Exclusive Dealing Case Study on The Distribution of Cement by PT. Semen Gresik Indonesia Presented by : Sholihatun Kiptiyah, KPPU Republic of Indonesia OECD-RCC Workshop Seoul October 2007

The Terminology * Within UNCTAD Model Law On Competition * Within UNCTAD Model Law On Competition Article 3 (a)Refusal To Purchase (b)Refusal To Sale

Indonesia Law No.5/1999 concerning Prohibition of Monopolistic Practices and Unfair Business Competition There is no specific words saying exclusive dealing within the law. But, in some parts, similar issue of exclusive dealing was discussed within the law No.5/1999 especially in Part Nine article 15 by using the term of Closed Agreements

Law No.5/1999 Law No.5/1999 Part Nine : Closed Agreement -Article 15 (1)Business actors shall be prohibited from entering into agreements with other business actors, stipulating that the party receiving the goods (2)Business actors shall be prohibited from entering into agreements with other parties stipluating that the party receiving certain goods and or services must be prepared to buy other goods and or services of the supplying business actor: a. Must be prepared to buy other goods and or services from the supplying business actor, and b. Shall not buy the same or similar goods and or services from other business actors, competitors of the supplying business actor.

The Case The case was investigated by KPPU based on monitoring activities done by KPPU’s secretariat The monitoring was aimed to see the pattern of cement distribution by PT.Semen Gresik

Related Parties PT. Semen Gresik as the producer of cement. Located in East Java. PT.Bina Bangun Putra, PT.Varia Usaha, PT.Waru Abadi, PT.Perusahaan Perdagangan Indonesia (Persero), UD.Mujiharto, TB.Lima Mas, CV.Obor Baru, CV.Tiga Bhakti, CV.Sura Raya Trading Coy, CV.Bumi Gresik ; as the trader of Semen Gresik PT.Bina Bangun Putra, PT.Varia Usaha, PT.Waru Abadi, PT.Perusahaan Perdagangan Indonesia (Persero), UD.Mujiharto, TB.Lima Mas, CV.Obor Baru, CV.Tiga Bhakti, CV.Sura Raya Trading Coy, CV.Bumi Gresik ; as the trader of Semen Gresik

Overview of The Case PT. Semen Gresik had the agreement with other related parties regarding the distribution of the cements produced by PT.Semen Gresik PT.Semen Gresik decided the market area and the price of the cements PT.Semen Gresik provide special treatments to it’s distributors The related parties within this case is in Area 4 PT.Semen Gresik will impose sanction to the distributors whose violate the agreement

Overview of The Case The other related parties established a Consortium of Semen Gresik’s Distributor in Area 4 Each distributor had their own customers (retailers and fixed customers) The consortium agreed to sell Cement produced by PT.Semen Gresik and prohibited the fixed customers and retailers in Area 4 to buy cements produced by PT. Semen Gresik from other distributors. The distributors were prohibited to sell the cements to other customers but their own The Price offered by the fixed customers and retailers are decide by the distributors For those whose violate the agreement will be punished

VMS VERTICAL MARKETING SYSTEM VERTICAL MARKETING SYSTEM (VMS) LT 1 LT 2LT3 LT 4 LT 5LT 6 LT 7 LT 8LT 9 PT. SEMEN GRESIK Tbk. Distributor ADistributor B Distributor C DA/Toko 1DA/Toko 2 DA/Toko 3 DA/Toko 4DA/Toko 5 DA/Toko 6 DA/Toko 7DA/Toko 8 DA/Toko 9

Stipulation The alleged parties found to have violated ; -Article 8 on Law No.5/1999 -Article 11 of Law No.5/1999 -Article 15 (1) of Law No.5/1999 -Article 15 (3). b -Article 25 (1).a

Stipulation Article 8 Business Actors shall be prohibited from entering into agreements with other business actors setting forth the condition that parties receiving goods and or services shall not sell or re-supply goods and or services received by them, at a price lower than the contracted price, potentially causing unfair business competition Article 11 Business actors shall be prohibited from entering into agreements with their competing business actors, with the intention of influencing prices by arranging production and or marketing of certain goods and or services, which may result in monopolistic practices and or unfair business competition

Stipulation Article 15 (1) Business actors shall be prohibited from entering into agreements with other business actors, stipulating that the party receiving the goods and or other services shall only re-supply or not re- supply the aforementioned goods and or services to certain parties and or at a certain place Article 15 (3).b (3) 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, competitors of the supplying business actor.

Stipulation Article 25 (1) a (1) Business actors shall be prohibited from using dominant position either directly or indirectly to : a.Determine the conditions of trading with the intention of preventing and or barring consumers from obtaining competitive goods and or services, both in terms of price and quality;

KPPU’s decision Prohibit the price fixing of cements done by PT.Semen Gresik Ordering related parties to dismiss the consortium Ordering PT Semen Gresik to eliminate certain points within the agreement which prohibited the distributor to sell other companies products and to supply the fixed consumers which not belong to the distributor’s group

THANK YOU Sholihatun Kiptiyah