ASLI Working Paper Series

Publication Title The Sanction of Merger Cancellation Found in Government Regulation No. 57 Year 2010 & its Irrelevance in the Merger Control Context
Publisher Asian Law Institute
Series WPS020
Publication Date Mar 2011
Author/Speaker Agustinus Prajaka Wahyu Baskara
After waiting for more than 10 years, Indonesia finally enacted the Government Regulation No. 57/2010 concerning the Merger or Consolidation of Business Entities and the Acquisition of Company Shares that could result in Monopolistic Practices and/or Unfair Business Competition on July 20, 2010. This regulation implements the regulations required by articles 28 and 29 of Law No. 5/1999 concerning the Prohibition of Monopolistic Practices and Unfair Business Competition. In paragraph 3 of article 28 of this law, it is stated that “further provisions regarding the prohibition of mergers or consolidations of business entities as referred to in paragraph 1 and provisions concerning the acquisitions of shares in other companies as referred to in paragraph 2 shall be stipulated in a government regulation”. And also in paragraph 2 of article 29 of this law, it is clearly stated that “provisions regarding the determination of assets value and or sales value as well as the procedure of notification as referred to in paragraph 1 shall be stipulated in the government regulation”.

This paper is based on the hypothesis that mergers are good but must be controlled. This is because those which are not properly controlled will result in market domination that may potentially lead to anti-competitive practices. This paper will discuss the issues related to the relevance of merger cancellation as a sanction aimed at maintaining the spirit of fair business competition. If we look at the title of the government regulation, the approach used is the ‘rule of reason’. Referring to the ‘rule of reason’ approach adopted in article 28, an action can be determined only in terms of the extent it results in unfair competition. The most relevant thing is thus its impact, and not the merger itself. In fact, the overriding issue is the misuse of a merger to introduce monopolistic practices and/or unfair business competition.
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