Legal development

Major overhaul of Indonesia Merger Regulation

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    Summary

    • The Indonesia Competition Commission (ICC) has issued two new regulations that introduce significant changes to Indonesia's merger control regime.
    • Revised notification criteria and a different approach to the local nexus text (for foreign to foreign transactions) are expected to result in considerably fewer deals being notifiable in Indonesia.
    • The ICC is also moving to an electronic portal notification system and must move swiftly to review notifications for completeness during pre-notification - within 3 business days (down from 60 business days). This significantly reduces the allowable period for the ICC's pre-notification review of a filing.
    • As the new regulation took effect on 31 March 2023, parties involved in transactions which are yet to complete but which were anticipated to require a post-closing merger notification in Indonesia, should revisit their merger filing assessments as this may no longer be the case.

    Background

    On 6 April 2023, the ICC issued the following new regulations which introduce significant changes to Indonesia's merger control regime:

    • Regulation No. 3 of 2023 on the Assessment of Merger, Consolidation, or Acquisition of Shares and/or Assets that could result in Monopolistic and/or Unfair Business Competition Practices (Merger Regulation); and
    • Regulation No. 20 of 2023 on Tariffs of Non-tax State Revenue Applicable in the ICC (Tariff Regulation).

    The Merger Regulation took effect from 31 March 2023. The Tariff Regulation will take effect from 5 May 2023.

    Merger Regulation

    The Merger Regulation makes a number of notable amendments to Indonesia's merger control regime. The key changes are set out in the table below.

    new merger regulationprevious position

    Quantitative notification criteria

    • the value of the combined Indonesia assets of the relevant parties is greater than IDR 2.5 trillion (c. USD 168 million); or
    • the value of the combined turnover in Indonesia of the relevant parties is greater than IDR 5 trillion (c. USD 337 million).

    Quantitative notification criteria

    • the value of the combined worldwide assets of the relevant parties is greater than IDR 2.5 trillion (c. USD 168 million); or
    • the value of the combined turnover in Indonesia of the relevant parties is greater than IDR 5 trillion (c. USD 337 million).

    Foreign to foreign transactions

    All relevant parties to the transaction must have assets and/or generate sales/turnover in Indonesia.

    Foreign to foreign transactions

    All relevant parties to the transaction must have assets/turnover in Indonesia; however if only one party has assets/turnover in Indonesia, the other party must have a sister company having assets/turnover in Indonesia.

    Online notification portal

    Notifying parties must register an account and submit merger notifications online through an electronic portal on the ICC's website (available on Indonesian business days from Monday to Friday between 9am to 2pm Jakarta time).

    Note. The online portal is not yet functional as of the date of publication of this article.

    Physical submission of notification

    Parties are technically required to submit filings in physical copy (by courier) to the ICC's offices and soft copy by email. However, since the pandemic, the ICC began accepting submission by email only (and are still accepting submissions by email only currently).

    Pre-notification review period

    On receipt of a notification, the ICC must now review a filing for completeness within 3 business days.

    Note. If a filing is not complete, we expect the ICC will have the power to "stop the clock" on the review period.

    Pre-notification review period

    On receipt of a notification, the ICC must review a filing for completeness within 60 business days.

    Tariff Regulation

    The Tariff Regulation introduces a fee for merger filings payable to the ICC. The merger filing fee will be calculated according to the following formula:

    0.004% x the value of assets or sales turnover that crosses the threshold, whichever is the lower. The amount payable will be capped at IDR 150 million (c. USD 10,000)

    The assets and turnover value are based on the Group-wide assets or turnover of the relevant parties to the transaction.

    The filing fee may be waived (in part or full) where a transaction is found to: (a) support SME enterprise development; (b) extraneous circumstances mean that the fee cannot be paid; or (c) the transaction concerns a government mandate. It is unclear how the ICC will exercise its discretion in determining whether the filing fee may be waived or when the filing fee needs to be paid. We expect that these issues will be clarified under separate regulations.

    Conclusion

    As a result of the revised notification criteria, considerably fewer deals are expected to be notifiable in Indonesia. Foreign to foreign transactions must also have a local nexus (by way of relevant parties' having turnover or assets in Indonesia). In addition, transactions that are filed in Indonesia will have the benefit of a quicker pre-notification review process (ie, 3 business days versus 60 business days).

    These amendments come as a welcome change for global businesses who no longer have to be concerned about notifying transactions in Indonesia just because the value of their worldwide assets exceed the thresholds.

    AuthorsAngie Ng, Partner; Dion Alfadya, Partner; Adelle Elhosni, Senior Associate; Indra Sudrajat, Associate; Chelsea Toner, Associate

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