No regulation deals precisely with ESG measures or sustainability agreements within the framework of competition law and regulations. Law No. 5 of 1999 on Prohibition of Monopoly and Unfair Business Competition, as amended by Law No. 11 of 2020 on Job Creation (“Indonesian Competition Law”), in essence, prohibits all forms of anti-competitive and restrictive conduct and agreements.

We do not foresee competition regulation on ESG measures being put in place this year. From observation, the Indonesian Competition Commission (“KPPU”) is still more focused on developing existing antitrust regulations and guidelines to accommodate the digital economy and market.

As far as we are aware, the KPPU has yet to issue guidance on the specific role of ESG in competition law analysis.

Yes, the KPPU has issued KPPU Regulation No. 4 of 2010 on Cartels (“Cartel Guidelines”), which provides a brief discussion on collaboration and exchange of commercially sensitive information, particularly in business associations, where it is often an indication of cartel conduct. However, Cartel Guidelines do not specifically address the ESG indicators in the competition law analysis in cartel conduct.

A “rule of reason” approach is adopted when determining whether certain conduct can be regarded as a cartel under the Indonesian Competition Law. In this regard, the KPPU would need to conduct an in-depth assessment of an undertaking’s reasons for engaging in certain conduct/collaboration, and its impact on business competition, to conclude whether these can be accepted as “reasonable” or “unreasonable” restraints. Under Cartel Guidelines, the assessment would include:

1. An Indication that there is a reduction in the production of goods/services or a price increase;
2. Whether the action is aimed primarily at reducing or stalling competition, or is an ancillary/side effect;
3. The existence of market power;
4. Whether the alleged cartel improves efficiency, so it may outweigh the drawbacks.
5. Whether there is a reasonable necessity, which means that the undertaking’s conduct is reasonable, and there are no better alternatives; and
6. Balance test: If the benefits that arise from the cartel/conduct outweigh the drawbacks, an undertaking’s conduct might be justifiable.

Due to the increase in awareness of ESG and sustainability aspects, the KPPU might incorporate these aspects in their test to substantiate the existence of reasonable or unreasonable restraints as briefly explained above, although perhaps not in the near future.

The KPPU has not established a specific directorate to deal with ESG matters.

However, the KPPU provides a general consultation service through the Directorate of Competition and Partnership Advocacy (“Directorate of Advocacy”). If a party seeks guidance on matters relating to competition issues in Indonesia, including those related to ESG, it may email or contact the Directorate of Advocacy verbally or in writing at:

Phone: +62-21-350 7015

Email: advokasi@kppu.go.id

As specific guidance on the role of ESG in competition law analysis has not yet been issued, to the extent of our knowledge, the quantification or calculation of ESG effects has not yet been adopted by the KPPU.

If an ESG collaboration is proven to result in an antitrust violation recognized under the Indonesian Competition Law, the calculation of its effects will vary, subject to the categorization of the violation. The types of antitrust violations recognized in Indonesia include cartels, price discrimination, price fixing, vertical integration, etc. In a merger filing, for example, the KPPU applies the Herfindahl-Hirschman Index ("HHI"), or the concentration ration ("CRn") as part of a preliminary assessment to determine whether or not a merger/acquisition has anti-competitive effects. If it is not possible to apply HHI, the KPPU will apply CRn.

Although it appears that the KPPU is not yet active in this topic, we have not found regulations that specifically prohibit collaboration between competitors and non-competitors within the ESG framework. In general, collaboration, whether or not within the framework of ESG, would be subject to the Indonesian Competition Law, particularly on cartels (Article 11). As specified in our response to Question No. 4 above, a cartel occurs when a group of companies in a particular industry that is meant to compete with each other agrees to coordinate their activities by regulating production, division of territory, collusion in tenders and other anti-competitive activities. This is so that they can raise prices and make a profit greater than a competitive price would produce. Collaboration within the framework of ESG may well be caught by a cartel prohibition if it potentially results in monopolistic practices or unfair business competition in the relevant market in which the parties are active.

The exchange of commercially sensitive information between competitors may be a significant factor in determining the existence of a cartel. However, this kind of exchange is not prohibited, provided the information exchanged is public/aggregated/anonymized or otherwise historical information. Particular caution is required in relation to participation in trade associations (or other industry-based associations/business associations), as these are often exploited as cover for cartel activities. Participants should distance themselves from possible exchange of commercially sensitive information at meetings held by these associations.

Within the framework of competition, none that we are aware of.

The concept of ESG is relatively new in Indonesia, and, so far, we see that the Indonesian government has articulated support for ESG-standard investing, and attempts have been made to increase investors’ awareness of ESG implementation. For example, in the capital markets sector, state-owned publicly listed bank PT Bank Rakyat Indonesia Tbk’s green bond issued in 2022 was oversubscribed, indicative of high public interest in environmentally sound investments. Reportedly, companies implementing ESG generated higher profits and had better stock price movements.

No specific antitrust regulation has given rise to private or class action ESG litigation.

We view that all disputes related to competition issues are examined and adjudicated by the KPPU; therefore, private litigation and class action lawsuits are not possible.

The Indonesian Competition Law provides a general provision that authorizes the KPPU to identify damage sustained by another undertaking or community (Article 36 (j) and impose administrative sanction as payment of compensation (Article 47 (2) (f)). The KPPU tested this provision in a case that involved the KPPU and EMI and others in 2008, in which the KPPU awarded damages to the reporting party.

In 2010, the KPPU issued KPPU Regulation on Procedure for Handling of Monopoly Practice and Unfair Business Competition Cases, as last amended in 2019 by KPPU Regulation No. 1 of 2019. Since these regulations were enacted, there has not been a case in which compensation was claimed.

Class action procedure is regulated under Supreme Court Regulation No. 1 of 2002. This was pursued by consumers in the telecommunications sector against a number of telecommunications companies, based on a KPPU finding that the companies had breached their obligations under the Indonesian Consumer Protection Law, over allegation of cross-ownership in the telecommunications sector. (However, the telecommunication companies successfully defended themselves.)

Scholars still debate about whether or not to recognize a class action lawsuit filed against a KPPU decision. A KPPU decision has implications for other stakeholders (including consumers with a legal relationship with the defendant that suffer losses as a consequence of the defendant’s action) .

As far as private actions are concerned, a claimant may file an unlawful act or tort lawsuit on the basis of Article 1365 Indonesian Civil Code. Under this provision, a party that commits an unlawful act that causes damage to another party is obliged to compensate that party. In other words, an aggrieved party may demand compensation for damages incurred against the tortfeasor.

In a current case between an individual buyer of an automatic motor scooter (the plaintiff) vs PT Astra Honda Motor and PT Yamaha Indonesia Motor Manufacturing (defendants), the plaintiff sought court damages following a KPPU sanction on these manufacturers for violating the Indonesian Competition Law and Article 1365 Indonesian Civil Code.

The defendants argued that the District Court had no jurisdiction to adjudicate the case, as it was properly within the authority of the KPPU. The District Court ruled that it had no jurisdiction to examine or determine the case, and emphasized that it was authorized to examine an appeal against the KPPU decision. The plaintiff appealed to the High Court and petitioned the Supreme Court in cassation, but both petitions were rejected.

Indonesian law operates a civil law system, which means that precedents are not binding on other cases. Further, Indonesian judges operate within an inquisitorial legal system, and have very broad fact-finding powers and a high level of discretion in relation to the manner in which those powers are exercised. Consequently, Indonesian judges can sometimes be influenced by factors, issues and evidence that may not be immediately apparent from the submitted documents in question. Despite this, in practice, precedents may offer Indonesian judges indicative guidance on how to deal with particular issues or interpret a provision.