Violation of Law No. 5/1999 Concerning Prohibition of Monopolistic Practice and Unfair Business Competition (Law No.5/1999)

ABUSE OF DOMINANCE IN DISTRIBUTION OF DRY CELL BATTERY

“Competitor Exclusion Program”

Verry Iskandar

M. Hadi Susanto

Commission for the Supervision of

Business Competition (KPPU)

Republic of Indonesia

Reported Business Actor

PT ARTA BOGA CEMERLANG (ABC)

The main business of the reported business actor are distributing many kinds of food and non food, including distributing for battery “ABC” which is produced by “PT International Chemical Industrial” and “PT Hari Terang Industrial”.

Background

Case began from a report received by KPPU stating that assumption of occurrence anti-competitive in promotion program of Dry Cell Battery “ABC”, so called “Competitor Exclusion Program” (Program Geser Kompetitor, PGK/CEP) during March - June 2004.

The program activities caused in several groceries, shops/semi-groceries in traditional market in area of Java and Bali were restricted by ABC through providing discount of 2% if they displayed product of ABC battery and 2% additional discount or more if they did not sell Panasonic battery. Price discount was given within period of PGK/CEP.

ABC

D C AA D C AA AAA

Panasonic

Extra Heavy Duty

Heavy Duty

General Purpose

Economy Model

MAIN MANGANESE BATTERY LINE UP

Relevant Product Market

Manganese UM-3 or R6 biru Battery or AA Blue or battery product having function, quality, and equal price

Relevant Geographical Market

JAVA & BALI

Relevant Market

Market Share

PGI7%

Others< 1%

ETI4%

ABC88%

June 2002 – May 2003

FACTS ABC with market share as 88% in dry cell battery

market of Manganese AA Blue, nationally having intention to exclude or at least make a difficulty for other business actors, in the respect of PT Panasonic Gobel Indonesia (PGI) which markets battery product of Panasonic in market dominated by ABC.

Furthermore, some facts also found that ABC also prohibited grocery shops or semi-groceries to buy Panasonic battery.

It resulted volume decreases in selling battery of Manganese AA Blue distributed by PGI, the emergence of potency curtailing competition level which is at the end it will decrease choices for customers to choose battery product as their preference.

Those facts became basis of the Commission to view that PGK/CEP was an effort of ABC in conducting unfair business practices against other business actors using their dominance.

Contain of ContractTerm and condition of Competitor Exclusion Program as

follows: The grocery shops/semi-grocery have to displayed

Battery ABC for 3 month consecutively, and they will get additional discount amount of 2%, with term and condition:

a) the grocery shops/semi-grocery has minimum 0,5 mtr x 1 mtr space/ABC’s battery display;

b) willing/able to display ABC Battery;c) willing to display material of promotion of battery

ABC.

a) The grocery shops/semi-grocery committed not to sell battery of Panasonic, for that the grocery shops/semi-grocery will get additional discount of 2%, with term and condition as follows:

a) the grocery shops/semi-grocery which first sold the battery of Panasonic, counted March would not sale the battery Panasonic anymore;

b) the grocery shops/semi-grocery only want to sale battery ABC;

Competitor Exclusion Program

In the investigation the Commission found many contracts of CEP typed with various font/letter, but the substance of contracts of Competitor Exclusion Program are the same.

The promotion policies, including Competitor Exclusion Program, are the Central Office policies. Branch offices, Sales Manager and Sales have no power or authority to make or to do any kinds of promotion program including Competitor Exclusion Program.

The differential of writing in some evidences documents not reducing the value of evidence itself, because the inconsistence in writing did not express the differential of substance from both documents of Competitor Exclusion Program.

Competitor Exclusion Program

Even the evidence of documents consist only of 5 document of contracts of Competitor Exclusion Program and 2 (two) documents of receipt of Bonus “Competitor Exclusion Program and Not to Sale any Products of Competitor”, but those documents are supported by explanation of witnesses (under oath), which stated that PT ABC was committed Competitor Exclusion Program.

Selling Trend (During the CEP Period)

0

5000

10000

15000

20000

25000

30000

35000

40000

J anuari Pebruari Maret April Mei J uni J uli Agustus September Oktober Nopember Desember

Panasonic 2003 Panasonic 2004 ABC 2003 ABC 2004

Related Market The investigation conducted by Commission

showed that ABC and their product (namely ABC Blue Manganese R6/AA) having dominant position in battery market of manganese UM-3 or Blue R6 or Blue AA or battery product having quality, function and equal price, in grocery and traditional semi-grocery trade in area of Java and Bali.

Having dominant position its self is not a conduct infringe Law No. 5 of 1999 but if the position exercise abusively by business actor and causing unfair business competition, so the business actor has potency to violate Law No.5/1999.

Conclusion

ABC was proven validly and convincingly violating Article 15 sub-section (3) letter b, Article 19 letter a, and Article 25 sub-section (1) letter a and Sub-section (2) letter a Law Number 5 of 1999.

Related to the violence, the Commission order ABC to stop “Competitor Exclusion Program” (Program Geser Kompetitor, PGK/CEP) developed by ABC with grocery and semi-grocery shops and instructed ABC to halt and not re-developing promotion activity such as PGK/CEP or sort of activities.

KPPU Republic of Indonesia

THANK YOU

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