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NEWS UPDATES 4 November 2009

French retail giant’s Indonesian unit found guilty of monopoly

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After an eight-month investigation, Indonesia’s Business Competition Supervisory Commission (KPPU) ruled Tuesday that retail giant PT Carrefour Indonesia is guilty of monopoly practices and ordered that the France-based company should  sell its subsidiary PT Alfa Retailindo, reported the Jakarta Post.

The commission also required Carrefour to pay 25 billion rupiah ($2.61 million) in fines to the state through the Trade Ministry.

Carrefour can file an appeal with the Central Jakarta District Court if not satisfied with the verdict, KPPU commissioner Dedie S Martadisastra who led the investigation, said.

“They have 14 work days since receiving the verdict to appeal,” Dedie said.

The commission believes that Carrefour’s 2008 acquisition of Alfa led to monopolistic practices, both at upstream (supplier) and downstream (consumer) levels of hypermarket and supermarket, which are prohibited by the Law No. 5/1999 on Monopolies and Unlawful Business Practices.

In January 2008, Carrefour acquired supermarket operator Alfa by buying 75 percent of its shares.

KPPU had initially charged Carrefour with violating Articles 17, 20, 25, and 28 of the law, but only two of these cases were proven.

Dedie said that KPPU investigators had found convincing evidence that Carrefour had controlled up to 57.99 percent market share of retail suppliers (upstream), which goes against Article 17.

“The dominating market share has given Carrefour a strong bargaining power which has been misused to pressure suppliers to agree with their offered trading terms,” another commissioner, Anna Maria Tri Anggraini, said.

According to the commission, Carrefour’s retail downstream market share has also exceeded the limit as stipulated by Article 25.

The company’s downstream retail market stood at 55.9 percent, up from 38 percent before the acquisition of Alfa.

KPPU’s investigators dropped the alleged predatory pricing practices (Article 20) after they failed to find evidence substantiating accusations that the company engaged in a trading scheme that involved lowering prices of goods to hit its retailer competitors.

The accusation of breaching Article 28 was actually proven, the commission said, but it had to be dropped due to the unavailability of government regulations explaining how the article was supposed to be implemented.

Irawan Kadarman, Carrefour Indonesia 's corporate communications director, said that the KPPU’s ruling was unfair, insisting that the company had never monopolised the retail market.

“We will soon hold an internal discussion in regard to the verdict, but I think we will surely file an appeal,” he told the Jakarta Post. 



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