Putting an Emphasis on Prevention, ICC Suggests the Ministry of SOEs to Rescind the Rules Allowing the Holding of Concurrently Two Positions
Indonesian Competition Commission (ICC) has thoroughly observed and examined the rules of the Ministry of State-Owned Enterprises (SOEs) on the holding of concurrent positions among the Boards of Commissioners or the Supervisory Boards of SOEs and the Boards of Commissioners of Companies other than SOEs. This has been provided for in Regulation of the Minister of SOEs Number PER-10/MBU/10/2020 regarding Amendment to Regulation of the Minister of SOEs Number PER-02/MBU/02/2015 regarding Requirements and Procedures for the Appointment and Discharge of Members of the Boards of Commissioners and the Supervisory Boards of SOEs (SOEs Minister Regulation), especially in Chapter V Sub-chapter A (Concurrently Two Positions) in the attachment to SOEs Minister Regulation Number PER-10/MBU/10/2020. The Regulation was signed on October 9, 2020 and takes effect as of its date of promulgation, namely October 16, 2020.
The substance of holding two positions among the Boards of Directors/Commissioners is provided for in Article 26 of Law No. 5 Year 1999 regarding Prohibition of Monopolistic Practices and Unfair Business Competition (Law 5/1999). The said law prohibits any person from holding the position of the Board of Directors or Commissioners of a company who concurrently serves as the Board of Directors or Commissioners of another company if the said companies are in the same relevant market, or have close ties in the field or line of business, or jointly in control of certain market share which may result in the occurrence of monopolistic practices and/or unfair business competition. This assuming of two positions may have the potential to violate fair business competition in the market in the shape of:
- The ease for companies to be involved in market arrangements with regard to prices, supply, division of territories, production quantities, and the like. The coordination of horizontal agreements will be easier to achieve and maintain if the holding of two positions concurrently of the Board of Directors/Commissioners takes place among the companies in the same market;
- The abuse of vertical barriers by perpetrating exclusivity practices, tying and bundling practices as well as other corporate actions involving companies where the Boards of Directors/Commissioners mutually hold positions concurrently; or
- The actions of market control among companies the business activities of which are interrelated, wherein the Boards of Directors/Commissioners of the said companies are involved in holding concurrent positions.
At the moment, various concurrent positions are found among the Boards of Directors/Commissioners among SOEs and non-SOE in the research processes at ICC in various sectors, such as (i) finance, insurance, investment (31 Directors/Commissioners); (ii) mining (12 Directors/Commissioners); and construction (19 Directors/Commissioners) and even the holding of two positions for one personnel in a certain sector (namely mining) may be found in 22 (twenty-two) companies. Such researches are still underway and it is possible that ICC will delve deeply into the law enforcement proceedings, if indications of unfair business competition as a result of the holding of two positions are found.
In order to prevent any potential unfair business competition as early as possible, ICC coordinated and conveyed a letter of suggestion and consideration to the Ministry of SOEs to revoke the provisions that allow the holding of concurrent positions of the Board of Commissioners and Supervisory Boards and the Board of Commissioners of companies other than SOEs. ICC also recommends the Ministry of SOEs to ensure that the personnel who serve as the Boards of Directors/ Commissioners within the scope of SOEs are not in a state of holding concurrent positions in companies other than SOEs, so as to reduce the potential violations of article 26 and other articles related to Law No. 5 Year 1999 regarding Prohibition of Monopolistic Practices and Unfair Business Competition.