ANSBEL - Competition Law Notes UTS Case ex; a company who's dominant in the market is using tricky ways to

prevent other companies from selling their products to the consumer --

Introduction saying to the consumer, if you're going to buy from me, you're not allowed
Case to buy from someone else
PT Telindo – Telecommunication company – used for internet communication. Should we intervene in order to prohibit the company from cheating?
Telindo’s cable network accounts for 70% of the total cable network capacity in  Yes, of course
Indonesia. PT Intermax, a startup telecommunications company has developed non- But, is the reason behind the prohibition is to protect the competitor?
cable (wire-free) network technology which can act as a substitute for cable network Competition law is to protect the process, not the business. Competition law
internet. Telindo approached Intermax and they agreed that Intermax will not provide does not prohibit something because they're afraid the company is going to
their non-cable network services in Java if Telindo will stop providing their cable go bankrupt. Competition law does not really care if a business fails or
network services in Sumatra. Telindo is concerned about one of its largest consumers. not, because that's the whole point of competition. There can only be one
PT Satindo who uses 55% of Telindo’s cable capacity. Satindo is considering to invest winner: like mooting, not everyone can win. If there are firms that goes
in cable infrastructure which will allow it to rely on its own cable network for internet bankrupt then that firm is inefficient therefore it can't compete. An
access. Telindo will stop providing services to Satindo when they begins the long inefficient company goes bankrupt is okay -- good for the competition.
process of building its own network. Telindo offers Satindo a discount of 30% if However, there will be a problem arising when a firm goes bankrupt as a
Satindo continues to purchase all of its requirements for internet services from Telindo. result of an unhealthy competition
 Violations: Recurring concepts
Entrepreneurs are prohibited from making any contract with other business Anti-competitive vs pro-competitive effects
competitors with the intention to:  Anti-competitive effects
o Area distribution: divide the marketing areas or market allocation of Effects that are harmful to the competition; it happens because businesses
the goods and/or services that can cause monopolistic practices and/or try to circumvent the competitive pressure
unfair business competitions. o It either happens to the consumer/ competitor
o Cartel: Influence the price by determining production and/marketing of o Example of anti-competitive effects:
goods and/or services, that can cause monopolistic practices and/or  Supra competitive prices: prices that are way
unfair business competition beyond the competitive prices. It prevents
o Dominant Position: Entrepreneurs are prohibited from taking advantage consumers from buying products of their competitor
of their dominant position, either directly or indirectly, in order to:  Pro-competitive effects
 Impose trade terms with the intention to prevent and/or Effects which are beneficial for the competitions and for the market
hamper the consumers to acquire competitive goods o Example of pro-competitive effects
and/or services, both in prices or quality; or  Increased efficiencies
 Restrict the market and technology development; or For instance; two companies which are in two
 Hamper other entrepreneurs having the potential to vertical line (supplier and manufacturer) conducting
become their competitors to enter the relevant market. acquisition. Such as; Nike acquiring manufacturer
Introduction of leather. It could be that the prices are reduced --
 Monopoly: a condition in the market where u only have one seller in that the shoes at cheaper prices, the logistics at cheaper
market prices.
 Oligopoly: a few sellers in the market  Innovation
o You don't have a lot of players, but you have a few Ex; IP -- patents. You can only have patent granted
 Maybe 3 or 5 to an invention. It doesn't have to be useful, but in
Negative impacts of monopoly most cases it should. If you have these innovations,
o A business that has no competitors the quality of the products can increase.
 Business will try to get as much profits as they can False positives vs false negatives
 Therefore, higher price We're talking about the enforcement of competition law
o Ex; Company A is the only company that makes sneakers shoes  False positives
 In terms of choice, it is going to be diminished -- because there's no The enforcement authority determines that there is a breach, but it is false.
competitive constrain -- no innovation Basically, punishing someone that should not be punished -- it is wrong.
o Less supply in the market because they don't need to sell a lot, but they will get It was thought that there is a breach, but there is not.
a lot of money anyway  False negatives
 There's no drive for them to sell as much as possible When the competition law authority thought that there was not a
o Lower quality competition law violation, when actually there is. In terms of scholarly
 Income and expenditure opinion, it is not settled which one is more harmful.
o The higher your income, the higher your profit Opinion: false positives is more harmful.
o Although prima facie it seems like false positives only affects the company
But also, if you're going to make a higher quality product, it's
being said, it actually affects the entire market. To a certain degree market
going to cost you more
and legal system are transparent. Competition law to a certain extent is a
o Not just they're going to charge you supra competitive prices,
public area -- hearings are open to public. When you punish this certain
but they're also going to put out lower quality company, everyone can see. The ripple effect is chilling competition. If you
o In the end, it will result in lower consumer welfare
punish the company, you are sending a signal to the business community --
 This is mentioned in the first consideration of making them less aggressive and companies will be stagnant -- they're
Indonesian Competition Law afraid to make certain moves. They won't do something extraordinary.
The concept of consumer welfare itself is actually a specific term in economics Over-deterrence vs under-deterrence
o An interesting field of law that combines 2 different things  Over-deterrence is one of the results of false positives. When talking about
o A bit of economics and law deterrence, we are talking about the ability of the law to prevent. Over-
o Invisible hand (Adam Smith) deterrence means that the competition authority is doing too much that it
o The market would run autonomously, therefore, the government scares everyone. When you have many false positives, it will lead to over-
does not need to interfere deterrence -- then it will lead to chilling competition.
 But the people who invented competition law  Under-deterrence is one of the results of false negatives. The level of
realizes that they cannot leave everything to the deterrence is too low that they're not afraid to violate the law.
market -- and they realizes that a certain degree of Approach to determine violation of competition
interference is still needed  Rule of reason
o How does consumer welfare work? Northern Pacific Rail Road Case
o Ex; Kukuh has needs to buy food and he really likes indomie Sherman Act Section 1: “Every contract (….) in restrain of trade/
without eggs. He has 10.000 to buy indomie for each meals, and commerce among several states/ with foreign nations is declared to be
he eats it 3 times a day -- therefore, he has 30.000 per day. By illegal”
the wonderful effects that competition brings, burjo places This wording was initially problematic (every contract) as it is too broad
compete with each other (mainly on price). There is one place in o The SC has to interpret the word "every"
which it sells the Indomie for 6.000 -- thus, his consumer Does every means every single contract (highly illogical) or
welfare is 4.000 contract does not necessarily mean everything?
 Reservation price: 6.000. The word "every", interpreted based on teleological approach
He could've saved the 4.000 for something (based on object and purpose) and SC realizes that the drafters
else. But if the monopolist/ burjo charge of the law did not intend to invalidate every single contract --
10.000, he has got no money left for the only the unreasonable ones
book. The welfare declined o Unreasonable: a contract gives an unreasonable restraint of
o The reason why monopoly is so bad is because what they're trade where the anti-competitive effects outweights the pro-
aiming to do is to price their goods equivalent to reservation competitive effects
price of the costumer. They're smarter than just to price the o It provides the basic standard of proof in US today
goods as high as possible o Thus, agreements/ contract that are seen unlawful in US
 US: certain behaviors of cartels is theft because it is antitrust law are the agreements/ contract in which the
taking away the consumer's welfare anticompetitive effects outweights the pro-competitive effects
Main goal of competition law o Problems with this approach: if you have to determine all the
 Consumer's welfare pros and anti-competitive effects, and you have to weigh them
It is number one -- it is going to be time consuming and it takes a lot of resources
 Protecting the process of competition in the judicial system
  That’s why SC in the case of Northern Pacific Rail In these situations, the debate on the relevant market is the debate that
Road came up with per se approach for: price would take up the most amount of time -- it is super important. Your ability
fixing, output limitation, market allocation, to either defend the client/ prosecute the company will depend on how good
boycott, and bid-rigging you are to define the market.
 Basically, the Court tries to determine the balance The definition of the market is inherently going to affect the market
and see where the scale tips between pros and anti- power of the company
competitive effects  Analogy
 Per se approach o Market definition = pool
Some agreements are very unlikely to bring anti-competitive effects, while o Market power of a company = dye
it is unlikely to bring pro-competitive effects -- that's why it is unnecessary The broader your definition of the market is, the less market power/ the less
to weigh the effects. The Court do not need to conduct further concentrated that company is going to be
examinations to determine and weigh the effects because the anti-  Lawyer: to argue that the definition is as broad as possible
competitive effects will always outweights the pro-competitive effects.  KPPU: as small/ narrow as possible
To ensure the concept of judicial economy: “peradilan harus cepat dan  Judge: have to find the balance -- what is the limit
sederhana” Too broad: false negatives
o If they already know this is going to be harmful for the market, The company is dominant, however because it is too broad; it will result in
why waste time? false negatives as the authorities thought they are not in power -- under
When it is proven that you conduct price fixing (for example), enforcement 
then it is obvious you violated competition law. It would be a How to determine relevant market
waste of time to examine the conduct in the market. 1. Product market
o There is a list of categories of agreement that falls under this When 2 or more products are in the same relevant product market, they are
violation. In the US case law, there is at least 5; price fixing, substitutable
output limitation, market allocation, boycott, and bid-  They can be easily replaced with one another/ interchangeable
rigging.  You can change it with one another and it would not make that much
o What if the companies just made an agreement and hasn't of a difference
acted yet? Ex; Fuji Apples is sold out, you would buy Washington Apples
It would still be under per-se illegality because the whole point When talking about substitutability, it is not just from the demand side --
of competition law is to prevent losses to the consumer welfare. also from the supply
If there is a conduct which has not been manifested, it would Demand side substitutability
have been absolutely ridiculous to wait until the act brings You can assess substitutability by looking at the demand from the consumer
harm to the market because the whole point is to prevent side. Basically, how substitutable are these products when it comes to the
losses consumer demands?
Analogy: DUI  SSNIP test (Small but Significant Non-transitory Increase in
 It is very likely for you to bring harm for the people Price) –5%-10%
on the road A hypothetical monopolist test (imaginary exercise)
 If you are drinking while driving, does the police Ex; Imagine if Coca Cola were to provide a small but significant
have to wait until you crash into someone before permanent increase in price, would that make the increase in price
they punish you? No, it is ridiculous. EU unprofitable for the producers. If it becomes unprofitable because so
competition law has this (?). many of its consumers switch to the other product, then they are in the
5 steps to prove violation based on rule of reason approach same market
 The plaintiff must prove that there is anti-competitive effect o People would switch to Big Cola, unless you are a die-
 Defendant defend themselves that there are pro-competitive effects hard Coca Cola fan
 Largest burden of proof by the defendant  Most people would switch because both are
o Prove the competitive effects empirically carbonated drink and they would not switch
o That those measure are the least restrictive way to achieve pro- to UC1000
competitive effects o Ex; you want to buy a Honda Jazz (dari 200 jt jadi 230 jt)
 Take all the evidences and balances whether the pro-competitive effects would that make the sale of Honda Jazz unprofitable
outweights the anti-competitive effects because Toyota Yaris exists in the market?
The state of competition law of Indonesia is below par/ severely sub optimum  In most sitaution: people would switch to
Our competition law is an intellectual defect; it's a mess, structure is out of place, and Toyota Yaris
there are a lot of mistakes o Another example is: Toyota Camry to Honda Accord
 Ex; Article 7 of Law no. 5 1999 talks about price fixing -- however, it is  Kalo naik 100 juta, people would most likely
written as rule of reason approach and not per se approach switch
Bankruptcy, competition, and ADR Indonesian laws are made in 1999 because of IMF's Whether or not if you apply this SSNIP test, you suffer loss because
request -- Washington Consensus the consumer switch.
There's no clear statutory instruction in Indonesian competition law regarding rule of Fallacy with SSNIP test
reason approach and per se approach “Cellophane fallacy”
 If the wording says "which may potentially cause anti competitive effects", If you have a market where it already has distortion in the goods --
then it is rule of reason company is already dominant, then you wanna get as much profit as
 Article which does not say this has been interpreted as per se approach possible (it is already supra competitive) -- the consumer is already
Market at the breaking point (they cannot afford it anymore). With that small
 Spectrum increase, the consumer cannot afford it anymore. They will just run
o Monopoly and oligopoly away and it will make it unprofitable -- the size of the market is
o Competitive and perfect competition bigger. This will make it seem as if they are not dominant, padahal
Which one is good and which one is bad? they are.
o Bad: monopoly Basically, the relevant market becomes broader and the company that
 Rare, usually it is government regulated industry is dominant becomes not dominant
o Good: perfect competition EU Court: “only apply this when the market is competitive”
 No such thing as perfect competition Supply side substitutability
We also need to take into account the manufacturer. How easily it is for
Market definition and market power
manufacturers to be able to swap the products from one product to one
 Important to understand
another
o Degree of power: lower to stronger
The consumer might not treat it as substitutable
o In a perfect competition: no one will have market power Ex; primary ingredient of making a book, birthday card, postcard: paper
 Market definition is to define the market  For consumers: postcard, book, and birthday card are not substitutable
o Simpler: to know the limits; at which point companies act as  For manufacturers: the ingredient is the same: pulp
substitute to one another Point of difference: thick or thin papers
 Market definition is a tool for us to know what are the boundaries within  It is possible for manufacturers of thin paper to make thicker paper
which products/ companies are competing with one another  Therefore, in the POV of manufacturers, they are completely
o Market definition: a tool to determine market where products substitutable
compete, i.e.: relevant market 2. Geographical market
o Trying to find out which companies are competing with which o We're talking about the area; in the sense that if they don't
companies/ products which products compete in the same area, then they're not in the same market
 This is important because if for example Toyota does something really bad o Definition: a territorial area in which the condition of
in car market -- Airbus would not mind because it is in a different market -- competition is sufficiently homogenous
their products are not substitutable, hence, not competing with one another o Ex; Honda Jazz and Toyota Yaris
 Market should be identified when there is o Another ex; The supplier of Lexus sells to France, Netherlands,
o Abuse of dominant position; to define the market in which the Belgium because they are able to get their cars to the ships boarding
firm is dominant to France, Netherlands, Belgium -- but they don't sell to Swiss as there
o Mergers; prohibited when they will lead to alter the structure of is no port in Swiss and transportation cost is too high.
the market as to concentrate it to the left (when the market is not Thus, Swiss is not part of the relevant market
competitive). Thus, it is done in order to define whether the Therefore, you cannot say the market is the entire Europe as it would
market that is concentrated render the market definition as too broad
 o Buyer power
 The less firms that exist with market power, the
higher power that the firm with dominant position possess
 Ex; a huge chicken supplier (60%), KFC control
80%, if KFC doesn't exist, they could just run free
Bonus
The fact that Article 25 of Indonesian Competition Law sets a rigid threshold of
50% meaning having market power means that it is more likely to incur the fallacy
of false negatives
If you control half of the market -- it is huge
Many of the markets today are not that concentrated
There might be 2 or 3 dominant company
Market shares actually is not the only thing to look at when considering market power.
Even if a company has large market power, and it prices the goods very high, and it is
easy for other business people to enter the market [low entry barrier], such company
will not retain their business in a long run, because other people can see there is
business opportunity to enter into.
Being able to have large market shares and able to raise the prices, temporarily, is not in
itself sufficient to gain the market power. It is because if there is low entry barrier, org
lain bs enter the market and nge charge lower price.
Example in phone market, Nokia mahal at that time. Bahkan skrg udh ga laku. Krn
potential competitornya cukup besar.
In conclusion, the 3 factors exercise constraints against the company to prevent them
behaving independently against the competitors and consumers.
If the competitors and/or consumers can exercise some degree against the company, this
company therefore does not have that high market power.
Market shares only gives the idea of actual competitors [the existing of market now] out
of the 3 factors.
By only assessing through market shares [under Art. 25.2], it is very disastrous for the
assessment of competition. By that definition, Apple sm Samsung bkn dominant
company krn mreka jg ga sampe 50% and therefore gabisa di punish under the
Indonesian Competition Law. To be able to reach of minimum the requirement market
shares under the Article is very hard. Supposedly, there shall be no minimum threshold
of market shares to determine the dominants. It shall depend on the market.
Different in EU, company A possesses 15% market shares, but company B and C has
1% or 2%. It is considered as dominant, walaupun kl dibandingin di Indonesia ga
mencapai thresholdnya.
3. Temporal market If you use this threshold, Apple cannot be punished -- although, it is clear that they are
o United Brands v. Commission dominant
Abuse of dominant position If there are for example, 10 players in the market -- 30% of the market is actually huge
To determine whether or not bananas is in the same market as other Flaw and fallacy in determining market power only using market share
fresh fruits in the supermarket (apple, cherries, bluberries, etc) (Problem in Article 25)
The behavior of the consumer of the market changes depending on the  It creates false negative because it is hard to reach 50% market share
time of the year  In real life, the dominant firms does not reach 50% but already pretty
o During the summer, the sale of bananas are low dominant in reality
o During the winter, the sale of bananas are high  If a firm controls 50% it means they're pretty badass
Lacking sunlight = less fruits Should we punish firms because they have market power?
However, bananas are year-round as it is mainly imported to Europe No, having market power is actually good because it acts as some kind of incentives for
from tropical countries other companies to reach the same position
Therefore, on summer, the sale of bananas are low because there are a  It is a misconception to say that having market power is bad
lot of other fruits. However, on winter, the sale of bananas is high  It is only prohibited if you cheat in order to get into that position or
because there are less other fruits 
you abuse that position
Market power
Determining relevant market
What is market power
Pizza case
The ability of a company to behave independently from the competitors/ consumers
Product characteristic
Behaving independently: they can do whatever they like and they would not be
One specific characteristic that would make them different
affected by either consumers/ competitors
 Frozen product: alter the shelf life of a product; months
Ex; If Huawei raises its prices too high then consumers are gonna switch. If Xiaomi
decreases the prices to $100, is Huawei going to be affected? Yes. Huawei consumers  Fresh pizza: not very long
are going to switch Thus, based on this, consumer's behavior will be different
This means, Huawei does not have market power -- they don't have dominance  Frozen pizza: students who stock
Ex; When Apple releases iPhone 10, it raises the price up until $1300, but consumers  Fresh pizza: people who eat at restaurants
don't switch They would not switch when there is a SSNIP
Thus, Apple exercises a degree of dominance in the market The market is the entire pizza market
 3 yardsticks There are consumers in which, no matter what happens, they would not switch --
o Actual competitors captive consumers
 Primarily done by measuring the market share Not everyone is like that. Thus, we should not take it as consideration
 By looking at market share We should take into account marginal consumers
The higher the market share, then the higher the market Would the company that make chill pizza and fresh pizza have different ingredients? No
power The treatment of the product is different (fridge v. oven)
In monopoly: 100% market share because there is no one It is going to be easy to replace the treatment of the product from the supply side
else in the market  Supply side substitutability: from the side of the company; can they
o We are looking the market as it is switch products tanpa harus ngeluarin biaya yg mahal and transisnya
o susah
It is not sufficient to just look at market share
  Demand side subsitutability: from the side of the consumer
Just because there is one company that has
Reading Materials MRW:
huge market share, doesn't mean it will stay
Horizontal and Vertical Agreements:
like that forever. There could be potential
 Horizontal agreements: Agreement between firms who operate at the
competitors
 same market level
Ex; Nokia used to have 50% of market power
o  Vertical agreements: Agreements between firms that are in some supply
Potential competitors
relation
 If there is low barrier to entry (very few things
Example:
that would prevent company to enter the market): when a
Steel market with two firms that supply steel to two car manufacturers, which in
company raise their price really high, other company is going
turn sell cars to consumers. The agreement between two steel suppliers would be a
to enter the market and sell goods in a lower price
horizontal agreement. The agreement between a steel supplier and a car maker
 When we're looking at potential competitors, we're
would be a vertical agreement. The steel market would be called the upstream
looking at barriers to entry
market and the car market is the downstream market.
In smartphone industry, what will make a buyer buy one
Relevant U.S Laws and General Legal Standards
smartphone over the other is technology
Sherman Act §1,15 U.S.C
 In this case, the legal barriers to entry is
“Every contract, combination in the form of trust, or otherwise, or conspiracy, in
patent
restraint of trade or commerce among the several States, or with foreign nations, is
 There are also economics barrier to entry
declared to be illegal.”
 Competitive constrain: a competitor of a company
“Every contract”  Not to take literally. Too broad.
exercises pressure and the buyer/ consumer also exercises
Only condemning “unreasonable” restraints of trade.
pressure
US Supreme Court Judges  “Every unreasonable restraints of trade”1  Sellers and buyers are in no position of controlling price 
AC outweigh PC competitive price
 If a challenged agreement on balance increases competition and trade Monopolists Market:
output, it is not really in restraint of trade at all. o Only one firm have power to unilaterally increase the price or reduce the
 Every agreement whose anticompetitive effects on trade outweigh its output without incurring loss
procompetitive effects is illegal. o Close to Monopolist:
Certain agreements are so likely to be anticompetitive, and so unlikely to have  Less competitors
procompetitive effects  Condemned “per se”  Distribution of marketing power not even
Per se illegal  Cara cepat  Unilaterally increase the price or reduce the output without incurring
 Just provide evidence of the existence of conduct loss
 Do not examine the effects  Dominance  Ability to act unilaterally without having competitive
 Without any case-by-case inquiry into their et effect constraints
 When an agreement is per se illegal, the Court will not consider any  Limited choice
procompetitive justifications or whether anticompetitive effects actually  Ability to control price
occurred. Oligopoly Market
 Blanket prohibition  all forms of shit is prohibited  only few buyers
 Price-fixing, market divisions, output restraints, and boycott.  firms are maximizing the profit
Rule of reason  Cara lama  the products sold can be differentiated or homogenous
 If a per se rule does not apply, the “rule of reason” review applies.  action of a firm highly affects other firms, firms watch closely other
 Determining the effect on the market firm’s action and strategy in order to determine its own strategy
 there is exit and entry barrier
 Not enough in just providing the existence of conduct.
 existence of economic profit
 5 steps:
 Cournot Model [limiting quantity] and Bertrand Model [price fixing]
1) The Plaintiff must prove the AC conduct exists
 Kinked demand curve
2) The Defendant shows plausible (Possible) PC effects.
 Competitive company will follow the price decrease should
3) The Plaintiff must prove actual AC exists
there is a firm reducing its price. However, should there is a
4) The Defendant must prove:
firm increasing the price, other firm will not follow the price
a) Actual PC effects empirically  Demonstrate it
increase
 e.g in a case of patent, the defendant bs bilang dengan paten
 Predatory pricing
ini kita create innovation in markets.
 When they lower the price below cost of production to get rid of
Knp disini ga perlu prove actual pro competitive effect?
the competition.  Not unlawful  only conducted by
Because there are certain
dominant company.
 Infant industry and cannot prove the actual effects, so
The conduct that violates competition law
economic and empirical sense can be accepted.
 AC agreements
b) Their allegedly AC conduct was the least restrictive way to
 Abuse of dominant position
achieve PC
 Mergers
 E.g in a case of patent, the defendant can argue that if there are
Abuse of Dominant Position
no paten, the benefit would not work because it will be rugi.
Dominance: ability to act unilaterally without constraints to competitive pressures.
No other way to achieve something without creating patent
- Predatory pricing
 Why? If there other ways in achieving then it still violating
 When they lower the price below cost of production to get rid of
If the Defendant can prove step 4, the Court must prove balancing act 
the competition.  Not unlawful  only conducted by dominant
AC or PC?
company.
 The Court make two doctrinal developments: - Dominant is not illegal. Monopoly in itself is not unlawful. As long as it is
a. Even if horizontal agreement “literally” constitutes price not abused.
fixing, an output restraint or a boycott, it will not be deemed  Why? As long as it does not affect the market – provides
to fall within such per se illegal categories when a PC motivation for businesses. The logic behind is that if market power
justification in fact exists for the agreement in question.2 is prohibited, then, it is the same as prohibiting the company to
b. Even if a restraint falls within the rule of reason, it will be gain profit, or more profit.
condemned summarily as a “naked” restraint if no PC
justification is offered for it.3 - Companies entering business
The rule of reason is really being applied in all cases; it is just  Gain maximum profit.
that the rule can be applied quite quickly in cases where no  Need to expand businesses  To have market power.
plausible PC justification has been offered.  How? Sell more products as possible  More consumers
In Indonesia:  More consumers  More market shares
1) MvT primarily undertaken by KPPU and the court.  Market shares  Gain market power.
2) Judicial acrobatics  wordings of article which may interpret - Incentive in market  Gain profit
certain articles per se or rule of reason - Bid Rigging? Anti-Competitive Horizontal Agreements
3) The bases of whether something is determine as per se or rule of Monopoly = Dominant Position?
reason - Market – monopolistic market - bad thing it leads to supra-competitive
“.. may cause monopolistic practices and/or unfair
bad quantity.
business competitions”  Rule of reason 
- Monopolistic power is not the same as monopoly
Cases
o Monopoly - It’s when a company moves towards the spectrum of
 United Brands
monopolistic.
 Hoffman La Roche
o Monopoly power is the same as market power. When you have
 Continental Cans
market power gives you to an extent to behave like a monopoly.
 Monopolist: 1999  Keburu2 banget  Abis crisis.
Business have dominant position in the market that can unilaterally Law no. 5/1999
increase the price or reduce the output without incurring loss and still Anti-Competitive Agreements - Horizontal Agreements
making profit. Cases
 Problem: Case 1:
o Raise the price into supra-competitive level  Consumers 5 sellers of bakso. Seller no. 1 2 3 4 5, each price their bakso 10-15k, If one raise the
need to pay more. price at 15k. What would happen?
o Resulted lower quality because they do not have Find a seller at a lower price
competitive restraints. The only one selling the product. Pa Joko gathers the four sellers. “We are the only seller of Bakso in this area. Why not
The business do not care. Do not bother to innovate. No sell in 20k together to increase our profit?” “Good idea!”
competition. Is it a violation? Legal basis?
To determine dominance  Yes, it is. According to Art. 5  Price Fixing
Perfect Competition Market: “Entrepreneurs are prohibited from making any contract with other business
o No firm would have power to unilaterally increase the price or reduce the competitors in order to fix prices on certain goods and/or services to be borne
output without incurring by
o Close to Perfect competition: the consumers or clients in the same relevant market.”
 More competitors Case 2:
 Distribution of marketing power even 5 sellers of beef. A month close to idul adha, one of the seller of the meat, gather his
 Plenty buyers and sellers friends, “a lot of people would buy a lot of meat in idul adha, why don’t we reduce the
 Homogenous products amount of meat for this month around 50% to sell it in idul adha?  Increase the price
 No entry and no exit barriers and sell more in idul adha.
Is it a violation? Legal basis?
1
Standard Oil Co. v. US  Yes, it is. Oligopoly Art. 4(1)
2 “Entrepreneurs are prohibited from making any contracts with other
Broadcast Music Inc. v. CBS. 441 U.S. 1, 8-9, 13,, 20-21, Northwest Wholesale Stationary entrepreneurs
v. Pacific Stationary & Printing, 472 U.S. 284, 294-298 “And even when it has said the per se with the intention to jointly control the production and/or the marketing of goods
rule applies and precludes consideration of PC justification, it has nonetheless gone ahead to and services that can cause monopolistic practices and/or unfair business
consider and reject those justifications” competition”
3
FTC v. Indiana Federation of Dentists, 476 U.S., 447,459 Case 3:
5 different markets around jogja. Pasar maguwo, Pasar Demangan, Pasar Beringharjo, - The harm is graver than it was cooperation between vertical companies
Pasar bantul , pasar klaten, successful at selling chicken. 5 chicken seller had another because horizontal covers all the market -- since they are competitors in a
meeting. “We are the largest chicken farm in jogja. Subordinates sell in other places in given market
other markets. Why don’t we stick at our area only? Take your subordinate sell at your Cartels cannot work unless all the players enter into the market
own respective area.” - If there is one/ two companies that do not join, then cartels would not work
Is it a violation? Legal basis? In Europe, when competition authority wants to assess a violation, they start with the
 Yes, it is. theory of harm -- what are the harms that can occur in the market?
 The harm: Lower quality because there is no incentive to improve the product, However, horizontal agreement, they skip that part because it has been empirically
less option because other competitors are prevented to enter the market, higher proven that these kinds of agreements will bring huge harms to the market
price because there is no competitors, - Infringement by object (EU)
 Art. 9 - Area Distribution/Market Allocation Variations:
“Entrepreneurs are prohibited from making any contract with other business - In price fixing cartels, the prices will be set at supra competitive price so
competitors with the intention to divide the marketing areas or market allocation that they could get higher profits
of - In output limitation cartels, then you have lower output
the goods and/or services that can cause monopolistic practices and/or unfair - In bid rigging, they have set who will be the winner who is the certain
business competitions.” tender, they would not have incentives to increase the quality of the product
Case 4: All of these causes the consumer welfare to be lower. The impact is parallel to of
Pasar Beringharjo, 3 big fruit stalls in that pasar. Good friends. They heard the news that monopoly; which is why price fixing is strictly prohibited (per se)
someone else is trying to open fruit stall in that pasar. They gather. If this new person 1) Price Fixing (Art. 5)
buy from any of the 3. Refuse selling it the new guy. - Normal price fixing and purchase price fixing
Is it a violation? Legal basis?
- Normal: Agreement between competitiors to fix the prices of their goods, so
 Yes, it is. that they don't have to compete in terms of the price
 Art. 10(1))  Boycotting  Between the sellers
“Entrepreneurs are prohibited from making any contract with other business  Article 5 of Indonesian Competition Law
competitors that could hamper other entrepreneurs in engaging in the same type
- “Entrepreneurs are prohibited from making any contract with other
of business, either for domestic or export purposes”
business competitors in order to fix prices on certain goods and/or services
Group 5:
to be borne by the consumers or clients in the same relevant market.”
Tengkleng. Faculty of Law held a dies natalies. 5 Universities. Hold a tender to procure
Tengkleng. 5 Tengkleng sellers. Instead of competing in getting the tender, they work - Purchase: KFC, Mcd, and Wendy's agree to buy chicken at a certain price
together. Each University will get one tengkleng seller. The winner tender, would be the Spanish Roll Tobacco: Buyer's cartel
lowest price. Other than Pak pong, they will sell at a higher price. Companies make an agreement to purchase the tobacco at a lower price;
Is it a violation? Legal basis? they argue its not anti-competitive bc by purchasing the tobacco at lower
 Yes, it is. price, they can provide lower prices to consumer
 According to Art. 22  Bid Rigging - It is still a violation because it eliminates competition. If they want to
“Entrepreneurs are prohibited from conspiring with other parties to arrange purchase dari supplier; raw materials, they would have to come up with a
and/or better deal. That itself is a competition. If they agree to purchase at a lower
determine the winner of the tender thus causing unfair business competition.” price, they eliminate the competition to make a strategic decision making
The fact that 5 Universities arrange which university get which Tengkleng seller, and competing on the merits, and enchancing their position
this will cause unfair business competition. - Merits; company can be more creative on the business strategy, mereka yg
What’s wrong with working together? tadinya mikir gmn caranya get a lower price, had already agreed on it first
 If sidestep competition  Not allowed  if its resulted in anti-competitive harm - In some cases, sellers and buyers are both found guilty
 The concept of monopoly market. - In per se; it is not necessarily for the consumer welfare to be reduced for a
a. One single producer control the market not affected by the consumers and violation competition to be found
competitor - It’s simply that since it is per se, it eliminates the competition
 Horizontal agreement usually per se, why? Its eliminate competition 2) Output Limitation (Art. 11)
 Horizontal agreement is an agreement made among competitors - Competitors agree with each other to reduce the volume of output that they
 Companies can compete on price, choice, quality, supply respectively produce, so that supply decrease and prices increases.
Theory of Harm - They reduce the output
Harmful Effects of Monopoly
- Consumer needs more: high demand, supply is less
Harmful Effects Explanation
- For example; susu bayi; if all susu bayi producers agree that we produce 3rb
Higher Prices Since monopolizing companies responsible for all output
aja per bulan instead of 10rb like usual -- berkurang -- awal2nya they
– can increase price by charging supra-competitive prices
probably jual cepet sold out, padahal susu bayi tu cepet abisnya. Kalo
or reducing output supply.
mereka naikin harganya, consumer will think yaudahlah gaada lagi cari
Lower Output Consumer deprived of goods/services because monopolist
dimana, they would buy it right then and there
prevent expansion to keep prices high. (choice and output)
- Consumers have less availability of products
Lower Quality Monopolist not forced to compete on quality – no
products incentive to improve quality or innovate. - It has the same effect as price fixing as the price gets higher and less
Lower Consumer Since monopolist can charge supra-competitive prices – availability for the consumer.
Welfare wealth transferred from consumer to monopolist. - Considered as rule of reason.
- Less money to spend on other things - “Entrepreneurs are prohibited from making any contract with other
- Supracompetitive: Competitive price business competitors with the intention to influence the price by determining
difference between consumer surplus. production and/or marketing of goods and/or services that can cause
Harmful Effects of Cartels monopolistic practices and/or unfair business competition.”
Horizontal agreement can result in the same detrimental effect as cartels. 3) Market Allocation (Art. 9)
Harmful Effects Explanation - Competitors agree not compete with each other in predetermined allocation
Higher Prices Competitors can agree to fix price to supra-competitive of market territories
levels. - Lower quality because there is no incentive to improve the product, less
Lower Output Competitors can agree to limit output in to reduce option because other competitors are prevented to enter the market, higher
supply and increase prices. price because there is no competitors, lower output
Lower Quality No competition on price or output -> no incentive to - It's when the competitors agree to reduce the output
products compete on quality. - They reduce the output
Lower Consumer Agree to fix supra-competitive prices – wealth - Consumer needs more: high demand, supply is less
Welfare transferred from consumer to cartels.
- For example; susu bayi; if all susu bayi producers agree that we produce
The Conventional Categories of AC Horizontal Agreement (Per Se Violations)
10rb susu/ bulan, kita produce 3rb aja per bulan -- berkurang -- awal2nya
Agreements between competitors
they probably jual cepet sold out, padahal susu bayi tu cepet abisnya. Kalo
What is then so harmful about horizontal agreements?
mereka naikin harganya, consumer will think yaudahlah gaada lagi cari
- It eliminates competition dimana -- udahlah skrg aja
It is only in one instance where it eliminates the competitors
o - “Entrepreneurs are prohibited from making any contract with other
Boycott
business
o However, in most cases, it does not eliminate competitors
competitors with the intention to divide the marketing areas or market
because are not competing with each other allocation of the goods and/or services that can cause monopolistic
What are the variables in which the competitors compete? Price, choice, quality & practices and/or unfair
supply business competitions.”
When someone conducts price fixing, is there a competition that is eliminated? 4) Boycott (Art. 10)
- Price is eliminated
- Competitors agree to refuse to do business with targeted individuals and
- Price competition is non-existent
businesses to prevent them from entering the market or to drive them out of
However, not all forms collaboration is prohibited
the market
- Joint venture work together and develop a new product jointly
- “(1) Entrepreneurs are prohibited from making any contract with other
- Not all forms of cooperation are prohibited in competition law
business competitors that could hamper other entrepreneurs in engaging in
- However, when the cooperation results in anti-competitive harm, it is
the same type of business, either for domestic or export purposes.
prohibited
 (2) Entrepreneurs are prohibited from making any contract with other use that information to determine their business conduct
business on the market.
competitors in order to refuse to sell goods and/or services from the other  The act of exchange strategic price may reduce the
entrepreneurs which: competition.
a. causes losses or could be suspected to cause damage to other  It will be supracompetitive = leads to price fixing
entrepreneurs; or indirectly, even though there is no agreement over that.
b. restricts other entrepreneurs to sell or buy goods and/or services Worse if its in oligopoly market.
from the relevant market.”  purchasing perspective  Violation under EU Competition Law
- E.g there are 2 farmers. One of them has a wife working at a market and a  Closest is bid-rigging  under Indonesian competition law
husband sell the crops directly to the consumers. Farmer B, sell to farmer C  “Other parties” is not defined in art. 23
which can be sold to the market because cannot directly sell it due to  Art 23 set out requirement of “company secret” which is very
reasons. The meaning of the perspective of the purchasing is the Farmer that hard to prove kyk according to siapa itu company secret. In
has direct access to the market tells to Farmer C other farmers in the market EU the threshold is strategic information.
to not buy from Farmer B who has no direct access. This leads to farmer B  T-Mobile ECJ: Information exchange is anti competitive by
to die eventually. object, even if there is no direct correlation, it is still anti
5) Bid Rigging (Art. 22) competitive
- Competitors conspire with each other on who will win a particual bid for a  NOT A VIOLATION
tender contest o Art. 23
- The Effects: Difficult to prove conspiring, company's secret and
- The price can be supra-competitive. the wording other parties kurang jelas siapa
If the winner of the tender usually is 1M, due to bid rigging, the next tender maksudnya
can set the next winner will be 2M (above the usual winner), then the other o Does competition law need to wait until competition
competitor who conspired with each other lebih mahal lg harganya biar si yg law materializes until it can be punished?
2m itu menang. DUI analogy
- Lower consumer welfare When you're drinking and driving, you could injure
- “ Business actors shall be prohibited from conspiring with other parties other people on the road. You don't have to wait
with the aim of determining the awardees of tenders which may cause unfair until someone dies in order to be punished. In
business competition” competition law, there is no strict threshold to wait
Market Allocation v. Price Fixing – Which is Worse? until the harm materializes baru it violates
 Price fixing – can compete other things (choice and quality) competition law; the whole purpose is to prevent
 Misal 5 tukang bakso price fixing 25rb, tp masih compete with each other harm in the first place
sbnernya krn customer msh pny 5 pilihan tukang bakso. What is the harm in sharing strategic information?
The more transparent your action is, it will be easier
 Market Allocation – same as monopoly.
to coordinate in the future
 Meanwhile in market allocation, there is no competition in any level, krn kyk
 Oligopoly
monopoly market jadinya, only one or few person in one market
 Entry barrier is high, there are a few players in the
 Here it is rule of reason (should be per se)
market. None of them are dominant between the
 Cannot resist temptation to increase the price. market participant
 However, people thought Price Fixing is most haram – krn specifically  Les competitive
prohibited and easier to prove (misconception)  High barrier to entry, if price is really high, difficult
Companies compete on 3 levels for other business actor to come in.
 Price  Market equilibrium
 Quality  Low barrier entry would affect this. Even there are 10
 Choice people doing price fixing, the price will go down
Per se violation  even there is no effect to the market yet, they still will be punish. eventually.
Same logic as traffic violations - Case No. 2:
Unique Features in Indonesia’s Competition Act on Horizontal Agreement 4 Retail stores sell furniture, good furniture makers, and all these buy from
In Indonesia an artisanal wooden furniture. One of the retail store representative meet
 Art. 4: dilarang work together with the wooden maker furniture. “In these semester, I will buy these
 Art. 4(2): the combined market share is 75% products and sell it in 15 mill. Profit 50%” The representative told the
 Price discrimination and predatory pricing falls under this wooden maker. Next day, the other retail store representative meet with the
o But kalo di EU sm US it is abuse of dominant position same wooden maker. For the same purpose as the previous retail store
In EU, you don't need to have agreement representative. When the retail store ask about the products, he answered the
 Characteristic of oligopoly, it is usually transparent price and told the retail store that the previous retail store who came here
o There is only a few seller, so it is normal for them to know each will sell at 15 mill.
other o Case Analysis:
o If they are in the market for long enough, then the pattern is  Violation of Art. 23 of Law No. 5/1998
recognized by the competitors, doesn't require an agreement  Hub and Spoke
1) Oligopoly (Art. 4)  term in EU for price fixing, where a supplier of
- Horizontal Agreements in Oligopoly some business actors, who act as the hub and that
- Case No. 1: information is shared to the spoke (business
Indonesia has 5 telecommunication companies. One day, there is a actors) through the Hub
conference organized by the faculty of law. Law and Technology regulating  See case of TESCO
telecommunication market. These companies were invited. One day The Phases Explanation
conference, The 5 representative met up in after dinner. They share the plans Phase I o Conduct: Retailer A disclose to the supplier their future
for each company, the future products, and strategic decisions. conduct and price
Case Analysis: Does not regulate about sharing private information o Mental: with the hope the supplier will disclose to Retailer
Information Exchange B (mental element). They know the supplier will pass this
- If you have competitors sharing information on prices and business information to the other retailer, which will influence the
strategy: Price becomes supra-competitive – because the one about to market condition
set lower price will set higher after hearing o Supplier sharing it to Ace
- It is when the competitors is just sharing the strategical information Phase II o Mental: Having received that information, Ace knows why
(price/ timeline) Informa shares that information
- How do u assess the business strategy? If apple say it wanna sell a o Conduct: to determine its future conduct (Conduct Element)
phone at a certain price, then samsung don't tell its price but say they  Presumed by Colta Anich principle & Troyhand
wanna release it next year  Uses information to determine future conduct.
- Exchange of info  Concerns the use of vertical information from completely different undertaking.
Colta Anich presumption: Don't agree on something, but they will (X is hub, Ace and Informa are Spoke)
use the information they obtain - Case No. 3:
- Case per case Trees in jogja made for pulps. There are 5 manufacturers in Jogja. They
Nature: transparent market have to calculate the time when to cut the trees and how many trees they
Sometimes, price is not business strategy want to cut. Before each quarter of the year, they will take the order. In
Ex; timeline -- TV Channel industry; industry video2 and movie, they October-December, they want to take order from the consumers. They will
release a new movie every 2 months -- the information is not a announce the price at beginning of September. On these quarter, they
business strategy information. But in other industry; pesawat; their announce the price at the exact same time. The price that they announce are
prices is not a business strategy because they know their prices. Di exactly the same.
assess transparentnya dibagian apa. This is not regulated in Case Analysis:
Indonesia  See Wood Pulp Case (in EU) market become too transparent
 Colta anich presumption – If you have group of business  Absence of collusion  Parallel conduct in itself not sufficient
actors who share information with each other and they evidence of AC agreement.
remain active in the market, it is presumed that they will  Passive collusion:
 When companies can agree on things without having agreement.  Theory of Harm
Substitute the risk to cooperate.  Concerted practices  Effects of certain agreement can have to competition
 To determine whether parallel conduct amount to concerted practices  In developed jurisdiction, in order to punish a conduct as being AC, the harm
o If there is plausible explanations other than collusion, then there needs to be proven
is no concerted practice  Unfortunately, the theory of harm has very close connection with economics.
o if there is no plausible answer, then there is concerted practice  In Europe, there is a resurgence of the importance in analysing the theory of
 In Wood Pulp Case, there are explanation why the prices are parallel harm.
i.e seasonal, they have to announce it beforehand, the simultaneously  It is because punishing an agreement that potentially have PC but only
of the announcement is a direct result of market transparency due to focus on formality of the conduct, it can bring impact to the market
the oligopolistic nature of market, and price parallelism is a very  This leads to false positive, meaning that there will be over enforcement
natural respon. And the announcement was only towards the and make competition stagnant that people are afraid to do anything.
consumer, not amongst the undertakings. 3 Theories of Harm in Vertical Agreements
 It can be sure it is anti-competitive  it can be competitive prices. Is basically an approach where a competition law authority needs to establish the harm
 However, ECJ turned the decision before saying that there is a violation. Most vertical agreement are rule of reason.
 Parallel conduct in itself is not anti-competitive/ illegal 1) AC Foreclosure
Just because companies are acting parallel, that does not mean that  Foreclosing or blocking access to the market for the other supplier.
they're doing price fixing  Bisa ke your current competitor bisa juga ke your future competitor
The important threshold made by the Court was that parallel conduct 2) Reduction or Loss of Inter-Brand Competition
is insufficient as a proof of conserted actions unless conserted  Reducing the competition between the suppliers and competitors
practice (a form of coordination between undertakings, by which  Different brands competing
without having agreement, they knowingly subtitute practical  The competition between Nike, Adidas, and Puma
cooperation) is the only possible explanation of the parallel conduct  For example, a supplier [Centro or Sports Station] can only sell Nike,
If the parties can prove that there are other possible explanation, then therefore Adidas and Puma will lose their market shares in Centro or
there is no concerted practice Sports Station.
There are number of factors that led the Court to believe that there 3) Reduction or Loss of Intra-Brand Competition
are possible explanation  Intra means inside
- Rational response to the seasonal nature. If they do not  Competition that exist for one brand
announce the prices, it would not make sense  The people who buy the products and sell them again
- The simultaneously of prices announcement. Direct result  Reducing the competition at the downstream level
of market transparency that is natural due to the  Exact same brand but the competition is reduced among different
oligopolistic nature. Having an oligopolistic market retailers.
structure in itself is not illegal. When you have parallel  In other words, one brand sold in different retailers.
behaviour, it cannot be condemned. It would be irratonal  Example, Nike sold in Centro, Sport Station. Thus, the competition
for the law to punish a firm to act irrational between Centro and Sport Station is intra brand.
- Case No. 4:  If Nike don’t want to be sold at Sport Station, Nike wants to be sold in
In Jogja there is association agricultural engineers  Companies who make Centro and Sogo, the competition is reduced within this intra-brand
the trucks. The biggest in Jogja. This association have a condition in competition
membership  Member  Disclose the association data regarding the Problem:
registration tractors. If you want to buy the tractor, it must be registered it in  What about McDonalds? McDonald has specific supplier of chicken
the Ministry. We can track the tractors. Accessible to all the members [exclusive agreement]. Does it cause harm or benefit to the market?
outside the member (submit their own data). They know how many the o It depends. If vertical agreements is mostly assessed through rule
dealer sells and how many the dealers make. Consequently, member or not of reason due to the harmful and beneficial effect.
member. They know the business strategy, know how much they sell. No o McD has exclusive purchase agreement not because the seller told
information on price. There 5 dealers in and 5 manufacturers. Limited
McD to do so, but McD is the one that does not want to buy from
number in the market.
anyone else due to the quality of the chicken. This is because it will
 Is there in competition violation under Indonesian Competition Law? harm the consumers if the chickens are bad.
 In EU its violation cause it creates tacit collusion o If it is made through independent business decision, it shall not be
 There should be a violation? Why? punished under the rules of AC agreements, unless it is abuse of
- They share data – Strategy, how much they sell, types of dominant position
products that are sold and how much do the dealers make. No PC Effect
information on the price. o Efficiency
- If they want to be a member, they need to disclose the data o Ensure the quality
regarding the registration tractors. o Network of distribution
2) Price Discrimination (Art. 6) 3 types of vertical agreements in EU
 You do not need to have agreement w/other competitor to discriminate - Resale price maintenance
your consumer for the same good. When the supplier stated that u can sell the product harganya X, and obviously u
3) Predatory Pricing (Art. 7) can jual mahal tp ga lebih murah dari X
 In the US it is considered abuse dominant position In Indonesia, Article 8
 Does not need other competitor to agree. The thing is, Indonesia is rule of reason. However, other country is per se
No 2&3 in US UK seen as abuse of dominant position. The only vertical agreement yg per se; sama aja kayak price fixing
Why is that? Setting minimum price meaning the consumer should pay more
Differences between Vertical and Horizontal Agreements than what they have to pay originally, reduce consumer's welfare and reduce
Vertical Agreement intrabrand competition
 Companies in different level of distribution or supply chain
- Exclusive dealing
 Most vertical agreements are assessed through rule of reason
Article 15(1) in Indonesia
 Positive effects of vertical agreements for competitions Critiques; reduce the interbrand competition
 May bring significant PC effects, meaning that there are benefits to Flaw: Setting forth the condition that the parties receiving goods. Wording yang
competition that are significant resulted from vertical agreements. nunjukin kalo in order to qualify as exclusive dealing, harus ada specific clause
o Having prior arrangement between seller and supplier and the stating "lu harus jual es krim gw". Ada wording shall refrain from resupplying.
supplier knows exactly how much they need to make. If its applied to the Minimarket case; supplier sm distributor -- masa ngejual
 It will be more efficient for them because they will know the lagi. Not end user. It is a very weird wording. It will be weird that if Minimarket
precise quantity of items in the inventory. and us make an agreement.
 In order for the seller wil not produce more than they need. - Exclusive distribution
o Quality insurance
Most likely ga diatur tp ada pasal 9 ttg market allocation
 For certain products  high quality products that require Business actors gaboleh kerjasama dengan other business competitors; apply for
certain degree of knowledge for people who sell the both horizontal and vertical (flawed)
products Rule of reason because it usually applies fof luxury goods
 Consumer need to buy the right product. Need to consult to Ex; in Jogja, setiap mall jual Prada padahal Jogja is a small city. Prada rugi
the seller and that seller needs to have standard to understand banyak -- banyak supply gaada demand. Jogja: satu retailer, Semarang: satu
the products. retailer These retailers is market allocation. In horizontal gaboleh, tp vertical
 The higher the quality of the products, the more you need to rule of reason. It is allowed to maintain exclusivity. The product needs to be
make sure that the people selling the products is also high. protected by exclusivity because if they have more than one retailer, it would
 Therefore, only certain kind of goods can be sold by certain have been oversupplied. They have a specific requirement; standard; misalnya
kind of stores. prada blg kl mau ngejual barang gw lo harus ada stadard tokonya, salesnya.
 Ex. Hermes is not sold in Matahari Standard of staff education and standard of store. It should not be
 Certain suppliers of products have certain people they prefer discriminatory. Any distributor when fulfilling these standard, they should be
which is why they do not sell to other distributor. able to sell the product regardless of the market
Horizontal Agreement Cases
 Companies in the same level of supply chain  Competitors
- Case No. 1
 Usually produces more harmful effect compared to vertical agreements, because Own a toy store. Toys r’ we. Barbie dolls and Barbie related dolls. Largest
the people engaged in horizontal agreements are competitors. producers  Mantel. Each Barbie dolls that you buy 150K. Make a condition to
Why is vertical agreement considered as a form of AC agreement? sell it at 300k min. in the market.
 Case analysis: 2 types of agreement;
o Violation under Article 8 Horizontal
“Business actors shall be prohibited from entering into agreements with Vertical
other business actors setting forth the condition that parties receiving the RPM (Resale Price Management)
goods and or services shall not sell or resupply the goods and or services  Art. 8
received by them, at a price lower than the contracted price, potentially “Entrepreneurs are prohibited from making any contract with other
causing unfair business competition.” entrepreneurs which sets the condition that the receivers of the goods and/or
o Rule of reason di UU 5/1999, but in other state it is considered as per se services are not to resell or resupply the goods and/or services they receive,
because it is the same as price fixing. under a price lower than the price agreed upon, thus causing unfair business
o Resale Price Maintenance competition”
o If they set minimum price, consumers have to pay more than they need  Recommended retail price; lawful if not followed
to pay originally. Most of the store would put the price way above the  Fixed retail price; unlawful if not followed
minimum price to anticipate if they want to put discount or something o Not allowed to set minimum price; but maximum price is
 Usually it is allowed for setting the maximum price fixing. allowed
Especially in UK, not minimum.  From supplier to distributor
o It reduces the intra-brand competition. Most of the retailers would sell the Exclusive distributors
products not far from the minimum price set in the agreement. This distorts  Art. 15(1)
the price competition between these people who are reselling the goods. “Entrepreneurs are prohibited from making any contract with other
- Case No. 2 entrepreneurs which imposes terms by which the parties receiving the goods
and/or services shall or shall not resupply the said goods and/or services to
Owner of chain of convenient store called Triangle M. Needs to sell ice cream.
certain parties and/or at certain places”
Ice Cream Company called Doors. They need to stock doors ice cream. Doors
 Agreement from the supplier/ distributor to the retailer which says that the
want to give ice cream refrigerator. However, the condition is if you want to use
retailer can only stock a certain kind of goods from a supplier/ retailer
this refrigerator, only use this to sell our ice cream. You can sell any other ice
o Ex; Mattel telling Toys R Us that they can't sell another Barbie
cream in other refrigerator. You can terminate the contract of the doors
refrigerator. Not prohibited to use other refrigerator. dolls aside from them 
Case analysis:
o Violation of Art. 15.1 Abuse of dominant position
If there's a company with 10% market share who conducts predatory pricing; it is not
“Business actors shall be prohibited from entering into agreements with
abuse of dominant position
other business actors setting forth the condition that the party receiving
the goods and or services shall only resupply or shall refrain from  Only unlawful if the companies are dominant
resupplying the aforementioned goods and or services to certain parties  In Indonesia; dominant; > 50%
and or at a certain place.” Exclusionary Exploitative
o Supposedly rule of reason, but Indonesia applies it as per se illegal Excluding the competition Exploiting the consumer
o The wording of “setting forth the condition” is very very per se gitu. Like Foreclose the competition/ rivals
if there is no contract ya not violation
o Overall this article is weird and very strange even mas rifky does not 1. Predatory 1. Excessive
knows whats wrong with this pricing (Art. 20) pricing (Art. 25)
o Exclusive Purchasing Agreement Buyer can only purchase from one “Entrepreneurs are prohibited Entrepreneurs are prohibited
single supplier  inter-brand competition from supplying goods and/or from taking advantage of their
o Convenient stores is not forced to only buy Ice Cream Doors only. They services by selling without dominant position, either
can buy other ice cream brand. It seems like there is no exclusivity. making any profits or by setting directly or indirectly, in order
o But due to the nature of the business, convenient store is small and have a very low price with the to: a. impose trade terms with
limited space, and it is not possible to buy many fridges. So, mostly no intention to eliminate or end the intention to prevent and/or
stock more than one fridge and fridge is a must for goods in convenient their competitors’ business in the hamper the consumers to
store. relevant market, thus causing acquire competitive goods
o Case of Van Den Bergh monopolistic practices and/or and/or services, both in prices
- Case No. 3 unfair business competition.” or quality; or b. restrict the
Owner of luxury bags store called Fancy Dress Shoes store. Man’s dress shoes market and technology
manufacturer  Crocket and James. Each store will only appoint one distributor development; or c. hamper
in each region/city. other entrepreneurs having the
Case analysis: potential to become their
o Violation of Art. 9 and 14 competitors to enter the
relevant market.
Under Art. 9, one of the elements is business actor with other business
competitors,
o But in the elucidation, the agreement meant shall refer to vertical 1. Exclusive 1. Price
dealing (Art. 25) discrimination (Art. 7)
agreement. Art. 9 cannot be used because in the elucidation is not
Entrepreneurs are prohibited
binding,
from making any contract
o This Art. clearly horizontal agreement.
with other business
o In Art. 9, it is considered as market partitioning cartel in horizontal competitors in order to fix the
agreement “Business actors shall be prohibited from entering into price below the market price,
agreements with their business competitors which have the purpose of that can cause unfair business
dividing marketing territories or allocating the market for goods and or competition.
services, potentially causing monopolistic practices and or unfair
business competition.” 1. Rebates/  
o Rule of reason discount (Art. 15(3))
o Exclusive Distribution Supplier is selling to only 1 distributor in the Entrepreneurs are prohibited
area the effect is similar to market partitioning cartel under Art. 9. but, from making any contract
different category. regarding prices or certain
o Falls under the reduce of intra brand competition discount prices of the goods
o Potentially violates nothing in Indonesia because Art. 9 only prohibits and/or services, which impose
business actors with other business other business actors. However, in EU terms by which the entrepreneurs
is a violation. receiving the goods and/or
o as a result it may be desirable to ensure that there is competition between services from the supplier
distributors and retailers in relation to the products of the firm with company: a. must be willing to
market power—so-called ‘intra-brand competition. purchase the goods and/or other
- Case No. 4 services from the supplier
Selling shoes Niko Shoes Indonesia. Hamster X Hamster (HXH). Sports company; b. shall not purchase
Terminal approach HXH  want to stop HXH to sell product. Sports Terminal the same or similar type of goods
is the largest retailer. HXH agreed since it can be exposed to many consumers. and/or services from other
The conditions: They want to be exclusive to Sports Terminal. entrepreneurs which are the
Case analysis: competitors of the supplier
o Violation of Art. 18.1 company.
“Business actors shall be prohibited from controlling the acquisition of
supplies or from acting as sole buyer of goods and or services in the 1. Tying (Art.  
relevant market which may potentially cause monopolistic practices and 15(2))
or unfair business competition” Entrepreneurs are prohibited
o Rule of reason from making any contract with
o Exclusive Supply Niko is only allowed to sell to ST, supplier cannot sell other parties which imposes
to anyone else. terms by which the parties
o But the para 2 set threshold of 50% market share which is super high receiving certain goods and/or
o Falls under Reduction to Intra brand competition services must be willing to
Notes from IBT
 3. ACDC plc is a UK based adapter manufacturer. Blommer BV is a Dutch
purchase goods and/or other wholesaler who is convinced that the famously reliable ACDC adapters would be a
services from the supplier market hit in the Netherlands. Blommer approaches ACDC and after negotiations
company. a contract is signed. The contractual agreement between ACDC and Blommer
provides that a) ACDC will supply its adapters for resale to Blommer in the
1. Refusal to   Netherlands exclusively and b) that Blommer, for a period of three years from the
deal (Art. 17, 19) date of the agreement, will not sell products competing with the ACDC adapters.
17: The market share of ACDC in the relevant market is 36% and that of Blommer is
(1) Entrepreneurs are prohibited 25%.
from controlling any production
and/or marketing of goods and/or
services that can cause a) Does this agreement fall within Art. 101(1) TFEU? b) Assuming that it does,
monopolistic practices and/or does it benefit from a block exemption?
unfair business competition. (2)
Entrepreneurs can be suspected Suggested solution:
or considered as controlling
production and/or marketing or
a) For there to be a violation of Art 101(1) TFEU, the following three conditions must
goods and/or services as referred
be present: (1) there must be one of the three forms of coordinated or collusive conduct
to under Paragraph (1) of this
between undertakings listed in Art. 101(1) TFEU, (2) the agreement may affect trade
article if: a. the said goods and/or
between Member States, and (3) the Agreement has as its object or effect the
services do not have
prevention, restriction, or distortion of competition within the internal market.
substitutions at that time; or b. it
causes other entrepreneurs to not
be able to enter business (1) There must be one of the three forms of coordinated or collusive conduct as listed in
competition for the same type of Art. 101(1) TFEU: as stated by the Court of Justice in T-Mobile (2009), there are three
goods and/or services; or c. one forms of collusion between undertakings which have the same nature and are therefore
entrepreneur or one group of distinguishable from each other only by their intensity and the forms in which they
entrepreneurs controls more than manifest themselves. An agreement is described in Bayer (2004) as “a concurrence of
50% (fifty percent) of the wills between at least two parties, the form in which it is manifested being unimportant
marketing share of one type of as long as it constitutes the faithful expression of the parties’ intention”. It can be
certain goods or services. vertical or horizontal; Consten and Grundig (1966). Decisions by associations of
19: undertakings are agreements within the framework of collective or representative
Entrepreneurs are prohibited bodies. A concerted practice has been identified in Dyestuffs (1972) as “a form of co-
from conducting one or more ordination between undertakings which, without having reached the stage where an
activities, either separately or agreement properly so-called has been concluded, knowingly substitutes practical co-
jointly with other entrepreneurs, operation between them for the risks of competition”. ACDC as a producer and
which can cause monopolistic Blommer as a wholesaler each clearly fall within the meaning of the term
practices and/or unfair business “undertaking”. There is an agreement between them. The agreement is vertical, i.e.
competition by: a. refusing between undertakings that are not competitors on the same level of production or
and/or hampering certain distribution.
entrepreneurs from conducting
the same type of business in the (2) The agreement may affect trade between Member States: the Court of Justice has
relevant market; or b. hampering adopted a broad interpretation of this requirement. There is an effect on trade between
the consumers or clients of their Member States wherever it is “possible to foresee with a sufficient degree of probability
company’s competitors from on the basis of a set of objective factors of law or of fact that the agreement in question
conducting any business contact may have an influence,
with those company’s
competitors; or c. restricting
distribution and/or selling of the direct or indirect, actual or potential, on the pattern of trade between Member States”;
goods and/or services in the Société Technique Minière (1966), Manfredi (2006). ACDC has agreed to exclusively
relevant market; or d. conducting supply its adapters for resale to Blommer in the Netherlands and Blommer has agreed
discrimination practices against not to sell products competing with the ACDC adapters. These contractual obligations
certain entrepreneurs. will have an actual effect on trade between the UK and the Netherlands. Nevertheless, it
is relevant only if it is appreciable; Tepea (1978). According to the Commission’s
guidelines on the effect on trade concept (2004), the aggregate market share of the
EU Competition Law exercises parties on any relevant market affected by the agreement shall not exceed 5% and, in
case of vertical agreements, the aggregate Union turnover of the supplier of the products
1. How is the term “undertaking” defined for the purposes of EU competition covered by the agreement shall not exceed EUR 40 million. In the present case, both
law? companies’ market share exceeds the 5% market share threshold. The turnover of
ACDC is not known. A distinction must therefore be made. Where the EUR 40 million
turnover threshold is not exceeded, then there is no appreciable effect on trade within
Suggested solution: the meaning of Art. 101(1) TFEU and the case is, therefore, not covered by Art 101(1)
TFEU. Conversely, where the EUR 40 million threshold is exceeded, then it is likely
There is no legal definition of the term “undertaking” to be found in the TFEU. that the agreement will appreciably affect trade between Member States.
Therefore, the term has been defined by the Court of Justice in a series of judgments.
The Court has opted for a broad interpretation focusing on the economic activity of the (3) The Agreement has as its object or effect the prevention, restriction, or distortionof
entity in question. Accordingly, an undertaking is “every entity engaged in an economic competition within the internal market: Either an anti-competitive object or effect is
activity, regardless of the legal status of the entity and the way in which it is financed" sufficient. In this case, it is reasonably clear that the exclusivity and non-compete
(e.g. Höfner (1991)) and "a unitary organisation of personnel, tangible and intangible clauses agreed between ACDC and Blommer are intended to restrict competition.
elements which pursues a specific economic aim on a long-term basis" (Shell (1992)). Accordingly, the agreement can be classified under the “object” category. As such it
may affect trade between Member States by its very nature; there is therefore no need to
2. Identify whether (and if not, why) the following entities fall within the meaning examine whether the actual effect on competition is appreciable within the meaning of
of the term “undertaking” for the purposes of EU competition law in the following the de minimis rule that is relevant in the context of the “effect” category; Expedia
situations: (2012) (see updates on the webcompanion, http://www.eur-
charts.eu/webcompanion/essential-eu-competition-law-in-charts).
a) A trade union representing workers on shipyards when negotiating the right of
paid paternity leave with the management. b) Metallor, a French steel producer b) An agreement may fall outside Art. 101(1) TFEU because the (cumulative) requisite
when entering into a distribution agreement with a wholesaler established in conditions of this paragraph are not met, or, if they are, because the (cumulative)
Belgium. c) A National Health System purchasing antibiotics for cost-free exclusary conditions in paragraph 3 also apply (i.e. an exemption). There are two types
treatment of the poor. d) Football players in exclusive contracts with sportswear of exemptions, namely individual exemptions (a term that was more common before the
companies. e) A compulsory pension scheme in Italy providing a minimum pension introduction of Regulation 1/2003/EC) and block exemptions. The present question
to all public sector employees. concerns the latter. Block exemptions provide for the automatic exemption of categories
of agreements that are regarded as normally satisfying the conditions laid down in Art.
Suggested solution: 101(3) TFEU. Block exemptions apply to the extent that an agreement contains
restrictions falling within Art. 101(1) TFEU. Further, block exemptions do not apply to
blacklisted conduct (so-called hardcore restrictions). As the present case concerns a
a) No, this is a representative organisation pursuing a social policy objective; Albany vertical agreement, Block Exemption Regulation 330/2010/EC on vertical restraints
(1999). b) Yes, c) No, this is an organisation purchasing goods without subsequently may be relevant. Art. 2 of the Regulation provides that Art. 101(1) TFEU does not apply
using them for an economic activity; FENIN (2006). d) Yes, undertakings may be legal to agreements between undertakings operating at different levels of the
persons or natural persons; Commission Decision RAI/Unitel (1978). e) This is an production/distribution chain relating to the conditions under which the parties may sell
organisation with an exclusively social function. Whether or not it is an undertaking or resell certain goods. More specifically, the Regulation covers both exclusive
depends on whether it is entirely based on the principle of solidarity and non-profit distribution arrangements, such as the one in the present case, and non-compete
making; Poucet (1993). obligations of a mere three years’ duration, neither of which falls under the prohibited
hardcore restrictions (Arts. 4(b)(i) and 5(1)(a)). However, Art. 3 states as a condition
that the market shares of both the supplier and the buyer may not exceed 30% on their position within the internal market by an undertaking (or two or more undertakings
respective relevant markets. While Blommer’s 25% market share is under this forming an economic entity for these purposes) insofar as it may affect trade between
threshold, ACDC’s 36% market share is higher, which renders Regulation 330/2010/EC Member States. Therefore, a violation of Art. 102 TFEU requires (1) that Ralph Rice is
inapplicable. in a dominant position, (2) that it has abused that position, and (3) that the abuse is
capable of affecting trade between Member States.
4. Three medium sized companies established in Greece, A, B and C, are active in
producing goods based on olives (such as olive oil, olive pâté etc.) for which Greece (1) The existence of dominance is determined by the undertaking’s economic power and
is famous. They have a combined market share of approximately 70% in this its ability to behave independently of its customers and competitors in the relevant
market in Greece and their annual aggregate turnover is EUR 150 million. The market. The relevant market is defined in terms of (a) products, (b) geography and (c)
remaining market share is held by two major importers and private label brands time.
of the two major supermarkets. The national sales directors of A, B and C in
Greece have regular dinner meetings in Kalamata, referred to as the "Elia a) With regard to the relevant product market, MotorSky should argue for a narrow
Group", where they discuss the state of the economy and of their industry as well market, namely that of turbine-powered jet engines where Ralph Rice’s market share in
as other issues such as packaging and labelling regulations, the public health the UK, Italy and the Netherlands rises to 83%. Ralph Rice would in contrast likely
aspects of certain ingredients, the possibility of increasing prices in the next round argue that the relevant product
of annual negotiations with the distributors, and the desirability of promotional
actions in supermarkets. Seen from a substantive angle, is A's conduct as a
member of the Elia Group potentially unlawful? For the purposes of this question, market is that of air-breathing jet engines where its market share is only 8%, which
you may assume that products based on olives form a single, coherent market. means that it is unlikely to be in a dominant position. At this point, cross-elasticity of
demand (demand substitutability) and cross-elasticity of supply (supply substitutability)
have to be taken into account. Demand substitutability concerns consumers’ behaviour,
Suggested solution: The case concerns the conduct of more than one undertaking (A, B in essence the question being whether the consumer would substitute turbine-powered
and C meeting in Kalamata), which means that Art. 101 TFEU must be examined. For jet engines with ram-powered jet engines on the basis of their respective characteristics,
the basics, see the solution to question 3. The relevant product market in the present use and price. The SSNIP (Small but Significant Non-transitory Increase in Price) test
case is the market for products based on olive oil whereas the geographic market is the on pricing as well as United Brands (1983) and Hilti (1991, 1994) judgments are
market of one Member State, namely Greece (i.e. the territory for which the discussions important in that regard. Conversely, supply substitutability concerns the behaviour of
in Kalamata are relevant). The undertakings concerned are on the same level of the other producers. The advice in this case would have to focus on whether air-breathing
production (horizontal situation). engine producers could cheaply and easily switch from making turbinepowered jet
engines to making ram-powered jet engines. Based on the information provided, there
(1) Based on the facts of the given case, no form of agreement seems to exist between appears to be low cross-elasticity of both demand and supply between turbine-powered
the undertakings. However, there is an exchange of information, which, in cases where jet engines and ram-powered jet engines due to the products characteristics.
it concerns individualised commercially sensitive information, leads to a rebuttable
presumption of a concerted practice; Anic (1999). Discussions on raising prices can be b) With regard to the relevant geographic market, Art. 102 TFEU requires a clearly
considered to be sensitive information. What is of particular note in this case is the fact defined geographic area “within the internal market or in a substantial part of it” in
that the market for olive products appears to be rather oligopolistic (only five companies which the products are marketed and where the conditions of competition are
in total). In such a situation, a lack of price competition might also be the natural way sufficiently homogenous for the effect of the economic power of the undertaking to be
for that market to operate and not the result of collusion. Where there is a concerted evaluated. Ralph Rice would likely argue for a broad geographic market, namely the
practice, the effect on trade between Member States and on competition has to be whole of the EU, where its market share is small (9%). MotorSky should seek to
checked. establish the narrower geographic market of UK, Italy and the Netherlands where Ralph
Rice has a market share of 83%. Cost and feasibility of transportation (Hilti (1991,
(2) Actual or potential effect on trade between Member States can easily be assumed in 1994)) or other factors, such as the use of the product or service, should be considered.
this case: although the relevant geographic market has been established as one Member As indicated, turbine jet engines are expensive to transport, and, thus, Ralph Rice has
State, this does not prevent an effect on trade between Member States since there are not sought to penetrate other markets. Three Member States are nevertheless sufficient
imports; Vereeniging van Cementhandelaren (1972). The test for actual or potential to be considered a “substantial part of the internal market”.
effect on trade between Member States is broad: a direct or indirect, actual or potential
effect is sufficient; Consten and Grundig (1966), Société Technique Minière (1966). c) The temporal market is not always relevant but might be considered e.g. for
The effect is appreciable since in this case the market share threshold (aggregate market products where there are limited production times. There is no specific temporal
share of the parties in any relevant market of at least 5%) as well as the turnover element to be identified in the given case.
threshold (aggregate turnover of the undertakings in the products covered by the
agreement of at least EUR 40 million) are exceeded.
In light of the analysis above, the relevant market is likely to be the market for turbine-
powered jet engines in the UK, Italy and the Netherlands for the time that Ralph Rice
(3) Regarding the effect on competition, it seems more reasonable in the present case to will be offering very substantial discounts to MotorSky’s existing customers.
assume that the concerted practice has the effect of restricting competition rather than
having the object to do so. Again, the effect must be appreciable, as Art. 101 TFEU
does not cover conduct with an insignificant effect on competition (de minimis rule, as Regarding the undertaking’s strength in the relevant market, Ralph Rice has an 83%
defined in Commission’s guidelines on the effect on trade concept (2004)). The market share of this market, which is probably enough to be conclusive of dominance; see Hilti
share threshold of 10% aggregate market share in any of the relevant markets for a (1991, 1994), Hoffmann-La Roche (1979). Other factors such as Ralph Rice’s financial
horizontal agreement (here: a concerted practice) is exceeded. resources, commercial advantages, technical advantages, supply-side factors and other
barriers making it difficult to enter the market may be relevant when assessing
dominance.
Where it is concluded that the conduct of the “Elia Group” indeed falls under Art.
101(1) TFEU, it needs to be examined further whether the case is covered by a block
exemption (not applicable in this case), the exemption of Art. 101(3) TFEU (highly (2) Dominance in itself does not amount to a breach of Art. 102 TFEU. There must also
unlikely as the four cumulative criteria do not seem to be satisfied) or the derogation of be an abuse. Abuse can be exploitative or exclusionary. Ralph Rice has negotiated
Art. 106(2) TFEU (not relevant in this case). If it does not, it is indeed prohibited and different discounts with individual building contractors, based on the size of the orders
void ex nunc on the basis of Art. 101(2) TFEU. placed and is offering discounts to a competitor’s (MotorSky) existing customers;
Hoffman-La Roche (1979). This appears to constitute an (exclusionary) abuse of its
dominant position. However, it has to be examined as to whether the abuse can be
5. Ralph Rice is a UK producer of turbine-powered jet engines, which it supplies to objectively justified. Whilst Art. 102 TFEU contains an absolute prohibition, an
its contractors in the UK, Italy, the Netherlands and Switzerland. Because of the objective justification may prevent the conduct from being qualified as abusive
high transportation cost of its products, Ralph Rice has not extended its sales (remember that abuse is a normative concept); Michelin (1983), European Night
operations beyond these states. Ralph Rice has only a 9% share of the EU market Services (1998) and Piau (2005). There is no indication of any objective justification in
for turbine-powered jet engines. However, it supplies 83% of the turbine-powered the case.
jet airplane engines sold in the UK, Italy and the Netherlands. Ralph Rice’s share
of the wider market of air-breathing jet engines (which consists of turbine-
powered jet engines and ram-powered jet engines) in the UK, Italy and the (3) Finally, there is the requirement that the abuse may affect trade between Member
Netherlands, is 8%. When compared to turbine-powered jet engines, ram-powered States. Under Art. 102 TFEU, an actual appreciable effect does not have to be proven.
jet have no moving parts, do not have any carbon-fibre parts, are less efficient (i.e. An undertaking that abuses a dominant position in a substantial part of the internal
require more gas) but are significantly cheaper. Using its extensive financial market is likely to affect trade between Member States. In the present case, the relevant
resources generated from healthy profits over the past five years, Ralph Rice has geographic market has been established as consisting of three Member States, and the
developed a very efficient distribution system. The company's strong market discounting arrangements offered by Ralph Rice can be assumed to at least have a
position has also enabled it to offer discounts to some of its UK customers, which potential effect on trade between Member States.
are negotiated separately with individual contractors and based on the size of the  
orders placed. Recently, one of Ralph Rice’s competitors, MotorSky SA, also Cara jawab UTS competition
discovered that Ralph Rice is offering very substantial discounts to MotorSky’s  Maybe there is no violation in Indonesian law
existing customers if they agree to become, over the next 12 months, customers of  But… there is anti-competitive effects
Ralph Rice. MotorSky questions the compatibility of the above discount o Possibly say false negatives or false positives
arrangements with Art. 102 TFEU. You are asked to advise MotorSky on this  You assess it based on the concept on reading materials (mostly EU law)
matter.  Then, if the result is different, then you find the difference yg bikin hasilnya
beda
o Knp Indo bilang no violation but EU says there is a violation
Suggested solution:
 Say how can Indonesian law be improved

This case concerns the conduct of one single undertaking (Ralph Rice). Accordingly,
Art. 102 TFEU must be examined. Art. 102 TFEU prohibits the abuse of a dominant