Upcoming amendments to Indonesia's Competition Law: Key changes for businesses

Indonesia’s parliament is currently finalising the amendment to Law No. 5 of 1999 on the Prohibition of Monopolistic and Unfair Business Competition Practices (the Competition Law) under the National Legislative Program or Prolegnas, with a targeted enactment date before the end of 2026.

In this article, we highlight the key changes expected in the amendment to the Competition Law (the Bill). This overhaul closely tracks the structural benchmarks outlined in Indonesia's ongoing OECD accession process, signalling a broader push to align domestic market regulations with international competition standards. 

Set out below are our key observations on three of the main changes under the Bill and their practical implications for businesses operating in Indonesia.

Transition to pre-closing notification regime

One of the most consequential changes under the Bill is the shift from the current post-closing notification regime to a mandatory pre-closing approval system. 

• Current framework: Under the current regime, merger notifications must be submitted to the Indonesian Competition Commission (KPPU) 30 working days after the transaction has become legally effective (Post-Closing Regime). 
• The new regime: Under the Bill, parties to qualifying transactions must submit a notification to the KPPU before the transaction becomes legally effective. Transactions that meet the relevant thresholds must not be completed without having obtained prior KPPU clearance. 
• Expanded scope: The pre-closing notification requirement applies to mergers, consolidations, share acquisitions, asset acquisitions, and the formation of joint ventures. Notably, the Bill captures greenfield joint ventures for the first time, marking a departure from the current post-closing regime, under which they were exempted. 
• Statutory timeline and deemed approval: The KPPU will have a statutory review period of 30 working days from the submission of a complete filing to conduct its assessment. The Bill introduces a deemed approval mechanism. If the KPPU fails to issue a decision within 30 working days, the transaction will be treated as having received clearance and the parties can proceed with the transaction. 

This shift will require businesses to factor in any KPPU review periods into their transaction timelines and update the conditions precedent to closing to account for pre-merger clearance from the KPPU.

For more a detailed discussion on the pre-merger notification regime, please see our separate article.

Introduction of abuse of superior bargaining position

The Bill also introduces a new chapter dedicated to the prohibition of an abuse of a superior bargaining position. This prohibition fills a long-identified gap in Indonesia's competition framework regarding power imbalances in commercial or partnership arrangements. 

• Distinction from market dominance: The existing prohibition on abuse of a dominant market position is based on a market share threshold of 50% for a single actor and 75% for multiple actors collectively. The new prohibition does not rely on market share thresholds. Instead, it specifically targets the exploitation of superior bargaining power within partnership agreements. 
• Scope of prohibited conduct: A superior bargaining position refers to a situation where one party can dictate terms because the two parties are not on an equal commercial footing. Prohibited abusive actions include dictating prices, refusing to deal/accept orders, delaying or reducing payments, returning goods, compelling the purchase of goods or services, and demanding early payment for raw materials. 
• Implementing regulations: The substantive scope and detailed criteria for this prohibition will be defined by implementing regulations that must be issued within one year of the law's enactment. 

Businesses operating through franchise, distribution, supply or similar partnership structures should get ready to audit their standard contract terms and commercial practices against these indicators once the implementing regulations are issued. This will ensure they remain compliant with the new regulations.

Introduction of formal leniency programme

To strengthen enforcement against horizontal agreements, the Bill also introduces Indonesia's first formal leniency programme.

• Incentivising disclosure: The programme encourages businesses to voluntarily disclose their involvement in specific anti-competitive conduct (such as price fixing, market allocation, production restrictions, conspiracies and exclusive dealings) and cooperate with KPPU investigations.
• Tiered benefits: In exchange for disclosure and cooperation, applicants may receive reduced administrative fines or full immunity. Similar to leniency programs in other jurisdictions, the level of the fine reduction depends strictly on the order in which businesses come forward.
• First-in structure: The framework grants full immunity to the first successful applicant to report the violation. The second applicant may receive a penalty reduction ranging from 50% to 75%, while a third applicant may obtain a reduction of 25% to 50%.

This development fundamentally changes the risk calculation for businesses that may be involved in, or discovering, potential cartel conduct, making internal compliance audits and swift reporting critical.

Other changes

The Bill also revises the threshold for establishing a dominant market position. Under the proposed framework, the threshold will be set at more than 50% market share, regardless of the number of business actors involved. This simplifies the current prohibition on the abuse of a dominant position, which relies on a dual threshold of 50% for a single actor or 75% for multiple actors collectively.

The Bill broadens the authority of the KPPU, providing the institution with a stronger legal foundation for its supervisory, investigative and adjudicative functions. For example, the Bill acknowledges that the KPPU will be equipped with enhanced evidence-gathering tools (ie indirect evidence may now be seen as a valid investigative lead) to support more effective enforcement. It also empowers the KPPU to enforce the competition law against businesses with activities in Indonesia that are incorporated or located outside Indonesia.

Looking ahead

These proposed amendments represent the most significant reform to Indonesia's competition landscape in 25 years. Compliance will be key to managing these new regulatory risks and businesses should begin assessing how these changes will impact their M&A pipelines, commercial contracts and internal reporting procedures. 

We will continue to monitor legal developments closely and issue further updates as the Bill progresses.