CN11 - New guidelines on the imposition of penalties for violations

On 31 May 2021, the Indonesia Competition Commission ("ICC") published the Regulation on Guidelines for the Imposition of Penalties for Violations of the Law on the Prohibition of Monopolies and Unfair Business Practices ("Penalty Guidelines").  The Penalty Guidelines set out factors relevant to the calculation of penalties and rules with respect to payment of penalties imposed on entities for violations of the Indonesian Competition Law.

Key takeaways

• Following major changes to the penalties regime introduced by the Omnibus Law in November 2020 (see article entitled Clarifications to "Omnibus changes" to Indonesia's Competition Law), the ICC has published Penalty Guidelines that set out mitigating and aggravating factors relevant to the calculation of penalties imposed for violations of the Competition Law.
• The Guidelines provide greater clarity on the factors relevant to, and which will be taken into account by, the ICC when imposing penalties for violations of the Indonesian Competition Law.
• Entities engaging in business activity in Indonesia ought to have regard to the mitigating factors set out in the Guidelines – including matters such as evidence of a culture of compliance through codes of ethics and training - which may result in reduced exposure to what may be sizeable penalties for violations of the Indonesian Competition Law.

On 31 May 2021, the Indonesia Competition Commission ("ICC") published the Regulation on Guidelines for the Imposition of Penalties for Violations of the Law on the Prohibition of Monopolies and Unfair Business Practices ("Penalty Guidelines").  The Penalty Guidelines set out factors relevant to the calculation of penalties and rules with respect to payment of penalties imposed on entities for violations of the Indonesian Competition Law.

Consistent with changes introduced by the Omnibus Law, the Penalty Guidelines re-iterate: 

1. the base penalty amount of IDR 1 billion (approximately USD 69,000);
2. a maximum penalty of up to 50% of the total net profit during the violation period or a maximum of 10% of the total gross sales during the violation period; and
3. applies to violations of the Competition Law.

Salient provisions of the Penalty Guidelines include:

1. Chapter II of the Penalty Guidelines sets out the factors that may be taken into account when imposing a penalty for a violation of the Competition Law:
   • the negative impact of the violation on competition (details of which are indicated to be further enumerated in a Commission Regulation);
   • the duration of the contravening conduct;
   • alleviating factors (such as evidence of a codes of ethics, training and other efforts which demonstrate an effort to promote a culture of compliance; no previous history of violation; a lack of impact on competition);
   • incriminating factors, including whether similar conduct has been engaged in within a period of less than 8 years and the role of the contravening entity in initiating the violation; and / or
   • ability to pay. Namely, the financial position of the contravening entity and impact of the penalty on their continued viability.
2. Chapter III of the Penalty Guidelines sets out requirements with respect to bank guarantees – parties will now be obliged to pay 20% of the total penalty in the form of bank guarantee before filing an appeal against an ICC decision. An appeal will not be filed if the bank guarantee letter is not submitted within 14 days after the ICC announces its decision; and
3. Chapter IV of the Penalty Guidelines sets out the terms on which payment of a penalty must be made (within 30 days of a decision) and procedures to request an extension to the payment period (which may be granted up to 36 months).

In summary, the Penalty Guidelines provide greater clarity on the factors which will be taken into account by the ICC when imposing penalties for violations of the Competition Law.  Entities subject to proceedings before the ICC may consider advancing arguments that draw on the mitigating factors set out in the guidelines to reduce their overall exposure to what may be sizeable penalties for violations of the Indonesian Competition Law.