pay Rp 299 billion in fines to the state as the KPPU had ordered.