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Jakarta Post

Watchdog probes alleged collusion on airfares

  • Riza Roidila Mufti

    The Jakarta Post

Jakarta   /   Tue, January 22, 2019   /   05:51 pm
Watchdog probes alleged collusion on airfares A Garuda Indonesia Boeing B737-800 aircraft taxis at the Soekarno-Hatta International Airport in Jakarta. (The Jakarta Post/Bagus BT. Saragih)

Reports about rising airfares that recently sparked customer complaints have called regulatory authorities into action as the competition watchdog is probing possible pricing agreements among airlines.

A press conference by the Indonesian National Air Carriers Association (INACA), where it responded to customer complaints by immediately lowering prices, has not put the issue to rest. In fact, it has raised a flag and prompted the Business Competition Supervisory Commission (KPPU) to investigate alleged cartel practices.

“There are indications that several business players -- in this case, the airlines -- have agreed to set prices with other business players. This information is what we would like to look into further,” KPPU commissioner and spokesperson Guntur Syahputra Saragih told the press on Monday.

Guntur said if airlines were found to have had agreements for fixing prices, either to raise or lower airfares, it could possibly be a violation of the 1999 Antimonopoly Law. According to the law, industry players and their competitors are forbidden from working together to set prices.

“To verify and to ask for clarity on this information, we have summoned the relevant parties from the government — the Transportation Ministry — and the industry — airlines — to provide further information on this,” said Guntur, adding that secondary data would also be used in the probe.

He said industry players in the same field could be considered a cartel if they worked together to fix prices, set production volumes or determine their marketing area. Guntur said the KPPU had begun its probe last week but he could not reveal yet when the results of the probes would be announced.

Garuda Indonesia president director I Gusti Ngurah Askhara Danadiputra said as one of the national airlines Garuda Indonesia would cooperate with the KPPU in the investigation.

“We were asked by the KPPU [to provide further information] last Friday. […]  Basically, we are open to providing any information needed by the KPPU,” Askhara told The Jakarta Post on Monday. 

Meanwhile, at a separate occasion on Monday, Transportation Minister Budi Karya Sumadi said the KPPU had the authority to conduct the examination to see whether there was any violation of the laws on monopolies and unhealthy business competition.

However, Budi said he did not believe there was any price fixing.

The KPPU would investigate further should the preliminary probe reveal any indications of cartel practices. After further investigation, the case could be brought to court.

Guntur of the KPPU said it was too early to pass judgment on the airlines. During the investigation, or even at a possible trial, it was possible that the industry players were not proven guilty. Under the prevailing law, industry players can be charged a Rp 25 billion fine if proven guilty.  

Previously, dozens of people filed complaints against the price increase that continued until around Jan. 11, several days after the Christmas and New Year holiday season had ended. Many were surprised at the increase in airlines ticket prices, which seemingly happened at the same time. Following the complaints, INACA agreed to reduce the prices during a press conference on Jan.13.

That move by INACA only led to more suspicion that the airlines industry players had made a deal to fix prices to both raise and lower airfares at the same time.

Earlier, senior economist Faisal Basri called on the KPPU to look into possible collusion among airlines regarding the high ticket prices. “It is weird that they could make the prices go up and down together,” he said on Jan. 15.

Meanwhile, Indonesian Consumers Foundation (YLKI) chairman Tulus Abadi said INACA’s press conference, during which it stated that airlines would reduce their fares, could raise suspicion of oligopolistic or cartel practices, as the airlines seem to have agreed on increasing and decreasing the ticket prices at the same time.

Moreover, aside from examining indications of cartel practices related to airline tickets, the KPPU is currently also probing the dual positions held by a number of Garuda Indonesia’s board of directors in Sriwijaya Air’s new board of commissioners after Garuda Indonesia and Sriwijaya Air signed an operational cooperation agreement (KSO) weeks ago.