Indonesian merger regulation clarified

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Indonesian

The Indonesian Business Competition Supervisory Commission (KPPU) has given verbal answers to several questions on the new merger filing regulation, Regulation No. 3 of 2019 on Assessment of Merger or Consolidation of Business Entities or Share Acquisitions of Companies.

The following is a summary of the clarifications:

  1. Updates on the criteria of the assets in an asset acquisition. The KPPU has further clarified that only acquisitions of productive assets that may bring economic benefit and increase the ability of the acquirer to control the relevant market need to be notified to the KPPU.

This policy is not consistent with the text of KPPU Regulation No. 3 of 2019, which seems to require notification to the KPPU in the event of merely a change of control over the assets.

The KPPU has given its clarification on this subject twice on different occasions, which gives a strong impression that the KPPU is only targeting asset acquisitions with the above criteria.

  1. Asset threshold calculation refers to the worldwide figures of the ultimate shareholder of the acquirer. Unlike the previous merger control regulation, which clearly sets out that the assets to be included in the threshold calculation are only the Indonesian assets, the new merger control regulation stipulates that assets to be included in the threshold calculation are as follows: (a) the assets of the acquirer and the target company; and (b) the assets of the direct and indirect entities of the parties involved in the transaction.

Further, KPPU Regulation No. 3 stipulates that the asset figures should refer to the figures in the audited financial statements of the transacting parties. From the text of KPPU Regulation No. 3, it is still not clear whether the calculation only covers the Indonesian target, or goes beyond that.

The KPPU clarified that the assets should cover the worldwide figures of the assets of the ultimate shareholder of the acquirer contained in the consolidated financial statements. This method certainly enlarges the threshold for the asset calculation, and it seems likely that more acquisition transactions will be captured than under the previous regulation, as it will also cover non-Indonesian assets.

It is worth noting that the above clarification by the KPPU is different from the authors’ clarification with them in our first discussion. So, we think that until the implementing guideline is issued, there will be changes to KPPU policy in implementing this regulation.

  1. “If required” data under the new template of the notification form. The notification form is now divided into two sections, with detailed information on products being in section 2, which is now marked as “if required” by the KPPU.

Section 2 covers the following information: (a) competitors of the acquirer and the target company; (b) profile of consumers of the acquirer and the target company; and (c) profile of suppliers of the acquirer and the target company.

The KPPU further clarified that the above information is not required in the initial submission and only needs to be submitted if the KPPU requires it. The authors have not tested this yet, but we will give an update once we have seen this policy being implemented.

  1. Only overseas transactions that have a relevant market in Indonesia need to be notified. KPPU Regulation No. 3 stipulates that any overseas transactions that have met the thresholds are required to be notified to the KPPU. The text does not say anything about whether only overseas transactions that cover the relevant market in Indonesia (or in other words, whether the overseas transactions should have market impact in Indonesia) need to be notified to the KPPU. But the KPPU clarified that they only require notification for overseas transactions that have a relevant market in Indonesia.

In the absence of the implementing guidelines, and as a precautionary measure, the authors suggest that the relevant parties submit the notification to the KPPU if the basic thresholds (assets and sales figures have met the threshold, there is a change of control and the parties are not affiliated) are simply fulfilled. This is because the authors have not yet tested the implementation of this new regulation, and the risk of not notifying is being declared as making a late merger filing. Note that for the latter, the sanctions applied are quite high, i.e., administrative penalty of a fine of up to IDR25 billion (US$1.8 million).

Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by emailing Danian Zhang at [email protected].