13 Oct 2020
Indonesian Competition Commission Publishes New Merger Control Guidelines


On 6 October 2020, the Indonesian Competition Commission (“KPPU”) published highly anticipated Merger Control Guidelines (“Guidelines”) to clarify the Merger Control Regulation (“Regulation”) introduced in October 2019.


As discussed in our legal update on the Regulation (see KPPU Flexes Muscles with Revamped Merger Control Guidelines), the introduction of the Regulation appeared to be a deliberate effort by the new KPPU commission to expand the scope of Indonesia’s merger control rules. This resulted in a significant increase in notifications at the end of 2019 and in 2020, including notifications for foreign-to-foreign transactions with little or no real impact on the Indonesian market. With the Guidelines, the KPPU aims to find a new balance, inter alia, by (i) introducing a number of exemptions and redefining the ‘nexus’ criterion, (ii) introducing a simplified notification procedure for transactions that have a limited or no impact on competition, (iii) allowing the KPPU to issue ‘no notification needed’ statements, and (iv) providing a detailed explanation of certain key concepts set out in the existing merger control legislation.


In this legal update, we discuss the key changes and clarifications that have been introduced by the Guidelines.


Clarification of Merger, Consolidation and Acquisition


Under the prevailing merger control legislation, mergers, consolidations and acquisitions that met certain criteria (see our legal update on the Regulation and also below) had to be notified to the KPPU.


The Guidelines clarify ‘merger’, ‘consolidation’ and ‘acquisition’, stressing that these concepts should be interpreted broadly, meaning any type of concentration of control over entities that were previously independent or parts of a group, or a change of control that results in a concentration of control or market concentration.


Under the Guidelines, the KPPU interprets ‘acquisition’ to mean the obtaining of existing shares from a shareholder, through the capital market, or via subscription of new shares by capital injection. Further, it goes beyond the conventional understanding of the term by encompassing legal instruments conceptually similar to shares, which enable their owners to control and receive benefit from such ownership, e.g., participating interest commonly acquired in the oil and gas industry.


To determine whether a change of control has occurred, the KPPU will take into consideration the voting rights attached to the shares as well as special rights to nominate board members. The KPPU explains that an acquisition of shares with no or limited voting rights (preferred stock) is exempt from notification as no change of control results.


Certain Asset Acquisitions Exempted


The Guidelines confirm the provisions of the Regulation to the effect that a transfer of assets (tangible or intangible) that results in:


  • a transfer of their management control and/or physical control; or
  • an increase in the ability of the acquirer to control a relevant market;


should be notified to the KPPU if the action is tantamount to an acquisition of shares, provided that the other relevant criteria are met.


However, the Guidelines establish exemptions for certain asset transfers:


  • A non-bank asset transfer transaction valued at < IDR 250 billion (approx. USD 17 million[1]);
  • A bank asset transfer transaction valued at < IDR 2.5 trillion ( USD 170 million);
  • The transfer of assets is carried out in the ordinary course of business. This depends on the business profile of the acquiring party and the purpose of the acquisition. Transactions in the ordinary course of business are:
    1. Transfers of assets that are finished goods from one undertaking to another undertaking for resale to consumers by an undertaking that is active in the retail sector (e.g., the sale of consumer goods by retailers);
    2. Transfers of assets that are supplies to be used within 3 months in the production process (e.g., the purchase by an undertaking of raw materials and basic components from various sources for production);
  • Transfer of assets specifically in the property sector that meet one of the following criteria:
    1. Office space for use by the buyer;
    2. Social facilities or facilities proposed for general use.
  • Assets not intended for business use by the acquirer (e.g., land for corporate social responsibility or not-for-profit activities, or to comply with statutory requirements).


The transferred asset value in (a) and (b) above is as cited in the latest financial statements or as calculated at the sale/purchase or other legal asset transfer. The highest of these should be the basis for calculation of the threshold.


Greenfield Joint Ventures Explicitly Exempted


Unlike its antecedent, the Regulation did not contain an explicit notification exemption for the establishment of greenfield joint ventures. It was clear from the outset that the KPPU did not intend to change its approach to the notification of greenfield joint ventures (which are arguably neither mergers, consolidations nor acquisitions). However, the absence of an explicit reference to this exemption in the Regulation created confusion in the market.


The Guidelines now make clear that greenfield joint ventures do not necessitate KPPU notification. However, a merger, acquisition or consolidation carried out by a joint venture after its establishment will not be exempt and must be notified, provided that the other criteria are met.


Calculation of Asset and Sales Value Thresholds


As discussed in our earlier legal update on the Regulation, the triggering thresholds for KPPU notification are:


  • combined asset value exceeds IDR 2.5 trillion (approx. USD 170 million) (in the banking sector, it is IDR 20 trillion, approx. USD 1.35 billion); and/or
  • combined sales value exceeds IDR 5 trillion (approx. USD 340 million).


Soon after the introduction of the Regulation, the KPPU made it clear that the asset value threshold should be calculated on worldwide turnover, and the sales value threshold on turnover in Indonesia, excluding exported products and/or services. The Guidelines now confirm this position.


According to the Regulation, of relevance to the calculation are assets and/or sales in Indonesia of (i) the target, (ii) the acquirer, (iii) all undertakings that directly or indirectly control or are controlled by an undertaking that carries out a merger, consolidation or acquisition of shares and/or assets.


The Guidelines introduce a further nuance to this rule by stating that the ultimate controlling entity for the calculation of the asset and sales value of a joint venture is the joint venture itself, so the calculation should be based on financial statements of the joint venture as well as of the target and its subsidiaries (if any). The asset and sales value of other affiliates of the joint venture (e.g. the ultimate controlling entity, undertaking holding shares in the joint venture, sister companies) may be ignored for the calculation of the threshold. It remains to be seen how the KPPU will apply this new approach in practice, partly due to the fact that the Guidelines fail to provide a definition of ‘joint venture’. Be that as it may, the new approach will be welcomed by the market and may be expected to result in a reduction in the number of transactions that meet the notification criteria.


Reintroduction of ‘Double Nexus’ Criterion


As per the prevailing merger control legislation, a transaction is only notifiable if it involves a change of control in an Indonesian company or otherwise has an impact on the Indonesian market.


Under the Regulation, foreign-to-foreign transactions would need to be notified if one or more  of the parties involved had business activities or sales within the territory of Indonesia. The Guidelines make clear that foreign-to-foreign transactions only need to be notified if one party engaged in the merger, consolidation or acquisition has business activities  in Indonesia, such as through an Indonesian affiliate, while the other party does not but has at least a sister company with business activities in or sales to Indonesia. This “double nexus” criterion is similar to the one that applied before the introduction of the Regulation.


This return from a “single” to a “double nexus” criterion will again be welcomed by the market and can be expected to result in a significant reduction in foreign-to-foreign transactions that meet the criteria for notification.


It should be noted, though, that the change does create new uncertainties. In reality, the Guidelines constitute an elaboration of the Regulation and, thus, should be complementary to and not deviate from the Regulation, which raises the question as to which nexus criterion should now be applied.


Notification with Simplified Assessment


The KPPU will now assess whether a notification qualifies for a simplified assessment, which, based on a market analysis, is not expected to create competition issues nor has the potential to significantly decrease competition.


The simplified assessment will take into account the following criteria:


  • The parties involved in the transaction are not be engaged in overlapping business activities;
  • They are not engaged in business activities that are vertically integrated;
  • If engaged in overlapping business activities, they should have a limited joint market share;
  • If engaged in vertically integrated business activities, they should have a limited market share for each business activity;
  • The transaction should not have tying or bundling potential, or network effect;
  • The notification is submitted within 30 business days of the transaction becoming legally effective; and/or
  • The transaction involves an acquisition resulting in an undertaking that gains sole control (from joint control with another undertaking hitherto).


A simplified assessment may be carried out not only at the KPPU’s own initiative but also at the request of the party making the notification. If the latter is the case, the notifying party should submit a request and a transaction impact analysis to the KPPU, in addition to the supporting documents that need to be submitted during the normal procedure.


If the KPPU approves the request to carry out a simplified assessment, it should issue a notification setting out its opinion on the transaction within 14 business days.


‘Notification Not Required’ Statement


If upon the review of the preliminary notification of a transaction, the KPPU concludes that a notification is not required, it will issue a statement within 60 business days of preliminary notification that the transaction is not notifiable. This means that parties will know if notification is required within 60 business days (instead of 150 days under the current arrangement).


ABNR Commentary


The issuance of the Guidelines is a welcome development as they exempt various types of transaction from the notification requirement, accelerate the processing of notifications for transactions with limited market impact, and clarify some concepts that previously caused confusion.


However, the new exemptions are less far-reaching than anticipated, with the result that many transactions with limited market impact will still need to be notified. In addition, the documentation that must be submitted for a notification using the simplified assessment procedure is quite onerous in itself.


Further, although the procedure for KPPU to issue ‘no notification required’ statements within 60 business days is an improvement, it would save all concerned more time if these statements could be issued without necessitating preliminary notification as a prerequisite, particularly where the Guidelines remain unclear on notifiability criteria.


In conclusion, the Guidelines are a double-edged sword: they clarify some key concepts but are also a source of new confusion, particularly where they are not fully in line with the provisions of the Regulation, thereby resulting in new uncertainties.

We hope that the Guidelines are a ‘work in progress’ and capable of being regularly updated as necessary. Otherwise, they are less the means to creating a clear-cut path and more a blunt instrument with which to tackle a regulatory Gordian Knot.


Contact us


Should you have any queries on the above or require legal advice as to how you can best protect your interests during this time of uncertainty, please contact the persons below, call us on +6221-2505125 or email us at


Mr. Emir Nurmansyah (

Mr. Nafis Adwani (

Mr. Agus Ahadi Deradjat (


[1] At current exchange rate of IDR 14,700 per USD


This edition of ABNR News and the contents hereof are intended solely to provide a general overview, for informational purposes, of selected recent developments in Indonesian law. They do not constitute legal advice and should not be relied upon as such. Accordingly, ABNR accepts no liability of any kind in respect of any statement, opinion, view, error, or omission that may be contained herein. In all circumstances, you are strongly advised to consult a licensed Indonesian legal practitioner before taking any action that could adversely affect your rights and obligations under Indonesian law.