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 15 Apr 2009

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Carrefour Indonesia shrugs off monopoly allegations

The first hearing between retail giant PT Carrefour Indonesia and the anti-monopoly watchdog on possible monopolistic business practices allegedly practiced by Carrefour, ended in stalemate as both have different starting points, reported the Jakarta Post.

Carrefour told Monday’s hearing that they did not have a dominant position in the market, while the Business Competition Supervisory Commission (KPPU) took another opinion, based on their preliminary investigation report.

“We have told the commission that we do not have a dominant market share because ours is still under 50 percent, (which) means that we have been complying with the existing regulations” said  Irawan Kadarman, Carrefour’s corporate affairs director, after the hearing.

Irawan said he based his arguments on AC Nielsen’s recent research that, after its acquisition of supermarket operator PT Alfa Retailindo (Alfa), Carrefour’s market share was only seven percent.

The figure is much lower than the KPPU’s finding which shows that Carrefour’s downstream market share soared to 48.4 percent from 38 percent while its share on the upstream market soared to 67 percent after acquisition of Alfa in January,  up from 45 percent.

The latter figures from KPPU suggest Carrefour may have violated anti-monopoly law (5/1999), which stipulates that a market share of 50 percent [or more] indicates possible  monopolistic practices.

Monday’s hearing was part of a KPPU  preliminary investigation following a report on the retailer’s alleged dominant position leading to monopolistic practices and unfair bargaining power vis a vis suppliers.

KPPU’s Commissioner Dedie Martadisastra, the investigation team leader, said that Carrefour and Nielsen were using different criteria for determining market shares.

“We have clarified our data to Carrefour’s representatives and they said that they would take this into consideration and would decide within the near future whether to accept or reject it,” he added.  

Dedie said that the commission would give Carrefour a chance to change its current business practices by May 13.

“If by that time Carrefour follow our proposal, we will stop the investigation. Otherwise we will move on to the next phase,” Dedie said.

Commented on the dispute, Indonesian Modern Market Supplier Association (AP3MI) chairman Susanto told The Jakarta Post: “Regardless of the fact that measuring the upstream market share is a complicated matter, it is a fact that Carrefour’s bargaining power has been increasing after the acquisition,”

“Carrefour’s exploitation of power was evident in the way it forced suppliers to pay for a major opening fee after the acquisition, while there was a regulation prohibiting such one-sided charges,” Susanto said.

He added that most of the suppliers agreed to pay the fee because if they refused to do so then Carrefour would simply terminate their trading relations and they would lose business.

According to the KPPU, the exploitation of bargaining power is indicated by a worrying trend towards increased additional costs such as promotional fees, and listing fees charged to the suppliers.

The commission will call other stakeholders such as suppliers and other retailers in the next few weeks, according to Dedie.




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