Newsletter on Indonesian competition law and policy

Vol. 08/II/2009 August 2009

© 2009 Komisi Pengawas Persaingan Usaha All Rights Reserved Publish and Design by Institutional Cooperation Division

Inside

What’s New?Inauguration and Handover of New Officers at the KPPU’s Secretariat

Law EnforcementBid Rigging on the Procurement of Road Periodic Maintenance Project, Simpang Kota Pi-nang, Labuhan Batu RegencyBid Rigging on the Procurement of Furniture and Interior Work in Public Works Agency ofRiau ProvinceBid Rigging in Indoor Cleaning Services in PT Chevron Pacific Indonesia

Competition AdvocacyEvaluation and Study on the Competition Policy in Cooking Oil Industry in Indonesia

InternationalThe 1st AEGC Workshop on the Handbook on Competition Policies and Laws for BusinessThe 4th AEGC Meeting and the 4th AEGC Training WorkshopThe 5th APEC Training Course on Competition Policy, etc.

Commission for the Supervision ofBusiness Competition (KPPU)

Jl. Ir. H. Juanda No. 36, JakartaINDONESIA 10120

Tel: (62-21) 3507015/16/43Fax: (62-21) 3507008

www.kppu.go.idinternational@kppu.go.id

What’s New?

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Drs. Mokhamad Syuhadhak,M.P.A., as the Head of Administra-tion Bureau and Acting SecretaryGeneral;Kurnia Sya'ranie, SH. MH., as theCommissioner’s Expert Staff;Ir. Ani Pudyastuti, M. A.., as theHead of Internal Audit Bureau;Ismed Fadillah, S.H., M.Si., asthe Head of Law Enforcement Bu-reau;Ir. Taufik Ahmad, S.T., M.M., asthe Head of Competition PolicyBureau;A. Junaidi, S.H., M.H., LL.M.,M.Kn., as the Head of Public Rela-tions Bureau.

In an organization, mutation and rota-tion of positions of its employees is aprocess to adjust with the organizationdevelopment and dynamics. Therefore,KPPU as an Indonesian business com-petition institution applies the same.

The inauguration and oath-taking ofthe managerial officers at the KPPU’ssecretariat was held on Friday, August21st, 2009. Then, the handover of thepositions from incumbent officers to thenewly installed officers was directly ledby the KPPU’s Vice Chairman, DidikAkhmadi, Ak., M.Com., on August25th, 2009.

The followings are the names and thepositions of the structural officers at theKPPU’s secretariat:

Inauguration and Handover of New Officers at the KPPU’s Secretariat

In front, from right to left: Ahmad Junaidi (Head of Public Relation Bureau), Taufik Ahmad (Head of Competition Policy Bureau), IsmedFadillah (Head of Law Enforcement Bureau), Ani Pudyastuti (Head of Internal Audit Bureau), Kurnia Syaranie (Commissioner’s ExpertStaff for Legal), and M. Syuhadhak (Secretary General).

Law Enforcement

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Nusantara and PT Audison Nusantarahave committed the horizontal conspir-acy in the tender.

In addition, some facts are also foundconcerning vertical conspiracy, inwhich the Tender Committee for theLocal Budget (APBD) Project of NorthSumatra Province in the Fiscal Year2008, Road Periodic Maintenance Pro-ject of Jalan Simpang Kota Pinang-Batas Tapsel, Labuhan Batu Regency,Labuhan Batu Field and TechnicalSection and Road and Bridge Agencyof Sumatra Province have evaluatedthe bidders and qualified PT AudisonNusantara. As a matter of fact, thecompany does not meet the requiredqualifications. Further, after beingawarded the contract, PT AudisonNusantara subcontracted the project toa third party, namely Jefri Jamril. Thispractice constitutes a violation of theprovisions stipulated in article 32 para-graphs 3 of the Presidential DecreeNumber 80 Year 2003 and the IntegrityPact.

Komisi Pengawas PersainganUsaha – KPPU (the Commis-sion for the Supervision of Busi-ness Competition) has decidedthe Case No. 03/KPPU-L/2009concerning the Tender for RoadPeriodic Maintenance Project,Simpang Kota Pinang, BatasTapsel, Labuhan Batu Regency,Fiscal Year 2008, which hasviolated the provisions stipu-lated in Article 22 of Law Num-ber 5 Year 1999 concerningProhibition of Monopolistic Prac-tices and Unfair Business Com-petition.

The Council’s Session was heldon August 25th, 2009 at theKPPU’s Building and chaired byIr. Dedie S. Martadisastra, S.E.,M.M., in the presence of themembers, namely Ir.Tadjuddin Noer Said and Yoyo Arifard-hani, S.H., M.M., LL.M.

In the case, a horizontal conspiracyhas occurred, in which Jul ArwantoSitepu through the mediator, BinsarSimare-mare has used the names ofPT Parnasib Nusantara, PT NasiotamaKarya Bersama, PT Buana BaruNusantara and PT Audison Nusantarain participating in the tender. In addi-tion, PT Parnasib Nusantara, PT Na-siotama Karya Bersama, PT BuanaBaru Nusantara and PT AudisonNusantara have presented similar Im-plementation Method and Schedule,and List of Proposed Equipments. Inaddition, the Commission’s Councilalso finds the facts that some of thesecompanies has the Board of Directorsand Board of Commissioners with thesame addresses. On the basis of thefacts on the use of the companies’names, similar quotations, family rela-tions and same addresses, it provesthat PT Parnasib Nusantara, PT Nasio-tama Karya Bersama, PT Buana Baru

In the case, there is a potency ofthe state financial loss in thesum of Rp 354,216,653.70 dueto the decision on awarding thecontract to PT Audison Nusan-tara, despite of the fact thatother bidder, (PT BersamaAbadi Jaya) who meets the ten-der requirements and submitsthe quotation with lower price. Inaddition, the tender committeehas made changes to the notar-ial deeds so as to facilitate suchconspiracy.

The Council’s Trial has decidedto prohibit the above-statedcompanies to participate in anytenders administered by theField and Technical Section ofLabuhan Batu Regency, Roadand Bridge Agency of North Su-matra Province. Further, it or-ders the tender winner to pay

the fine in the sum of 50 million Rupiahand recommends that the administra-tive officials at the provincial govern-ment of North Sumatra impose admin-istrative sanctions to the tender com-mittee and asks the Supreme AuditAgency (BPK) to audit the tender forRoad Periodic Maintenance, SimpangKota Pinang – Batas Tapsel, LabuhanBatu Regency, Fiscal Year 2008 andasks the Indonesian Notaries Associa-tion to render supervision against itsmembers before drawing up the deedsfor the companies which will participatein the tenders.

Bid Rigging on the Procurement of Road Periodic Maintenance Pro-ject, Simpang Kota Pinang, Labuhan Batu Regency

ocroad.com

Law Enforcement

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Settlement and Regional InfrastructureAgency (currently, Public WorksAgency) of Riau Province in the FiscalYear 2008, Technical ImplementingOfficers of Building Construction ofRiau Library Building in the Fiscal Year2008 which obviously involved theTender Committee and Direct Appoint-ment of the Local Budget-Funded Ac-tivities at the Settlement and RegionalInfrastructure Agency (currently PublicWorks Agency) of Riau Province, CiptaKarya Division, Fiscal Year 2008).

In this session, it is found that all of thecompanies and government agenciesas above stated are found to involve inthe tender conspiracy and in this case,the Council’s Trial concludes that theycan be decided as suspects. In theimplementation of the Tender for Furni-ture and Interior Work, Riau LibraryConstruction, Office Building Construc-tion at Settlement and Regional Infra-structure (Dinas Pemukiman danPrasarana Wilayah) of Riau Province,Cipta Karya Division, in the fiscal yearof 2008, a tender conspiracy has oc-curred in which, as the Council states,certain brand had been stated in the

The Commission for the Supervision ofBusiness Competition KPPU (the Com-mission for the Supervision of Busi-ness Competition) has decided theCase No. 02/KPPU-L/2009 concerningTender for Furniture and Interior Work,Office Building Construction at Settle-ment and Regional Infrastructure(Dinas Pemukiman dan PrasaranaWilayah) of Riau Province, which hasviolated the provisions stipulated inArticle 22 of Law Number 5 Year 1999concerning Prohibition of MonopolisticPractices and Unfair Business Compe-tition. The Council’s Session was heldon August 25th, 2009 at the KPPU’sBuilding and chaired by Ir. M. Nawir.Messi, M.Sc, in the presence of themembers, namely Dr. Sukarmi, S.H.,M.H., and Didik Akhmadi, A.k.,M.Comm.

The case, involves not only a numberof companies (PT Findomuda DesainCipta, PT. Lince Romauli Raya, PT.Waskita Karya, PT. Wijaya Karya, PT.Pembangunan Perumahan, PTGeo Issec and PT Yodya Karya), butalso a number of government authori-ties (Head of Cipta Karya Sub-Agency,

bid document, bid announcement washeld on Saturday (May 3rd, 2008)which was not a working day, andthere two Self-Estimated Prices (HPS)which was used and validated by dif-ferent committee, similar implementa-tion methods proposed by the biddersand similar personnel from differentbidders.

On the basis of the above facts, thenthe Commission’s Council has decidedthat:

The above mentioned companiesand institutions which are decidedas suspects in the said case havebeen proven violating article 22 ofLaw Number 5 Year 1999.To instruct PT Findomunda Desainto pay the fine of Rp 1 billion.To instruct PT Geo Issec to paythe fine of Rp 150 million.

Bid Rigging on the Procurement of Furniture and Interior Work inPublic Works Agency of Riau Province

fmlink.com

Law Enforcement

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PT Freshklindo Graha Solusi and PTYogi Pratama Mandiri), where thesecompanies were suspected violatingthe tender and shall be decided assuspects in the case.

In this trial, it could be proved that thetender process won by PT Nusa IntiSharindo and PT Avia Jaya Indahcontained tender violation. The viola-tion constitutes vertical conspiracywhere PT. Chevron Indonesia tried tofacilitate certain participants in order todetermine the tender winner. In addi-tion, there was also a horizontal con-spiracy among these companies inorder to determine the tender winner,where the tender participants make anagreement letter to determine the ten-der winner as well as the effort of theparticipants to influence PT Chev-ron in order to evaluate the tender par-ticipants.

The KPPU has decided that the caseNumber 04/KPPU-L/2009 concerningthe tender of Indoor Cleaning Servicesin Duri Dumai (Package I – Number5453-Xk) and Rumbai-Minas (PackageIi-Number 5454-Xk) within the Prem-ises of PT. Chevron Pacific Indonesia,has violated the article 22 of Law Num-ber 5 Year 1999 concerning the Prohi-bition of Monopoly Practice and UnfairBusiness Competition. The trial hasbeen conducted on August 31, 2009 inthe KPPU Building Jakarta and the trialwas chaired by Ir. H. Tadjuddin NoerSaid and the members were Dr. Su-karmi SH., MH and Ir. Dedie S. Marta-disastra, S.E., M.M.

Besides involving several companies(PT Chevron Indonesia, PT. Nusa IntiSarindo, PT Avia Jaya Indah, PTShandy Putra Makmur, PT JacolinFitrab Cabang Pekanbaru,

According to the facts that have beenproved in the trial, then the commis-sion Council decided that:

All suspects in the trial have vio-lated Article 22 of Law Number 5Year 1999To sentence a fine of Rp 2 billionto PT. ChevronTo sentence a fine of Rp 1 billionrespectively to the tender winners(PT Nusa Inti Sharindo and PTAvia Jaya Indah)To prohibit PT Shandy Putra Mak-mur, PT Jacolin Fitrab CabangPekanbaru, PT Freshklindo GrahaSolusi and PT Yogi PratamaMandiri to participate in any tenderheld by PT Chevron Indonesia forduration of 1 year since the issu-ance of this decision.

Bid Rigging in Indoor Cleaning Servicesin PT Chevron Pacific Indonesia

Evaluation and Study on the Competition Policyin Cooking Oil Industry in Indonesia

On Wednesday, 5 August 2009, in theKPPU Office in Jakarta, a limited dis-cussion has been held in order to dis-cuss the Evaluation and Study on theImpact of Competition Policy in Cook-ing Oil Industry in Indonesia. The dis-cussion was held as the KPPU’s effortto obtain additional data and informa-tion from several stakeholders in acomprehensive manner. The discus-sion was attended by several partici-pants from the KPPU Secretariat orrelevant stakeholders (Trade Ministry,Industry Ministry, Indonesian Con-sumer Protection Foundation/YLKI andsome business actors.

The discussion held by presenting aspeaker Ir. Taufik Ahmad (Head ofDKP Bureau of the KPPU) was basedon the fact of the decrease of CPOprice which was relatively dispropor-tional and it affects thedecrease of fried oilprice. Due to the move-ment of fried oil price,either bulk or packed,which is relatively re-sponsive to the increaseof the movement of CPOinput price.

yeelee.com.my

Kompetisia Vol. 08/II/2009

International

Laos). In addition, the workshop alsodiscusses the basic principles in ar-ranging guidelines on competition pol-icy, where the handbook constitutesbasic guidelines to introduce, imple-ment, and enforce competition law aswell as general business competitionadvocacy activities in Southeast Asiaregion.

Competition policy constitutes a cer-tainty to develop a healthy economysystem in a country or territory. In thiscase, ASEAN which plans the FTA,has not possessed any generally appli-cable competition policy and law in itsterritory, considering that ASEAN re-gion constitutes a very potential areafor the growth, development or mobilityof economy.

For that purpose, ASEAN Secretary asthe institution arranging FTA planningin the region considers the importanceof a generally applicable regulation forASEAN region relating to fair businesscompetition. For that purpose, ASEANExpert Group on Competition (AEGC)held the 1st Workshop on the Hand-book on Competition Policies andLaws in ASEAN for Business on 18-19August 2009 in Yogyakarta. The eventheld by ASEAN Secretary and InWent– International Capacity Building (aGermany international donor institu-tion) was attended by the delegation ofbusiness competition authorities fromcountries within Southeast Asia regionas well as experts from Fratini vergano(a business consultant in Europe Un-ion).

This is the first workshop for the pur-pose of obtaining information on thecondition of countries within ASEANregion to be used to arrange an initialdraft for Handbook of Competition Pol-icy to be thoroughly implementedwithin ASEAN region. For that pur-pose, it is necessary to obtain an intactinformation from countries withinASEAN region, either those which al-ready have competition law (Indonesia,Singapore, Thailand, and Vietnam) orthose which have not any competitionlaw (Malaysia, Cambodia, Philippine,Myanmar, Brunei Darussalam and

For the next step, expert will imple-ment their mission in several ASEANcountries in order to obtain informationand implement identification with re-gard to competition that has been heldin order to support the next step to ar-range the draft.

The 1st AEGC Workshop on the Handbook on Competition Policiesand Laws for Business

International

Kompetisia Vol. 08/II/2009

This Workshop was held in coinci-dence with the 4th AEGC Meeting atLangkawi Island, Malaysia on August10th- 12th, 2009. It discussed the ap-proach and methodology as well astechnique to be applied the implemen-tation of the business competition law.In addition, the workshop enumeratedthe objectives of the competition law inan effort to create total welfare, notonly the consumer welfare. Then, theworkshop discussed the case sampleson many kinds of cartels and tendercases which frequently arise. There-fore, a Leniency Program is applied atsome countries in handling the cartelproblems.

The workshop also discussed VerticalAgreement and Vertical Restraint. Ver-tical agreement constitutes an agree-ment among various parties from dif-ferent levels of production chain and

The meeting was held on August 7th-8th, 2009 at Langkawi Island, Malay-sia. It was attended by some represen-tatives from Asian countries and theforum was chaired by the Chairpersonof AEGC from Malaysia.

The meeting discussed all programsand problems as well program plans tobe implemented by the Asian countriesas an effort to create a better competi-tion at the region. The forum high-lighted the notes, progress and deci-sion to the main issues in the meetingto summarize into the ASEAN Secre-tariat Information Paper. In addition,the forum paid attention to some devel-opments achieved by the AEGC.

The meeting also serves a forum toexplain and reports the outputs at-tained in the Regional Guidelineswhich was first held in Bali on July30th-31st, 2009. It also discussed theoutline draft of the handbook to be de-veloped by the experts from FratiniVer-gano on the basis of the outline drafthandbook issued by WG which weredistributed during the third AEGCMeeting. The forum reviewed and ap-proved the outline draft handbook withsome notes that the outline draft hand-book shall only serves as structure forthe Asian countries which have estab-lished the Law on Competition.

In addition, the forum also notes thenegotiation progress with the GTZ inrespect of the the implementation ofthe technical assistance on the compe-tition policy and law in the ASEAN.

distribution, such as distribution agree-ment and goods transportation. Verti-cal Restraint constitutes a restraint inbusiness freedom against one or morebusiness actors to enter any verticalagreement such as the limitationagainst after sale price, the require-ment not to compete, selected goodsdistribution and exclusive goods distri-bution. The negative impact of verticalrestraint reduces inter-brand and intra-brand competition. The positive impactof vertical restraint reduces any “free-riding” in distributors and suppliers.

The 4th AEGC Meeting

The 4th AEGC Training Workshop on Ap-proaches, Methodologies and Techniques ofCompetition Law

International

Kompetisia Vol. 08/II/2009

the improvement of con-sumer welfare occurs inAPEC member countries.With the presence of com-parative study from variousbusiness competition au-thorities within APEC coun-tries, it is expected to pro-vide a new point of viewand perspective from theKPPU toward businesscompetition dynamics.

This activity was held by Taiwan FairTrade Commission (TFTC) and facili-tated by APEC Secretariat and JFTCand attended by several institutionsrelated to business competition withinAPEC countries. The discussion in thetraining was divided into 2 groupsnamely small Group on Vertical Re-straint and small Group on Interrelationbetween Competition Policy and Con-sumer Policy. The Small Group ses-sion on Vertical restraint discusses themechanism of Resale Price Mainte-nance (RPM) either relating to the ef-fect and incentive which underlined theRPM or the dominant aspects such asthe definition and collective dominant.

The Small Group session on Interrela-tion between Competition Policy andConsumer Policy discusses the rela-tionship between business competitionlaw and consumer protection against

ing to market share discount also oc-curred. Where there was a companywhich abused their dominant positionby offering market share and volumediscount. The discount was given by‘golden handcuffs’ where the closedagreement has excluded competitorsfrom the business, and enabled thecompany to determine extremely highprice.

It is expected that the workshop wouldprovide a comprehensive understand-ing for the KPPU against any issuesand problems around business compe-tition law.

The 5th APEC Training Courseon Competition Policy

ASEAN Regional Workshop“The Economics of Monopoly / Dominance”This workshop was held on 24-26 Au-gust 2009 in Da Lat City, Vietnam. Thedelegations attending the workshopwere the representatives from busi-ness competition authorities withinASEAN region and Mongolia, as wellas academicians and government offi-cials.

The workshop discussed the use ofeconomy theories relating to monopolyand market domination. In addition,there was also several case examplesdiscussed in the workshop, such asthose relating to executive dealing in-volving Denstply. The case concerningexecutive dealing between Denstplyand its distributors is the presence ofan entry barrier for the competitors aswell as monopoly. Another case relat-

This workshop was held on August1st-8th, 2009 in Perth, Australia byInternal Auditor Education Foundation(YPIA) and several private organiza-tions, regional government and finan-cial auditor bodies in West Australia.Besides KPPU, Indonesia was alsorepresented by 11 representativesfrom several government institutionsand State Owned Enterprises. Thisworkshop was held in the Price Water-haouse Cooper (PWC) Consultant of-fice which performs government auditprograms by using co-sourcing sys-tem.

International

Kompetisia Vol. 08II/2009

Participation in the Workshop and Technical Visit “Best Practice in In-ternal Audit and Implementation of Internal Control in Public Sector”

mesaaz.org

The workshop also discussed the prac-tical implementation of Governmentinternal control system and Risk Man-agement. In addition, training on bestpractice and risk management, fraudmanagementand the use of CAAT asaudit application was also provided.

It is expected that the activity will beable to contribute a capacity buildingfor the KPPU, particularly for InternalAudit division, so that they would un-derstand the internal audit function aswell as the focus of performance audit.

In accordance with KPPU’s coopera-tion with the Supreme Court and GTZ,the Implementation of Competition LawProject presented an international lec-ture by Mr. Andre Brantz and Mr.Robert Lancop from Canadian Compe-tition Authority on the implementationof competition in Canada with an adop-tion to Indonesian competition law.

The activity held on 12-15 August inBali is aimed to introduce KPPU withinternational experts as well as absorbtheir knowledge in identifying marketpower and its abuses. The lecture ex-

International Lecture on Competition Law

plained overall and rational frameworkon competition policy correlated withtechnical issues on merger control.Therefore, investigation and analysistechnique are needed. The lecture alsodiscuss other aspects such abuse ofdominant position and cartel.

The lecture touch upon case studies inmentioned subjects. In merger, therewere four cases are presented, namelycase on Canadian Waste ServiceMerger, Southam Newspaper Merger,Superior and ICG Merger in PropaneIndustry, and Staples-Office Depot

Merger. For abuse of dominant posi-tion, Laidlaw Waste Management andAC Nielson Case are discussed. As incartel investigation, Quebec City Con-crete and Charterways (the first bidrigging case handled by CanadianCompetition Commission) are dis-cussed.

Despite of short allocated time due topreference in merger control, the lec-ture is a success in providing broadunderstanding on Canadian Competi-tion Law, especially in handlingmerger, cartel, and abuse of dominant.

Kompetisia Vol. 08/II/2009

News Picks

investigating the case, the KPPU hasgiven both parties a chance to explaintheir sides of the issue, Ahmad said.

The battle between Blitz Megaplex andGroup 21 gives a picture of the state ofthe national film industry. After operat-ing for more than 15 years, Group 21’sCineplex 21 is being challenged byGLP’s Blitz. In 2008, Group 21 had379 screens in 90 locations.

Although Blitz cannot hope to competewith Cineplex 21 in terms of the num-bers of screens, it offers superior facili-ties in marquee locations. The chain isplanning to expand to other major cit-ies.Designed as a venue to meet all enter-tainment needs in one place, BlitzMegaplex offers a minimum of eightscreens per cinema complex with vari-ous attractions like lounges.

Group 21 was also reported to theKPPU in 2003 by a nongovernmentalorganization for alleged unfair prac-tices, including manipulation of filmdistribution and having undue influenceover two affiliated companies, CamilaInternusa Film and Satrya PerkasaEsthetika Film. The KPPU dropped thecharges in 2003 due to a lack of evi-dence.

The presence of Blitz Megaplex and itsrapid growth has sent a strong signalto Group 21 to modernize its own facili-ties. In 2007, Group 21 started refur-bishing its Cineplex 21 venues andstarted opening the more sophisticatedCinema XXI and Premiere, which useDolby Digital Cinema 3D technology.

Cinema XXI was first built in Plaza In-donesia, where a Blitz Megaplex islocated, and was followed by movietheaters in malls including PlazaSenayan, Pondok Indah, Gading andPuri in Jakarta, as well as adding cine-mas Bandung and Surabaya.

Allegations of a monopoly over the na-tion’s film distribution network haveresurfaced again, the Business Com-petition Supervisory Commission saidlast Monday, after it received a reporton unfair industry practices last month.

The regulator, also known as theKPPU, said it had received a reportfrom PT Graha Layar Prima, operatorof Blitz Megaplex, claiming that cinemagiant Group 21, along with four dis-tributors and six film production com-panies, had long been in control of thedistribution of movies, especially do-mestic films. The KPPU has invitedGLP and Group 21 to provide informa-tion for the regulator’s investigation onThursday.Based on the report, the strict controlof distribution by Group 21 and its affili-ates had made it difficult for rival cine-mas to gain easy access to local mov-ies.

With its immense market share, Group21 has strong leverage over movie pro-ducers to keep films off rivals’ screens.According to the Indonesian Associa-tion of Movie Entrepreneurs (GPBSI),Group 21 controls 67.6 percent of cine-mas in the country, and 76.9 percent ofthe screens. GLP claims that throughMay, Blitz has only been able to show17 domestic films out of 42.Group 21 is facing possible chargesover its domination of movie distribu-tion, colluding with film importers anddistributors, lack of transparency in itsworking contracts, and having had thesame board of directors from Group 21presiding over two of its units, PTCamila Internusa Film and PT SatryaPerkasa Esthetika Film.

Ahmad Junaidi, KPPU communicationdirector, said on Friday that his officehad not yet made any conclusions re-garding the claims that Group 21 wascompeting unfairly. To obtain sufficientdata and evidence before going further

The reawakening of the local film in-dustry has driven the need for the es-tablishment of more cinemas. Accord-ing to the national film association,there were 483 cinemas with 959screens throughout Indonesia in 2007.

Though less popular than in the na-tion’s golden era of film in 1990 with2,600 cinemas, 2,853 screens and 312million viewers, the public remains en-thusiastic about watching movies.

The history of the national film industrycan be traced to the Dutch era.

Source:http://thejakartaglobe.com/business/blitz-megaplex-in-box-office-brawl-with-group-21-over-alleged-monopoly/327014

Blitz Megaplex in Box-Office BrawlWith Group 21 Over Alleged Monopoly

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News Picks

share, with 127 screens across thecountry.

The KPPU report singles out Cineplex21's alleged unfair practice of not al-lowing other cinema networks to getcopies of the movies until Cineplex 21-affiliated theaters have finishedscreening them.

"Other cinema networks only have theright to screen movies after Cineplex21 has screened them," said Noor.Cineplex 21 screened all 87 films pro-duced in the Indonesian movie industrylast year, while other networks couldonly screen 11, says the report. Mostproducers acknowledged they had tospend at least Rp 20 million(US$2,000) per film copy, out of the Rp5 billion to Rp 10 billion they alreadyspent on production costs.

Because Cineplex 21 has the domi-nant market share, Noor said, produc-ers are reluctant to provide film copiesto other cinema networks.

The cinema industry needs to be morecompetitive as it is dominated by a sin-gle company, a report highlighting un-fair practices in the movie distributionbusiness concludes. Economic ob-server Faisal Basri suggested the filmdistribution sector should operatethrough tenders to enforce good busi-ness practice.

"Better regulation of the movie distribu-tion business is also required," he saidThursday.

The Business Competition SupervisoryCommission's (KPPU) preliminary in-vestigation found movie producerswere overly dependent on the country'slargest cinema network, Cineplex 21,as a result of an alleged lack of healthycompetition. According to the KPPU,Cineplex 21, which is owned by PTNusantara Sejahtera Raya (NSR), anaffiliate of diversified business con-glomerate Subentra Group, will castmovies out of its network if film produc-ers provide copies to other distributionnetworks.

"Producers can only provide a limitednumber of film copies. Therefore, it isconsidered costly to provide copies tonetworks that have a smaller marketshare," said KPPU head of businessmonitoring M. Noor Rofieq in a meetingwith more than 30 movie industry play-ers and academics on Thursday.

The producers can obtain a break-even point in their profit margins fasterif they use the Cineplex 21 network,says the KPPU report.

In 2008, Cineplex 21 had 74.9 percentof the cinema industry market share,with a total of 379 screens, of which213 were located in Greater Jakartaand the rest in other regions. This per-centage excludes cinema networksthat are affiliated with Cineplex 21, thereport says. The non-Cineplex 21 net-works have 25.1 percent of the market

"Most movie producers prefer Cineplex21 because it provides better images,segmentation, number of screens andnumber of film copies. It has the larg-est audiences too."

The report states movie producersstrongly connected to Cineplex 21 re-ceive better technical services whentheir movies are screened together,such as larger spaces and exclusivescreenings.

Source:http://www.thejakartapost.com/news/2009/09/04/healthier-competition-needed-film-business.html

Healthier competition needed in film business

drexel.edu

Kompetisia Vol. 08/II/2009

If you would like to receive this newsletter by e-mail, please send your e-mail address to international@kppu.go.id. This newsletter is published in English by theInstitutional Cooperation Division. Excerpts from this newsletter may be reproduced with full reference. Please send inquiries, comments and items to be consid-ered for publication to:

Deswin NUR (Mr.)Head of Institutional Cooperation Division

Bureau of Public RelationCommission for the Supervision of Business Competition

Jl. Ir. H. Juanda No. 36, Jakarta, INDONESIA 10120Tel: (62-21) 3507015/16/43—Fax: (62-21) 3507008