Yes, there is a regulatory regime applicable to mergers and similar transactions.

The Indonesian Competition Commission (Komisi Pengawas Persaingan Usaha, “KPPU”).

Not applicable.

The merger filing requirements in Indonesia are set out in several laws and regulations, as follows:

1. Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unhealthy Business Competition, as amended by the Job Creation Law (the “Indonesian Competition Law”);
2. Law No. 6 of 2023 on the Ratification of Government Regulation No. 2 of 2022 (in lieu of Law No. 11 of 2020 on Job Creation) into Law (the “Job Creation Law”;
3. Government Regulation No. 57/2010 on Mergers, Consolidation and Acquisition of Shares that May Result in Monopolistic or Unfair Business Competition Practices;
4. Government Regulation No. 44/2021 on the Implementation of the Prohibition of Monopolistic and Unhealthy Business Competition Practices (“GR 44/2021”);
5. Government Regulation No. 20/2023 on the Type and Rates of Non-Tax State Revenues at the KPPU;
6. KPPU Regulation No. 4/2012 on Guidelines for the Imposition of Penalties for Late Notification of a Merger, Consolidation of a Company or the Acquisition of Shares in a Company;
7. KPPU Regulation No. 3/2023 on the Assessment of Mergers or Consolidations of Undertakings or Acquisition of Shares in a Company that May Result in Monopolistic Practices or Unfair Competition;
8. KPPU Guidelines on the Assessment of Mergers, Consolidations, or Acquisitions issued on 6 October 2020 (the “Merger Guidelines”); and
9. Supreme Court Circular Letter No. 1/2021 on the Transfer of Examination of Objections to KPPU Decisions to the Commercial Court.

The following KPPU regulations are also relevant:

1. KPPU Chair Regulation No. 4/2022 on the Definition of Relevant Markets;
2. KPPU Regulation No. 2/2023 on the Case Handling Procedure; and
3. KPPU Regulation No. 2 of 2021 on Guidelines for Enforcement of Sanctions of Violation of Monopolies and Unfair Competition (“KPPU Regulation No. 2/2021”).

The following transactions are caught:

1. Mergers are defined as the juridical act of one or more undertakings merging with another undertaking, resulting in assets and liabilities being transferred by operation of law to one undertaking, and the legal status of the other to cease by operation of law.
2. Consolidation is defined as the juridical act of two undertakings or more to consolidate by establishing a new undertaking that obtains the assets and liabilities from the consolidating undertaking by operation of law, with the legal status of the consolidating undertakings ceasing by operation of law.
3. Acquisition is defined as the juridical act of an undertaking acquiring shares or assets of another undertaking resulting in a change of control of the undertaking or assets of the undertaking. It is generally assumed that a change of control could also involve a change from sole to joint control.

The concepts ‘merger’, ‘consolidation’ and ‘acquisition’, should be interpreted broadly, meaning any type of concentration of control over undertakings that were previously independent into one undertaking or one group of undertakings, or a change of control from one undertaking to another undertaking that results in a concentration of control or market concentration.

A share acquisition may be achieved via direct purchase from the existing shareholder, the capital market, or via subscription of new shares by capital injection. It goes beyond the conventional understanding of the term by encompassing legal instruments conceptually similar to shares, which enable their owners to control and receive benefit from such ownership (e.g., a participating interest commonly acquired in the oil and gas industry). An acquisition of shares with no, or limited, voting rights (preferred stock) is exempt from notification as no change of control results.

A transfer of assets (tangible or intangible) is tantamount to the acquisition of shares and, accordingly, should be notified to the KPPU, if there are:

1. a transfer of their management control or physical control; or
2. an increase in the ability of the acquirer to control a relevant market;

Exemptions

The following asset transfers are exempt:

1. a non-bank asset transfer transaction valued at < IDR250 billion (approximately USD $16.6 million, based on an exchange rate of USD $1 = IDR 15,000);
2. a bank asset transfer transaction valued at < IDR2.5 trillion (approximately USD $166 million);

Depending on the circumstances, a minority investment may trigger a notification requirement.

One of the criteria that triggers a notification filing is the occurrence of a change of control. Under the Indonesian merger control regime, control occurs if the acquiring party holds more than 50 percent of the shares or voting rights or holds 50 percent of the shares or voting rights or less but the ability to influence or direct the company’s policy or management, or both.

Whether the acquiring party has the ability to influence or direct the undertaking’s policy or management is to be determined case by case. Case law shows that an acquiring party may, for instance, have control despite minority shareholding but because it has certain veto rights and a right to nominate the majority of directors, including the president director, or where it has more expertise than the other shareholder in the business in which the target is engaged.

Foreign-to-foreign mergers may have to be notified if they have a dual nexus and an impact on the Indonesian market.

As with the pre-2019 approach, another major change is that only foreign-to-foreign transactions that have a dual nexus with Indonesia will need to be notified to the KPPU. This means that two undertakings involved in the transaction should directly or indirectly (through affiliates) have business in or sales to Indonesia. This is again a significant development: under the 2019 regulation, even a transaction involving only one undertaking with business in or sales to Indonesia (single-nexus) could trigger a notification to the KPPU. This was another reason why the number of notifications in Indonesia spiked in 2019. It is expected that the dual-nexus approach will be another reason for a reduction in the number of foreign-to-foreign transactions that need to be notified to the KPPU.

In addition, the transaction should have an impact on the Indonesian market. According to the Merger Guidelines, this ‘includes’ a situation where one party that carries out the merger, consolidation or acquisition, has business activities in Indonesia and the other party does not but has a sister company that carries out business activities in or has sales to Indonesia. Other transactions with an impact would occur if two parties involved in the transaction have sales. In other words, transactions that create a concentration in Indonesia (i.e., with at least two parties involved in the transaction having business or sales in Indonesia) would, in principle, need to be filed in Indonesia.

Based on the Single Economic Entity doctrine, a party referred to above can form part of a business group with (1) the surviving undertaking in a merger or the undertaking that carries out the consolidation or acquisition, (2) the undertaking that carries out the consolidation or (3) the undertaking that carries out the acquisition or the undertaking that is being acquired. Other parties involved in the transaction relevant to establishing nexus are the seller who becomes a joint controller or target, and any of its affiliates.

‘Business activities in Indonesia’ can be broadly interpreted and include direct and indirect (portfolio) equity investment in an Indonesian limited liability company (Perseroan Terbatas, or “PT”), investment in financial instruments other than shares, such as loans or assets, contractual rights, participation in a unit or trust, no matter whether directly or indirectly, or the opening of a representative office.

Whether a company has ‘sales in Indonesia’ is not always easy to determine. Note that parallel sales could also trigger a notification requirement.

Although a transaction is believed not to have any impact on the Indonesian market if just one party has business or sales in Indonesia, parties to the transaction are encouraged to notify the transaction so that the KPPU can assess the impact of the transaction on the Indonesian market comprehensively.

The applicable thresholds for notification are:

1. combined worldwide value of assets exceeds IDR2.5 trillion (approximately USD $166 million, based on an exchange rate of USD $1 = IDR15,000) or if all undertakings involved in the transaction are active in the banking sector, IDR20 trillion (approximately  USD $1.333 billion); and/or
2. combined sales value exceeds IDR5 trillion (approximately USD $332 million) in Indonesia.

‘Target’ will include the target and its subsidiaries, and the seller is not taken into account. However, if the transaction results in a change from single to joint control, the combined assets or sales in Indonesia, or both, of the existing shareholder and its affiliates are also relevant (unless the target is a joint venture within the meaning discussed below).

The asset and sales value are calculated based on the latest consolidated audited financial report of the ultimate beneficial owner or, if no consolidated financial report is available, the financial reports of the ultimate beneficial owner and each of its subsidiaries. Sales value includes sales of products produced domestically and imported products. Exported products should be excluded from the calculation.

If the asset or sales value of a party involved in the merger, consolidation or acquisition has decreased by 30 percent or more in an accounting year as compared to the year before, the value is calculated on the basis of the average in the past three years, or if the decrease occurred in under three years, the average in the past two years.

If the transaction involves a joint venture, the ultimate controlling entity for the calculation of the asset and sales value is the joint venture itself, so the calculation should be based on the financial statements of the joint venture as well as of the target and its subsidiaries (if any). The asset and sales value of other affiliates of the joint venture (e.g., the controlling entities, and sister companies) may be ignored for the calculation of the threshold.

According to the KPPU, the joint venture referred to above should form an independent business unit, independent of each of the shareholders that have formed the joint venture. The joint venture should have its own financial statements, separated from each of the undertakings that have formed it.

The KPPU does not seem to require that the shareholding of parent companies in the joint venture is equal (i.e., 50:50), or that they have exactly the same rights over the governance of the joint venture; but rather that both parent companies are given rights over strategic decisions (including veto rights) that would confer on them joint control over the joint venture.

Indonesia adopts a mandatory post-merger regime if all criteria are met. Parties involved in the transaction may also carry out a voluntary pre-merger consultation. However, even if parties carry out a voluntary pre-merger consultation, a post-merger notification will still be mandatory.

A transaction that meets the relevant criteria should in principle be filed within 30 business days of the date that the transaction becomes legally effective.

‘Business days’ excludes Saturdays and Sundays, official national holidays and joint leave days determined by the Government of Indonesia.

If the target is an Indonesian limited liability company, a transaction becomes legally effective:

1. For a merger:
   1. the date of approval of the Minister of Law and Human Rights (“MoLHR”) of the amendment of the articles of association;
2. For a consolidation:
   1. the date of approval of the MoLHR of the deed of establishment;
3. For an acquisition:
   1. the date of notification of the MoLHR; and
4. For the acquisition of assets:
   1. the date of the asset transfer.

A transaction involving a target that is a public company becomes legally effective on the date of the public disclosure letter of the transaction submitted to the Financial Services Authority (Otoritas Jasa Keuangan, "OJK") or the last date of payment of shares and/or other equity securities in the exercise of a rights issuance, merger, consolidation, or acquisition carried out by a public company in connection with a public company or a private company in connection with a public company;

The commencement of validity of foreign-to-foreign transactions is based on the closing date in the agreement between the parties or approval by the authorities in the jurisdiction in which the transaction takes place.

If a transaction has more than one date on which the transaction is to become legally valid, the last date will apply.

As Indonesia adopts a post-merger system, there are no waiting periods, and implementation of the transaction does not have to be suspended prior to clearance.

Under the new regulation, notifications must be submitted through an online portal (referred to in the new merger control regulation as the “notification system”), at notifikasi.kppu.go.id. The portal is only accessible between 9 am and 2 pm on business days, which excludes Saturdays and Sundays, official national holidays and joint leave. This implies that a notification not submitted before 2 pm on the day of the deadline of 30 business days after the transaction becomes effective and deemed complete by the KPPU task force handling the notification will be considered a late submission, and be subject to penalties of IDR 1 billion (approx. USD $67,000) per day, with a maximum of IDR 25 billion (approximately USD $1,675,000).

A filing document consists of a notification form and supporting documentation. The notification form provides, among other things, general details of the acquiring party and its affiliates, target and its subsidiaries, sales and assets figures, products and estimated market shares in Indonesia.

1. A power of attorney (notarised and consularised if signed abroad) granted by the notifying party to legal representatives to make the submission to the KPPU;
2. Corporate documents and audited financial reports of the parties and their affiliates for the last 3 years. Foreign language documents, in principle, need to be translated into Bahasa Indonesia. (A translated summary of each submitted document is permissible);
3. Company profiles of the acquiring party and target;
4. Business structure schemes before and after the transaction;
5. A business plan containing an industry analysis, management strategy for the next three to five years;
6. An impact analysis (of transactions, market share, markets affected or the benefits of the transaction);
7. A summary of the transaction;
8. Receipt of payment of filing fees amounting to IDR 150 million.

In addition to the above, the KPPU can ask parties to submit supplementary documents and additional information on competitors, suppliers and consumers.

Incomplete notifications will not be accepted, and the KPPU will not issue a receipt of submission. If the submission is late, the KPPU may initiate a formal investigation and may impose penalties for the delay. Further, if inaccurate or misleading data is suspected to have been submitted, the KPPU may carry out its own assessment using its own data.

As of May 2023, the KPPU charges filing fees. They are calculated by multiplying the value of assets or sales in excess of the notification threshold, whichever is lower, by 0.004 percent based on Government Regulation No. 20/2023.

The value of assets or sales is based on the total asset or sales value of:

1. the surviving entity, the consolidating undertaking, or the acquiring undertaking and the acquired undertaking; and
2. the undertakings that are directly or indirectly controlled by the surviving undertaking resulting from the merger, the consolidating undertaking, or the acquiring undertaking and the acquired undertaking.

If both the asset and sales value meet the threshold, the filing fee will be calculated using whichever value is lower and will only be payable if the KPPU finds that the transaction is notifiable. The maximum fee is IDR 150 million.

The notification fee can be reduced to zero percent or fully waived based on one or more of the following considerations:

1. the transaction supports the development of micro, small, and medium-sized enterprises;
2. inability to pay or force majeure; or
3. pursuant to a specific government policy.

These considerations are to be further elaborated in a KPPU regulation, subject to prior approval from the Minister of Finance.

Notification review is carried out in 2 stages:

1. Receipt of notification

After a notification is submitted, the KPPU will examine the completeness of the required information and supporting documents. The KPPU is entitled to request supplementary information/documents if deemed necessary. Only when the KPPU considers the information and supporting documents complete will a notification receipt be issued. The issuance date of the receipt would be considered as the notification date.

During this phase, which is applicable to all notified transactions, now also consists of a check if the transaction is notifiable. This check should be completed within three business days after the notification is submitted. If the notification documents are complete, the KPPU will issue a notification registration number and official confirmation on whether or not the transaction is notifiable. If the transaction is notifiable, the notification will continue to the review phase. If the notification documents are not complete, the KPPU will request the undertaking to provide whatever additional documents/information that may be deemed necessary.

1. A review, consisting of initial and comprehensive review sub-phases (90 business days)

In Stage 2, after the Stage 1 period has ended and if notification is deemed to be required, the KPPU has a further 90 business days to carry out its assessment and issue its opinion. The assessment may consist of initial and comprehensive review sub-phases, with the latter only being applicable to transactions that appear to be problematic from an Indonesian competition perspective.

If submitted information or documents prove to be false, the KPPU may cancel the registration of the notification and/or the findings of its review. Cancellation may again be treated as late notification, and be subject to penalties of IDR 1 billion (approx. USD $67,000) per day, with a maximum of IDR 25 billion (approximately USD $1,675,000).

Substantive test for clearance

The KPPU carries out a comprehensive assessment if the Herfindahl–Hirschman Index (HHI) is between 1,500 and 2,500, and the change in HHI is above 250; or the HHI is above 2,500 and the change is above 150. If the market concentration test is positive, the KPPU will consider entry barriers.

Simplified Assessment

The KPPU introduced a simplified assessment for transactions that are not expected to raise competition concerns. Simplified assessment can be carried out at the initiative of KPPU or based on request by the notifying party, if:

1. The parties are not engaged in overlapping business activities;
2. The parties are not engaged in vertically integrated business activities;
3. Should overlapping business activities exist, they have a limited joint market share (HHI ratio ≤ 1,500 – 2,500 and ΔHHI ≤ 250; or HHI ratio > 2,500 and ΔHHI ≤ 150);
4. Should vertically integrated business activities exist, they have a limited market share for each business activity (HHI ratio < 1,500);
5. The transaction should not have tying or bundling potential, or network effect;
6. The notification is submitted within 30 business days of the legal effective date of the transaction; and/or
7. The transaction involves an acquisition resulting in an undertaking gaining sole control (from joint control with another undertaking hitherto).

The KPPU will assess whether the filing is suited to a simplified assessment during the clarification and examination process. If the KPPU decides to proceed with or grants the notifying party’s request for a simplified assessment, it should complete the assessment in 14 business days.

The regulations are silent on whether the time frame for general and simplified assessment can be shortened or extended. In practice, the KPPU may need more time to issue its opinion.

KPPU tests the level of concentration by applying the HHI or CRn. Only if the market concentration test is positive as indicated by (i) the HHI concentration ratio is between 1,500 – 2,500 and ΔHHI (level of concentration before and after the transaction) exceeds 250; or (ii) the HHI concentration ratio is between 2,500 and ΔHHI exceeds 150, would the KPPU carry out a comprehensive assessment of other aspects, as explained in point 14 above.

Upon completing the assessment, KPPU will issue a Statement which contains one of the following Opinions:

1. No alleged monopoly and/or unfair business competition (as part of the initial review phase);
2. Alleged monopoly and/or unfair business competition (as part of the initial review phase); or
3. Alleged monopoly and/or unfair business competition, with conditional approval (as part of the comprehensive review phase).

If the KPPU is concerned about a transaction, the parties may try to negotiate structural remedies (i.e., divestiture) or behavioral remedies, for example:

1. Structural remedies:
   1. Share divestment
   2. Other divestment equivalent to share divestment
2. Behavioral remedies:
   1. Granting of access to the intellectual property of certain essential facilities;
   2. Removal of barriers to entry, such as:
      1. Exclusive agreements;
      2. Consumer switching cost;
      3. Tying and bundling; and/or
      4. Barriers to supply and purchase.
3. Determination of fair selling price by taking into account the production costs, costs of goods sold and other relevant costs;
4. If KPPU finds that the transaction potentially violates other regulations, KPPU may notify the authority or institution that oversees the implementation of such regulations to ensure the undertaking’s compliance.

The notifying party is permitted to request remedies in the form of structural or behavioral remedies, or determination of fair selling price. The request should be submitted along with the notification or during the assessment process in the framework of the comprehensive review phase.

Failure to notify a transaction that triggers a notification obligation is treated as a late notification, subject to administrative fines of a minimum IDR1 billion (approx. USD $66,666, based on an exchange rate of USD $1 = IDR15,000). Previously, the maximum amount in administrative fine was IDR25 billion (approx. USD $ 1,666,650, based on an exchange rate of USD $1 = IDR15,000) for violation of the ICL.

Further, the KPPU recently issued KPPU Regulation No. 2/2021, which stipulates that the fine of IDR1 billion constitutes a base fine, plus certain values calculated based on:

1. negative impact caused by the violation;
2. duration of violation;
3. mitigating factors;
4. aggravating factors; and
5. the ability of the undertaking to pay.

The final calculation of fines is subject to the following limits:

1. a maximum of 50% of net profit earned by an undertaking in the relevant market during the period of the violation; or
2. a maximum of 10% of total revenues from the relevant market during the period of the violation.

If incorrect or misleading data is suspected to have been submitted, the KPPU may ask the notifying party to rectify it or carry out the assessment using its own data.

If misleading data leads to abuse of dominance or prohibited agreements, the KPPU may initiate a separate investigation against transactions that allegedly violate other provisions under the ICL.

Indonesia adopts a post-merger system, hence, only completed transactions are notified.

Subsequent to a notification being made to the KPPU, the KPPU may issue an order to cancel a prohibited transaction. However, it is unclear as to how a merger, consolidation or acquisition, post-transaction, can be undone from a corporate law perspective. So far, the KPPU has never imposed this type of sanction.

It also remains unclear how the sanction would be imposed if the transaction concerns foreign-to-foreign transactions.

A non-notifiable transaction is unlikely to raise competition concerns. Before the KPPU issues a Statement of No Notification Required, the authority may always request the transaction parties to explain/clarify the transaction.

To initiate a case, the KPPU primarily relies on media reports or notifications to a government institution to detect a party’s failure to notify a transaction.

Further, the KPPU may always ask the transaction parties to clarify an unnotified transaction.

If the KPPU deems that the clarification is not satisfactory, the authority may initiate a formal inquiry in connection with an unnotified but allegedly notifiable transaction. If it is later found that the transaction is notifiable, KPPU will initiate an investigation for late notification, which may result in sanctions (see point 18).

For the past 5 years, the majority of the KPPU’s enforcement activities involved bid-rigging in public procurements. Recently, the KPPU has become increasingly active in imposing fines against undertakings for late notification of mergers. Since the beginning of 2021, it imposed penalties in at least eighteen cases, two of which related to foreign-to-foreign transactions.

The most recent development was the introduction of profit/revenue-based fines through enactment of GR 44/2021 and KPPU Regulation No. 2/2021 (see also point 18). These regulations also introduced the mitigating and aggravating factors to be considered by the KPPU in calculating administrative fines, negative impact of the violation, duration of the violation and an undertaking’s ability to pay the fine.

In July 2021, the KPPU issued KPPU Regulation No. 2 of 2021 on Guidelines for Enforcement of Sanctions on Violation of Monopoly Control and Unfair Competition, which provides further details of the factors and elements that determine the imposition of fines.

Further, the KPPU issued KPPU Regulation No. 3/2023 on the Assessment of Mergers or Consolidations of Undertakings or Acquisition of Shares in a Company that May Result in Monopolistic Practices or Unfair Competition, which resulted in significant changes and streamlined Indonesia’s merger control regulation, which makes fewer mergers, consolidations and acquisitions subject to a notification requirement (particularly foreign-to-foreign ones), sets new rules on the notification process, and reduces review periods.

Finally, the Indonesian government issued a regulation on 5 April 2023, which became effective on 5 May 2023, which makes merger notifications to the KPPU subject to a filing fee.

The Indonesian legislature plans to enact a new competition bill that will replace the current Competition Law, but it will not be enacted in 2023 as it is not part of the 2023 national legislation program.