COMMISSION For The SUPERVISION Of BUSINESS

COMPETITION The REPUBLIC Of

INDONESIA

REGIONAL ANTITRUST WORKSHOP

ON ABUSE OF DOMINANCE

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KPPU’s DECISION

• CASE No: 11/KPPU-I/2005

Allegation Violation of the Act No. 5 Year 1999 concerning with Case Bundling conducted by Cement Producer

By. Nur Muhammad INDONESIA

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KPPU carry out investigation based on an initiative of the Commission itself.

The cases come up from cement retailer who suffering losses as a result of

exclusive agreement between producer and distributors.

The agreement related to a model of distribution that called Vertical Marketing

System (VMS)

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Allegations Violation of the Provisions:

Law Number 5 Year 1999 Concerning Prohibition of

Monopolistic Practices and Unfair Business Competition

- Article 11 => Cartel- Article 15 => Exclusive

Dealing Sub Article (3) b, as: Bundling

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Reported Parties

1. Reported I :PT. Semen Gresik Tbk. (producer of cement)

2. Reported II - XI : 10 Distributors

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RELEVANT MARKET

• Product market: 1. Portland Cement Type I, 50 Kg per bag2. Portland Pozzolan Cement, 40 Kg per bag • Geographic Market:Area IV: consist ing of 8 cities (7

Areas)• Market Structure70% Gresik (90% 7 Areas), 30% (5

competitors)

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Pursuant to Article 15

Sub Article (3) b, Act No. 5 year 1999

- “Business actors shall be prohibited from entering into agreements concerning prices or certain price discounts for goods and or services, stipulating that the business actor receiving goods and or services from the supplying business actor:

- b. Shall not buy the same or similar goods and or services from other business actors, competitor of

supplying business actor.

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Inside agreement, producer determines the conditions of trading with the intention as

follow:

1. Fixed the price of buying and price of resale from the level of distributors to retailers;

2. Determined level of profit margin from the level of distributors to retailers;

3. Determined distribution channel with certain number of consumers;

4. Each consumer prohibited to get supply from difference channel;

5. Prohibited from selling the same products from competitors;

6. Violation of the provisions of the agreement, will not get a discount (a bonus system), decrease supply or stop supply.

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BINDING AGREEMENT

such conditions of price fixing of

buying and selling, and shall not buy the same or similar goods

from other business actors, competitors of the supplying

business actors.

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Model of Vertical Marketing System

Arrangements between the producer and his distributor, which involve the allocation of a specific territory

(territorial allocation) or specific type of customers (customer allocation), i.e. where and with whom the distributor

can deal.

R 1 R 2 R 3 R 4 R 5 R 6 R 7 R 8 R 9

VERTICAL MARKETING SYSTEM

PRODUCER(PT. SEMEN GRESIK Tbk.)

Distributor A Distributor B Distributor C

R = retailers

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R 1 R 2 R 3

CONSORTIUM OFFICE (Joint Office)

R 4 R 5 R 6 R 7 R 8 R 9

FLOW OF SUPPLY AND DEMAND

PRODUCER (PT. SEMEN GRESIK Tbk.)

Distributor A Distributor B Distributor C

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R 1 R 2 R 3

CONSORTIUM OFFICE (Joint Office)

R 4 R 5 R 6 R 7 R 8 R 9

FLOW OF FIXING OF PRICE

PRODUCER (PT. SEMEN GRESIK Tbk.)

Distributor A Distributor B Distributor C

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Forms of Vertical Sales Bundling

Exclusive sales contracts are concern by definition with suppliers who are obliged to supply only a specific purchaser in a specific area (exclusive supply obligation) and/or with exclusive purchasing obligations, meaning obligations to purchase products exclusively from the supplier him/herself.

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Sanction Imposed

1. stipulation declaring agreements 2. order to business actors to stop

activities proven to have been causing monopolistic practices or being harmful to retailer.

3. imposition of fine of Rp. 1.000.000.000,- (one billion rupiah)

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Thank You