Business competition is an economic instrument in the development of the Indonesian economic system, as evidenced by the enactment of Law Number 5 of 1999 concerning the Prohibition of Monopolies and Unfair Business Competition. The issues discussed in this study are: what forms of agreements are prohibited in business competition activities according to Law Number 5 of 1999 concerning the Prohibition of Monopolistic Practices and Unfair Business Competition, and what are the responsibilities of business actors involved in cases of monopolistic practices and unfair business competition according to Law Number 5 of 1999 concerning the Prohibition of Unfair Business Competition. The data collection method in this study was conducted through library research and document review. This involved collecting legal materials through journals, legal research results, and various official institutional documents such as laws and regulations, court circulars, and other literature relevant to the research problem.
Competition in the business world is an unavoidable dynamic. For some businesspeople, competition has a negative connotation because it threatens their business, leading to fears of reduced profits or consumers preferring competitors' lower prices. However, this is not the case. Healthy competition can be beneficial for businesses, competitors, and even customers.
Business competition is a crucial factor in the running of a country's economy. It can influence policies related to trade, industry, a conducive business climate, business certainty and agreements, efficiency, the public interest, public welfare, and so on. Competition within the market mechanism applies to all market participants without exception. Competition law protects the competitive process, regardless of who the participants are, with the good intention of ensuring efficient resource allocation. Competition law seeks to monitor and prevent anticompetitive acts or agreements such as cartels, monopolies, the use of dominant positions, monopsony, and others.
Business actors are parties that distribute goods or services to consumers, for example, retailers, wholesalers, agents, and distributors. According to Article 1, Number 3, No. 8 of 1999 concerning Consumer Protection (UUPK): A business actor is any individual or business entity, whether a legal entity or not, established and domiciled or conducting activities within the jurisdiction of the Republic of Indonesia, either individually or jointly through an agreement, to conduct business activities in various economic sectors.
The rights and obligations of business actors, as regulated in Law No. 8 of 1999 concerning Consumer Protection (UUPK), are as follows:
1. Article 6 of the Consumer Protection Law defines the rights of business actors as follows:
a. The right to receive payment in accordance with the agreement regarding the conditions and exchange value of the goods and/or services traded;
b. The right to legal protection from consumer actions acting in bad faith.
c. The right to defend oneself appropriately in the legal settlement of consumer disputes.
d. The right to good reputation rehabilitation if legally proven that the consumer's loss was not caused by the goods and/or services traded. Rights regulated in other laws and regulations.
2. Article 7 defines the obligations of business actors as follows:
a) Acting in good faith in conducting their business activities.
b) Providing correct, clear, and honest information regarding the condition and guarantees of goods and/or services, as well as providing explanations regarding their use, repair, and maintenance.
c) Treating or serving consumers correctly and honestly and without discrimination.
d) Guaranteeing the quality of goods and/or services produced and/or traded based on applicable goods and/or service quality standards.
e) Provide consumers with the opportunity to test and/or try certain goods and/or services and provide guarantees and/or warranties for the goods manufactured and/or traded.
f) Provide compensation, restitution, and/or reimbursement for losses resulting from the use, utilization, and utilization of traded goods and/or services.
g) Provide compensation, restitution, and/or reimbursement if the goods and/or services received or utilized do not comply with the agreement.
Business actors often practice monopolies by unfairly controlling the market, such as setting prices beyond reasonable limits, preventing the entry of new business actors, or entering into exclusive agreements with certain distributors, thereby hindering healthy business competition and harming consumers.
Monopolies are efforts by relatively large companies or groups of companies with dominant positions to regulate and increase control over the market through various anti-competitive practices such as predatory pricing, preemptive facilities, and closed competition. This type of monopolistic market has business actors who control production and/or marketing, so that these business actors can determine for themselves how many goods or services will be sold, or how many goods will be sold depending on the profit they want to achieve so that sellers will apply prices that will provide the highest profit.
Monopolistic practices are commonly practiced by businesses when they have a favorable position. Monopolistic practices represent a concentration of market power in one hand. This means that a single business or group of business actors has the power to dominate the market. Business actors who engage in monopolistic practices will have negative impacts. These negative impacts not only affect the business climate and business actors but can also extend to harming entrepreneurs, society, and the state.
With market dominance by one or more specific business groups, this will create or result in a situation where consumers have no choice in the availability of goods and/or services. Ideally, from a consumer protection perspective, consumers should be free to choose the goods and/or services they desire. However, with a monopolized market, consumers' right to choose is neglected.
Monopolies create a high-cost economy that burdens the wider community. This occurs because production factors are not operating efficiently, while the results of monopolistic practices are enjoyed only by a few individuals or specific business groups, while the people become increasingly poor and suffer. The fifth principle of Pancasila, which emphasizes social justice for all Indonesians, appears to be neglected. The characteristics of a monopoly market are:
1. A monopoly market is a single-company industry. Therefore, the goods or services produced cannot be purchased elsewhere. Buyers have no other options. The terms of sale are entirely determined by the monopoly, and buyers cannot create or determine the terms of the sale.
2. There are no close substitutes. The goods produced by the monopoly company cannot be replaced by other goods in the market. These goods are unique in nature, and there are no similar goods that can replace them.
3. The industry is impossible to enter. This characteristic is the main reason why companies have monopoly power. Without this characteristic, a monopoly market would not exist because without these barriers, there would ultimately be several companies in the industry.
4. It can influence price determination. Because the monopoly company is the sole seller in the market, it can control price determination. By controlling production and the quantity of goods offered, a monopoly company can set prices at its desired level.
5. Advertising is less necessary. Because a monopoly company is the only company in the industry, it does not need to promote its products through advertising.
One example of a monopolistic practice is PT. CONCH KALIMANTAN CEMENT (CONCH), which was accused of deliberately lowering cement prices or selling at a loss to dominate the market. This case began with a public report. The public report alleged violations of Article 20 of Law No. 5/1999, specifically regarding CONCH's attempts to sell at a loss and/or set very low prices in the sale of PCC cement in South Kalimantan.
In accordance with Article 20 of Law No. 5 of 1999, "Business actors are prohibited from supplying goods and/or services by selling at a loss or setting very low prices with the intention of eliminating or destroying the business of their competitors in the relevant market, which could result in monopolistic practices and/or unfair business competition." Based on the trial process and evidence obtained, the Commission Panel concluded that CONCH had sold at a loss in 2015 and set very low prices from 2015 to 2019.
In 2015, CONCH in South Kalimantan sold Portland Composite Cement (PCC) for IDR 58,000 per 50-kilogram bag. Meanwhile, Semen Gresik, a subsidiary of the state-owned Semen Indonesia, sold cement for IDR 60,000 to IDR 65,000 for similar weights. CONCH continued this practice in subsequent years, gradually eliminating cement from outside Kalimantan from the market.
The extremely low pricing was concluded through evidence showing CONCH's average selling price was lower than that of its competitors for PCC cement sales in South Kalimantan. The Commission Panel also found that CONCH is owned by Anhui Conch Cement Company Limited, its parent company, a multinational company with strong financial capabilities and a significant potential to dominate the global cement industry.
With this support, CONCH has the ability and financial capital to implement business strategies from production to marketing, including pricing strategies to lower market prices and/or those of its competitors. The implementation of these various pricing strategies resulted in losses for its competitors.
Based on the facts of the trial, the Commission Panel imposed an administrative fine on CONCH in the amount of Rp 22,352,000,000 (twenty-two billion three hundred fifty-two million rupiah) for violating Article 20 of Law Number 5 of 1999. This fine must be deposited into the State Treasury as revenue from fines for violations of business competition. Payment must be made no later than 30 (thirty) days after the decision becomes legally binding, and a copy of the fine payment must be reported and submitted to the KPPU.
Law Number 5 of 1999 concerning the Prohibition of Monopolistic Practices and Unfair Business Competition regulates the duties of the Business Competition Supervisory Commission, as stated in Article 35. The Commission's duties include:
Assess agreements that could result in monopolistic practices and/or unfair business competition, as regulated in Articles 4 through 16;
Assess business activities and/or actions of business actors that could result in monopolistic practices or unfair business competition, as regulated in Articles 17 through 24;
Assess the existence or absence of abuse of a dominant position that could result in monopolistic practices and/or unfair business competition, as regulated in Articles 25 through 28;
Take action in accordance with the commission's authority;
Provide advice and considerations regarding government policies related to monopolistic practices and/or unfair business competition;
Prepare guidelines and/or publications related to this law;
Provide periodic reports on the commission's work results to the President and the House of Representatives.
Based on the cases above, the author is interested in writing further about "Legal Analysis of the Responsibilities of Business Actors in Monopolistic Practices and Unfair Business Competition According to Law Number 5 of 1999 concerning the Prohibition of Monopolistic Practices and Unfair Business Competition"
In essence, the term "business actor" refers to an individual or entity— whether legally incorporated or not—that engages in economic activities with the objective of earning profit. As defined in Law No. 5 of 1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition, a business actor is any person or business entity, whether legal or non-legal, that is established and operates within the territory of the Republic of Indonesia, either independently or in collaboration with others through agreements, and engages in various economic sector activities. Both definitions exhibit similar characteristics.
Article 8 of 1999 concerning Consumer Protection regulates the rights and obligations of business actors in conducting business, namely:
Rights of Business Actors:
a. The right to receive payment as agreed upon, in accordance with the terms and value of the goods and/or services exchanged;
b. The right to legal protection against actions taken by consumers in good faith;
c. The right to a fair opportunity to defend themselves in legal processes related to consumer disputes;
d. The right to restore their reputation if it is legally proven that the consumer's losses were not caused by the goods and/or services provided.Obligations of Business Actors:
a. To act in good faith while conducting business activities;
b. To provide accurate, clear, and honest information about the condition and guarantees of goods and/or services, including guidance on their use, maintenance, and repair;
c. To treat consumers fairly, honestly, and without discrimination;
d. To ensure the quality of goods and/or services produced or traded, in accordance with applicable standards and regulations;
e. To allow consumers to test or try certain goods and/or services, and to offer guarantees and warranties for them;
f. To offer compensation, indemnification, and/or reimbursement for any losses incurred due to the use, consumption, or application of the goods and/or services provided;
g. To provide compensation, refunds, and/or replacements if the goods and/or services delivered do not meet expectations or agreed-upon standards.
Monopolistic practices refer to competitive actions between business entities that are carried out in a dishonest or unfair way. These practices are regulated under Article 1, point (1) of Law No. 5 of 1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition, which defines monopoly as "the control over the production and/or distribution of goods and/or the use of specific services by a single business actor or a group of business actors." In addition, Article 2 (2) clarifies that a monopoly involves the concentration of economic power by one or more business actors, which leads to control over the production and/or distribution of certain goods and/or services, potentially resulting in unfair business competition and harm to the public interest.
Business competition is essentially a normal part of the business world. Business competition also serves to encourage business actors to improve the quality of their products/services, thereby fostering new innovations in these products. Consumers can also freely choose the goods and services they need, with good quality and affordable prices. However, in practice, this business competition not only creates innovation for business actors but also creates business competition that is created for the benefit of a single business group, resulting in other business groups struggling to develop or even dying. This business competition is referred to as unfair business competition.
Article 1 paragraph (6) of Law Number 5 of 1999 concerning the Prohibition of Monopolistic Practices and Unfair Business Competition states that unfair business competition is competition between business actors in carrying out production and/or marketing activities for goods and/or services that is carried out dishonestly or unlawfully.
In composing this journal, the author employs a normative legal research method. This approach concentrates on legal norms, rules, and principles found within statutory regulations and other written legal sources relevant to the topic. The research draws upon primary legal materials, including Law No. 5 of 1999 on the prohibition of monopolistic practices and unfair business competition, as well as various related regulations. It also utilizes secondary legal materials— defined by Soerjono Soekanto as data encompassing official documents, books, and legal literature—alongside tertiary legal materials, such as legal encyclopedias and dictionaries, which offer additional clarification of the legal terms used in the study.
The provisions of Law Number 5 of 1990 concerning the Prohibition of Monopolistic Practices and Unfair Business Competition aim to foster healthy, fair, and transparent business competition. This law also serves as a foundation for business actors to obtain legal certainty and protect their interests, thereby achieving fairer, more open competition that does not harm other business actors. In general, business competition is a natural part of any business activity.
It aims to stimulate economic and business growth. This competition will also continue to drive economic growth through the development of business innovation, the development of environmentally friendly products, and increased job creation. This competition will also open up opportunities for consumers to actively and freely choose the products they need.
Article 1, number (6) of Law Number 5 of 1999 states that unfair business competition is competition between business actors in carrying out production and/or marketing activities for goods and/or services that is carried out dishonestly or unlawfully or hinders business competition. This provision certainly serves as a basis for ensuring that business competition practices must be conducted properly, honestly, fairly, and not against the law in order to create fair business competition that does not harm other business actors.
However, in practice, various forms of unfair business competition often occur, which result in losses for other business actors, consumers, and disrupt a fair business climate. Unfair business competition also refers to business actions or strategies carried out by business actors in ways that violate the law, business ethics, or fair competition norms, with the aim of obtaining illegal profits or eliminating competitors from the market.
Forms of business competition practices and unfair business competition can take the form of prohibited agreements such as oligopoly agreements, unilateral price fixing agreements, territorial division agreements, oligopoly agreements, cartels, trusts, closed agreements, and vertical integration agreements.
Generally, an oligopoly is a market where there are only a few producers producing competing goods. An oligopoly market can also be defined as a situation where only a few companies or business actors are able to dominate the market, either individually (independently) or through secret collaboration with other companies. These companies are typically giant corporations that wield influence over a significant portion of the market, making it difficult for smaller companies to compete or grow.
This definition is further clarified in Article 4 of Law Number 5 of 1999 concerning the Prohibition of Monopolistic Practices and Unfair Business Competition, which defines oligopoly as a form of business competition involving only a few companies selling the same product, resulting in very limited market competition and high prices.
In practice, an oligopoly market consists of only a small group of companies, but they influence each other. These companies also exert influence over product prices, resulting in unstable prices. This power will ultimately make it very difficult for small or new businesses to grow, leading to their inability to compete (bankruptcy).
Price fixing is a collaboration between competing companies to set market prices. In the practice of business competition, businesses or companies with a stronger position than other businesses or companies are prohibited from setting prices arbitrarily but must instead consider the prevailing levels of supply and demand in the market, creating perfect competition. However, this practice is often exploited by businesses or companies with significant influence. The company will set prices below market prices for a certain period of time, thus benefiting consumers.
These businesses or companies will then raise the price of the product, causing consumers to feel disadvantaged, resulting in new businesses starting out and existing businesses being gradually eliminated from the market. This practice is often referred to as predatory pricing, an effort by companies to maximize their profits and cover losses incurred from setting low prices or selling at a loss.
This practice is also used by businesses to maintain a strong (dominant) market position. Therefore, businesses will employ a limit pricing strategy, setting very low prices and increasing production. This is done to prevent other businesses from competing with the strong-positioned business and to discourage new business players from entering and competing in a particular product market. This practice, of course, is in stark contrast to Article 7 of Law Number 5 of 1999 concerning the Prohibition of Monopolistic Practices and Unfair Business Competition, which stipulates that businesses are prohibited from entering into agreements with their competitors to set prices below market prices, which could result in unfair business competition.
In practice, territorial division agreements are agreements made by businesses to divide the territories or marketing areas for their products. This territorial division agreement contradicts Article 9 of Law Number 5 of 1999 concerning the Prohibition of Monopolistic Practices and Unfair Business Competition, which states that "Business actors are prohibited from entering into agreements with their competitors aimed at dividing marketing areas or allocating markets for goods and/or services, which could result in monopolistic practices and/or unfair business competition."
This territorial division agreement will impact consumers, making it difficult to find the products they need and also leading to price instability, which tends to be more expensive due to limited production. This agreement also impacts new businesses, who will have difficulty establishing their businesses in the region because it is already dominated by businesses with stronger economic power.
In the context of Law Number 5 of 1999, Article 13 paragraph (1) explains that an oligopsony is an agreement in which several business actors collude to control the purchasing or supply process. This is done with the aim of manipulating the prices of goods or services in the market. This type of agreement is prohibited because it has the potential to create monopolistic practices and/or unfair business competition. It is important to note that the prohibition on oligopsony is subject to the "rule of reason," meaning that enforcement requires concrete evidence that the action has actually resulted in a monopoly or unfair business competition.
Article 11 of Law No. 5 of 1999 clearly forbids cartel practices within business competition. It states that "Business actors are prohibited from making agreements with competitors that aim to influence prices by controlling the production and/or distribution of goods and/or services, as such actions may lead to monopolistic practices and/or unfair business competition."
Cartel practices are business competition practices aimed at influencing the price of a product and controlling the production of that product/service. This practice will inevitably lead to a monopoly of goods/services, thus creating unfair competition among other businesses.
Generally, a trust agreement is an agreement that establishes a larger partnership or joint venture while maintaining and sustaining the viability of each member company or individual, with the aim of controlling the production and/or marketing of goods and/or services.
Law No. 5 of 1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition clearly outlines the ban on monopolistic behavior in business activities. Article 12 states that "Business actors are prohibited from forming agreements with other business actors to cooperate by creating a larger partnership or joint venture, while still preserving the independence and operations of each participating company, with the purpose of controlling the production and/or distribution of goods and/or services, which may lead to monopolistic practices and/or unfair business competition."
A closed agreement refers to an arrangement between business actors or companies operating at different levels within the production or distribution chain of goods or services. Such agreements fall under the category of prohibited agreements. Article 15 of Law No. 5 of 1999 prohibits business actors from entering into closed agreements with other parties. Specifically, Article 15 provides that:
Business actors are not allowed to make agreements that require the recipient of goods and/or services to exclusively supply or refrain from resupplying those goods and/or services to certain parties or in specific locations.
Business actors are prohibited from making agreements that require the recipient of certain goods and/or services to also purchase other goods and/or services from the same supplier.
Business actors are forbidden from entering into pricing or discount agreements for goods and/or services that: Require the recipient to also purchase other goods and/or services from the supplier; or Prevent the recipient from buying similar goods and/or services from competing suppliers.
Vertical integration refers to an agreement between businesses or companies designed to control the production of several products within a specific production chain of goods and/or services, where each stage in the chain involves further processing—either directly or indirectly. Such vertical agreements are prohibited in the context of business competition. As stipulated in Article 14, "Business actors are prohibited from entering into agreements with other business actors that seek to control the production of multiple products within a specific production chain of goods and/or services, where each stage involves further or continued processing, whether directly or indirectly, if such agreements may lead to unfair business competition and/or cause harm to the public."
Legal accountability that can be imposed on business actors proven to be involved in unfair competition can take the form of administrative sanctions and criminal sanctions as stipulated in Law No. 5 of 1999 concerning the Prohibition of Monopolistic Practices and Unfair Business Competition. Article 47 states that:
1) The Commission has the authority to impose sanctions in the form of administrative actions against business actors who violate the provisions of this Law.
2) Administrative actions as referred to in paragraph (1) may include:
a. Deciding on the cancellation of agreements as referred to in Articles 4 to 13, Article 15, and Article 16; and/or
b. Ordering business actors to cease vertical integration as referred to in Article 14; and/or
c. Ordering business actors to cease activities proven to give rise to monopolistic practices and/or unfair business competition and/or harm the public. and/or
d. Ordering business actors to cease abuse of dominant position; and/or
e. Determination of cancellation of mergers or amalgamations of business entities and takeovers as referred to in Article 28; and/or
f. Determination of compensation payments; and/or
g. Imposition of a fine of at least IDR 1,000,000,000.00 (one billion rupiah) and at most IDR 25,000,000,000.00 (twenty-five billion rupiah).
In this case, business actors or companies may also be subject to principal penalties if administrative sanctions are deemed insufficient to provide a deterrent effect for business actors or companies involved in unfair business competition practices. These criminal sanctions are expressly stipulated in Article 48, which provides for violations of Articles 4, 9 through 14, 16 through 19, 25, 27, and 28, namely:
Violations of the provisions of Article 4, 9 through 14, 16 through 19, 25, 27, and 28 are punishable by a fine of at least Rp 25,000,000,000.00 (twenty- five billion rupiah) and a maximum of Rp 100,000,000,000.00 (one hundred billion rupiah), or imprisonment in lieu of a fine of up to 6 (six) months.
Violations of the provisions of Articles 5 through 8, Article 15, Articles 20 through 24, and Article 26 of this Law are punishable by a fine of a minimum of Rp 5,000,000,000.00 (five billion rupiah) and a maximum of Rp 25,000,000,000.00 (twenty-five billion rupiah), or imprisonment in lieu of a fine for a maximum of 5 (five) months.
Violations of the provisions of Article 41 of this Law are punishable by a fine of a minimum of Rp 1,000,000,000.00 (one billion rupiah) and a maximum of Rp 5,000,000,000.00 (five billion rupiah), or imprisonment in lieu of a fine for a maximum of 3 (three) months.
Furthermore, Article 49 reiterates that business actors or companies found to be involved in unfair business competition practices may also be subject to additional penalties in the form of:
Revocation of business licenses; or
Prohibition of business actors found to have violated this law from holding director or commissioner positions for a minimum of 2 (two) years and a maximum of 5 (five) years; or
Cessation of certain activities or actions that cause losses to other parties.
Although business competition is fundamentally legitimate and essential to the economic system, in practice, forms of unfair competition often emerge that violate the law, business ethics, and principles of fairness. Such actions are typically carried out by businesses with dominant market positions to eliminate competitors or control the market, thereby causing losses to other businesses and harming consumers. Some of the practices prohibited by Law No. 5 of 1999 include oligopoly agreements, price-fixing agreements, territorial division agreements, oligopsony cartel agreements, trusts, closed-door agreements, and detrimental vertical integration. All of these practices violate the basic principles of fair business competition. Therefore, strict regulation and oversight by the state through the KPPU (Business Competition Supervisory Commission) are crucial to protect small businesses, safeguard consumer interests, and encourage fair and sustainable economic growth.
Law No. 5 of 1999 concerning the Prohibition of Monopolistic Practices and Unfair Business Competition provides a strong legal basis for taking action against businesses found to have committed fraud in business competition. Forms of legal responsibility that can be imposed on business actors include: Administrative Sanctions, as regulated in Article 47, including Criminal Sanctions, as regulated in Article 48, given if administrative sanctions are deemed insufficient and the implementation of Additional Criminal Sanctions (Article 49) can be implemented in the form of, Revocation of business permits, Prohibition from holding director/commissioner positions for 2-5 years and Termination of activities that are detrimental to other parties. With these provisions, it is hoped that it can provide a deterrent effect and encourage the creation of a healthy, fair and sustainable business competition climate in Indonesia.
Future research should examine the effectiveness of Law No. 5 of 1999 in curbing monopolistic practices and ensuring fair business competition in Indonesia. Despite its clear legal framework and the role of the KPPU in enforcing it, questions remain regarding the consistency and impact of its implementation. Empirical studies can investigate how often administrative, criminal, and additional sanctions are applied, and whether these measures have successfully deterred anti-competitive behavior, particularly among dominant market players. Comparative analysis with other countries that have established robust competition laws—such as those in the European Union or the United States—can also provide valuable perspectives on potential reforms and best practices that Indonesia might consider adopting.
In addition, interdisciplinary research that explores the intersection of legal regulation, business ethics, and economic performance is essential to fully understand the broader implications of unfair competition. Scholars could analyze how unethical competition practices impact small and medium enterprises (SMEs), consumer welfare, and overall market efficiency. Investigations into public awareness of business competition laws and the
responsiveness of the KPPU in addressing complaints would also be valuable. Ultimately, such research can contribute to enhancing policy recommendations, promoting corporate compliance, and reinforcing the importance of ethical business practices in building a fair and resilient economy.