Indonesia’s competition authority (KPPU) finished its assessment on Asahi Glass Company Ltd. acquisition of 58.77% share of Vinythai Public Company. Ltd. with the issuance of a conditional non-objection opinion for this acquisition. The acquisition took placed on 22 February 2017 in Thailand.

Asahi Glass Company is a Japan company established in 1907 which focuses its business activities in glass, electronic chemical, and ceramics manufacturing. Asahi conduct their business activities through its subsidiary in Indonesia, including PT. Asahimas Chemical, PT IWAKI Glass Indonesia, and PT Asahimas Flat Glass, Tbk. Vinythai is a Thailand company which produces Poly Vinyl Chloride (PVC) and Epichlorohydrin (ECH) products for plastic industries. They export some of their PVC products to Indonesia, specifically Suspension-PVC (S-PVC), Emulsion-PVC (E-PVC) and Epichlorohydrin (ECH).

KPPU assessment focuses on the relevant market among merging parties, namely S-PVC. PVC is a thermoplastic polymer resulting from a chemical process of chlorine (Cl2) and ethylene (C2H4). Meanwhile, the S-PVC type is mostly used for pipes, film and sheets, floor, bottle, and cable manufacturing. The relevant market was defined through the analysis on cross-price elasticity of substitution (Eyx) method. The geographical market for this case is Indonesia, and the assessment is limited to their sales in Indonesia.

During the assessment, KPPU found a significant increase of Hirschman Herfindahl Index (HHI) on S-PVC market, since one of Asahi’s subsidiaries in Indonesia is a market leader in PVC market with more than 50% market share. Even though Vinythai did not have a significant number of sales in Indonesia, this acquisition still passed the threshold of an increased HHI after the acquisition. Hence, KPPU has to perform a phase 2 analysis on their transaction.

The phase 2 analysis contains several type of analysis, namely analysis on absolute barrier in trade, structural barrier, unilateral effect, coordinated effect, and efficiency analysis. The unilateral effect analysis is conducted though the upward pricing pressure (UPP) method.

Based on the analysis, KPPU found that the structural barrier in this market is significant, but the absolute barrier is minimum since there is no barrier for cross-border purchase of PVC products to Indonesia. In other words, international price and import can limit their ability to affect price in domestic market. The UPP test concluded that there is a significant pressure to the domestic price caused by this acquisition. The efficiency test found that the potential efficiency from this acquisition may not lead to a price decrease to one of the merging party.

Following this assessment, KPPU issued a conditional non-objection opinion on this acquisition, and requires Asahi Glass Company. Ltd. to regularly report their production, sales, and price of S-PVC in Indonesia, and the export and price of S-PVC from Vinythai Public Co. Ltd to Indonesia quarterly for the next 3 (three) years. This remedy aims to monitor the effect of their transaction to the future price of S-PVC in Indonesia.