COMMISSION For The SUPERVISION Of BUSINESS COMPETITION The REPUBLIC Of INDONESIA REGIONAL ANTITRUST WORKSHOP ON ABUSE OF DOMINANCE

2 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

3 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)

4 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

5 Reported Parties 1.Reported I : PT. Semen Gresik Tbk. (producer of cement) 2.Reported II - XI : 10 Distributors

6 RELEVANT MARKET Product market: 1.Portland Cement Type I, 50 Kg per bag 2. Portland Pozzolan Cement, 40 Kg per bag Geographic Market: Area IV: consist ing of 8 cities (7 Areas) Market Structure 70% Gresik (90% 7 Areas), 30% (5 competitors)

7 Pursuant to Article 15 Sub Article (3) b, Act No. 5 year “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.

8 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.

9 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.

10 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 1R 2R 3 R 4R 5R 6 R 7R 8R 9 VERTICAL MARKETING SYSTEM PRODUCER (PT. SEMEN GRESIK Tbk.) Distributor ADistributor BDistributor C R = retailers

12 R 1R 2R 3 CONSORTIUM OFFICE (Joint Office) R 4R 5R 6 R 7R 8R 9 FLOW OF SUPPLY AND DEMAND PRODUCER (PT. SEMEN GRESIK Tbk.) Distributor ADistributor BDistributor C

13 R 1R 2R 3 CONSORTIUM OFFICE (Joint Office) R 4R 5R 6 R 7R 8R 9 FLOW OF FIXING OF PRICE PRODUCER (PT. SEMEN GRESIK Tbk.) Distributor ADistributor BDistributor C

14 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.

15 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 ,- (one billion rupiah)

16 Thank You