D

espite its relatively insignificant financial impact, the recent decision by the country’s antimonopoly agency to fine major poultry industry players found guilty of cartel practices should be applauded, as it will help educate the public about the importance of promoting fair competition in the sector, experts and analysts suggest.

On Thursday, the Business Competition Supervisory Commission (KPPU) ordered 12 companies to pay a total of Rp 119.67 billion (US$9.16 million) in fines for the premature culling of 2 million parent stock chickens following an oversupply of day-old chicks (DOC) in September last year.

The KPPU stated that the instruction from the Agriculture Ministry’s livestock and animal health directorate general to perform the mass cull, which was the first of three stages in the cull of a total of 6 million parent stock chickens, was actually an “order” from the 12 companies in an effort to control market prices.

Among the 12 companies are publicly listed poultry giants Charoen Pokphand Indonesia and Japfa Comfeed Indonesia, each fined Rp 25 billion, and Malindo Feedmill, which was fined Rp 10.83 billion.

“Those fines, however, won’t have a significant impact on their businesses because the figure is small compared to their profits,” Bahana Securities analyst Michael W. Setjoadi told The Jakarta Post.

In the first half of this year, Charoen booked net profits of Rp 1.74 trillion, while Japfa recorded profits of Rp 1 trillion and Malindo Rp 167.8 billion.

At the end of trading on Friday, the stock prices of Charoen, Japfa and Malindo declined by 0.27 percent, 1.73 percent and 2.27 percent, respectively.

“It’s true that we can still survive, but the KPPU’s punishments will lead to brutal competition, in which companies with stronger liquidity will rule the market,” Japfa’s lawyer Rikrik Rizkiyana said.

The KPPU stated the businesses had no valid supporting data to claim an oversupply situation even though the selling price for chickens had plunged 40 percent at that time.

“We are certain, even if cartel practices truly existed, they occurred based on the government’s instruction. Hence, it was not what the 12 companies wanted,” Charoen director Jemmy Wijaya said recently, as quoted by kompas.com.

Meanwhile, Bogor Institute of Agriculture (IPB) economist Iman Sugema said poultry industry players must comply with the KPPU’s decision, because they dominated both upstream and downstream operations within the industry.

Currently Charoen and Japfa are the largest firms operating in the country with activities ranging from breeding to feed and vaccine production, as well as making chicken nuggets.

“Big players have to show the spirit of healthy competition so it can pave the way for small farmers to grow,” Iman said.

To put an end to the alleged monopoly in the poultry industry, Agriculture Minister Andi Amran Sulaiman signed a memorandum of understanding (MoU) in March with various stakeholders, including the KPPU, the Indonesian Poultry Farmers Association and Information Center (Pinsar Indonesia) and the Indonesian Breeders Association (GPPU).

Under to the MoU, big poultry farmers need to build new slaughterhouses away from residential areas. They are also required to support the government’s efforts to strengthen the downstream industry and boost exports by involving small players in the process.