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2022, Indonesia, Other

Jakarta (29/7) – Indonesia Competition Commission (ICC) has decided that PT Sinar Ternak Sejahtera, constituting part of the business group PT Charoen Pokphand Indonesia, Tbk, is proven to have violated Article 35 paragraph (1) of Law No. 20 of 2008 in the implementation of partnership with its 117 (one hundred and seventeen) plasmas. The Commission Panel has imposed a maximum sanction on PT Sinar Ternak Sejahtera, namely in the form of penalty of IDR10,000,000,000 (ten billion rupiah) and the revocation of its business license if it does not execute the rectification order in its partnership cooperation agreement for such violation. The decision was read out by ICC in the Panel Hearing held for the Reading Out of Decision on Case Number 09/KPPU-K/2020 regarding Alleged Violation of Article 35 paragraph (1) of Law Number 20 of 2008 regarding the Implementation of the Core-Plasma System in the Hen Husbandry Sector pertaining to the Development and Modernization of Coops by PT Sinar Ternak Sejahtera at the Head Office of ICC in Jakarta today.

This case had its origin from the result of research conducted by ICC on the implementation of partnership conducted by PT Sinar Ternak Sejahtera (Reported Party) through a cooperation agreement with the plasma, providing for the coop development and modernization program therein. The Reported Party is a company engaged in a hen husbandry partnership, wherein the Reported Party does not produce its own husbandry production facilities in the form of DOC (day old chicken), feeds and medicines, but it buys them from its affiliated companies or business group. The majority of the Reported Party is owned by PT Prospek Karyatama having an ownership relation with PT Sarana Farmindo Utama. This company at the same time constitutes a subsidiary of PT Charoen Pokphand Indonesia, Tbk. The Reported Party as a company engaged in the field of hen husbandry is the core company in the core-plasma partnership relationship. The partnership relationship conducted by the Reported Party as the core and its 117 (one hundred and seventeen) plasmas does not work in the implementation thereof based on the principles of mutual benefit partnership, mutual trust, mutual strengthening, and mutual support.

ICC provided the opportunity for improvements through 3 (three) Written Warnings to the Reported Party in the supervision process. ICC has also given adequate time to the Reported Party to execute the rectification orders at the stages of Written Warning I, Written Warning II, Written Warning III including the addition of a 30-(thirty-day) period to the Written Warning III. However, up to the end of the additional period of the Written Warning III, the Reported Party had not yet executed some of the rectification orders of ICC, hence, the case was continued to the Partnership Follow-Up Examination stage by the Commission Panel.

Based on the results of the hearings of the Commission Panel, it was summed up that the Reported Party did not execute various rectification orders, among other things, pertaining to the separation of the financing/debt agreement for the modernization of coops and the partnership cooperation agreement; the setting of the sale and purchase price of land and plasma coops; the regulating of the rental price agreements for renting land and plasma coops; the setting of the period and the paying off of the debts for the modernization fund of the coops before falling due which must be separated from the partnership cooperation agreement; and other improvements.

Based on the aforementioned facts, the Commission Panel has decided that the Reported Party is proven to have violated Article 35 paragraph (1) of Law Number 20 of 2008. Therefore, the Commission Panel imposed a sanction in its Decision in the form of Command to the Reported Party to expunge the legally controlling form in the partnership cooperation agreement between the Reported Party and the Plasma which has been proven to have violated Article 35 paragraph (1) of Law Number 20 of 2008, by way of making improvements in terms of, among other things:

  1. Separating 2 (two) provisions of the agreements, namely the coop modernization financing/debt agreement and the partnership cooperation agreement as well as the obligation of the Reported Party to provide the proof of the separation of agreements in the shape of Deed of Granting of Security Rights (APHT) and security right certificates for all the plasmas;
  2. Expunging the entire substance of the coop modernization financing/debt agreement in the partnership cooperation agreement;
  3. Adding a clause with regard to the reimbursement (return) of the husbandry production facilities from previously following the signing of the minutes of handover to be 1 x 24 hours following the acceptance of the goods by the plasma;
  4. Adding the regulating of the period and paying off of debts before falling due in the coop modernization financing/debt agreement;
  5. Adding the regulating of rights of the plasma to determine the continuity of its husbandry business after the paying off of debts in the coop modernization financing/debt agreement.

The Reported Party is commanded to execute the aforementioned Orders within 6 (six) months following the acceptance of the Exceprt and Copy of the Decision. If not executed, ICC will order the Minister for Investment/Chairman of the Capital Investment Coordinating Board as the business license granting official to revoke the business license of the Reported Party within 30 (thirty) days following the acceptance of the conclusion of the Decision execution monitoring results declaring that the Reported Party does not execute such various Orders.

In addition to the above, the Commission Panel also sentences the Reported Party to pay for a penalty of IDR10,000,000,000 (ten billion rupiah) that must be remitted to the state treasury by no later than 30 (thirty) days since the Decision has had a permanent legal force. The amount of the penalty constitutes the maximum penalty that can be imposed by ICC under the law for the violations of the implementation of micro, small, and medium business partnership. Such Decision of ICC is final in nature because there are no further legal remedies based on the laws and regulations against such Decision, hence, it must be directly executed by the Reported Party.