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Regulation on Pre-Notification of Mergers, Consolidations and Acquisitions in Indonesia

August 2010 - Corporate & Commercial. Legal Developments by Makarim & Taira S..

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Mergers, consolidations and acquisitions are three means commonly used by businesses, among other things, to expand and increase their efficiency. They can also attract the attention of competition regulators, as these types of transactions can result in an increase of concentration in the relevant market, which may eventually result in the occurrence of monopolistic practices and/or unfair business competition, as defined by the relevant laws.

The Indonesian business competition regulator, the Commission for the Supervision of Business Competition (Komisi Pengawas Persaingan Usaha / "KPPU") is authorized under Law No. 5 of 1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition (the "Anti-Monopoly Law") to annul mergers, consolidations or acquisitions which can cause monopolistic practices and/or unfair business competition to occur. This power, however, introduces an element of uncertainty to these types of transactions, as the businesses concerned would not know until afterwards whether their merger, consolidation or acquisition would be annulled by the KPPU upon their realization.

To provide greater legal certainty to businesses and at the same time to prevent the occurrence of monopolistic practices and/or unfair business competition, the KPPU recently enacted Commission Regulation No. 1 of 2009 on The Pre-Notification of Mergers, Consolidations and Acquisitions (the "Pre-Notification Regulation"). Pre-notification is voluntary.

Since the KPPU only has the authority to oversee mergers, consolidations or acquisitions which may result in violations of the Anti-Monopoly Law, not all mergers, consolidations or acquisitions qualify for a pre-notification. There are certain requirements which must be met before a business can make a pre-notification to the KPPU. They include, among other things, minimum asset values, amount of sales (turnover) or control of market share in the relevant market, resulting from the relevant merger, consolidation or acquisition. These requirements are set out in Articles 3 and 4 of the Pre-Notification Regulation.

After a pre-notification to the KPPU has been made, the KPPU will conduct an initial evaluation and if, based on the initial evaluation, there are indications of high concentration in the relevant market, a full evaluation will be conducted.

Upon completion of each evaluation, the KPPU will issue its initial opinion, the content of which could be "no objection", "objection" or "conditional no objection". The business in question may consult the KPPU regarding its initial opinion within no later than 30 days of its receipt of the KPPU's initial opinion. Following the expiry of the 30-day period, the KPPU will announce a final opinion.

An adverse KPPU opinion resulting from the pre-notification process will not formally prejudice the position of the business in question, as it is "non-binding" on the business concerned. It will, however, bind the KPPU itself. This means that if the KPPU issues a ‚Äėno objection' opinion regarding a merger, consolidation or acquisition transaction, then the KPPU cannot annul the merger, consolidation or acquisition upon completion of the transaction without a change in circumstances. If the KPPU issues an adverse opinion, this will not bind the business, which can opt whether to carry out the merger, consolidation or acquisition plan regardless of the KPPU's adverse opinion. Of course, in these latter circumstances, they would be on notice that the KPPU considered the transaction to violate the Anti-Monopoly Law and would be running the risk of its being annulled later after completion of the transaction.

Even though pre-notification is voluntary in nature and would absorb valuable time and resources, it is expected that, over time, many businesses will take advantage of the pre-notification mechanism in the interests of certainty.

The Pre-Notification Regulation was enacted on and has been in force since 13 May 2009.


Kurniawan Tanzil ( is a Senior Associate and Richard Cornwallis ( is a Foreign Legal Consultant with the Indonesian law firm of Makarim & Taira S. (