CN10 - Indonesian Competition Authority continues active enforcement against bid rigging conduct

In February 2022, the Indonesia Competition Commission ("ICC") published two decisions involving bid-rigging conduct pursuant to government funded tenders.  The first case related to a fishing port tender in Tulungagung and the second case related to the construction of a swimming pool in South Kalimantan. 

Key takeaways

• Article 22 of the Indonesian Competition Law ("ICL") prohibits business actors from conspiring with other parties to arrange or determine the winner of a tender where this may result in unfair business practices.
• In the first case, the ICC imposed a penalty against the winner of a fishing port tender and issued an order prohibiting other tender participants involved in the collusive conduct from participating in state-funded construction tenders for one year.
• In the second case, the Supreme Court of Indonesia upheld the ICC's earlier finding that the relevant state procurement office responsible for a swimming pool construction tender was knowingly involved in and therefore itself in breach of Article 22 of the ICL. In that case, the ICC recommended that relevant staff of the procurement office be reprimanded by removing them from duties in the procurement division for a period of one year. The ICC had also imposed a penalty against the winner of the tender, and issued an order to prohibit all other entities involved in the collusive conduct from participating in state-funded construction tenders for two years.

In February 2022, the ICC published two decisions involving bid-rigging conduct pursuant to government funded tenders.  The first case related to a fishing port tender in Tulungagung and the second case related to the construction of a swimming pool in South Kalimantan.

Fishing port case

The ICC published its decision against five parties found to have conspired with one another to fix the outcome of a tender related to development works for a fishing port in the Tulungagung Regency in the East Java Province of Indonesia.

The parties involved were:

• PT Cipta Karya Multi Teknik ("Party 1" and winner of the tender);
• PT Bangun Persada Construction ("Party 2");
• PT Wahana Eka Sakti ("Party 3"); 
• PT Tiara Multi Teknik ("Party 4"); and 
• the Technical Implementation Unit for Goods and Services Procurement, Investment and Integrated Services Agency of the East Java Province ("Party 5"),
  (together, the "Parties").

The ICC found that the Parties had conspired on the outcome of the tender, and took into account evidence of:

• direct relationships (including family-relations) that existed amongst Parties 1, 2, 3 and 4;
• coordination of tender offers amongst Parties 1, 2, 3 and 4; and 
• forms of "neglect" by Party 5 during its administration of the tender procurement process.

The ICC: 

• imposed a penalty of IDR 2.7 billion (c. USD 188,000) on Party 1;
• imposed a prohibition on Parties 1, 2, 3 and 4 from participating in tenders in the construction sector funded by the State Revenue and Expenditure Budget and Regional Revenue and Expenditure Budget for one year; and
• made recommendations to the Governor of East Java to impose disciplinary sanctions on Party 5 for its role in facilitating the collusive conduct. 

Swimming pool case

The Supreme Court of Indonesia upheld the ICC's earlier decision to penalise four parties for conspiring with one another to fix the outcome of a tender related to the construction of a swimming pool in the Hulu Sungai Selatan Regency in the South Kalimantan Province of Indonesia.

The parties involved were:

• PT Cahayahikmah Jayapratama ("Party 1" and winner of the tender);
• PT Karya Kandangan Nasional ("Party 2");
• PT Diang Ingsun Mandiri ("Party 3"); and
• the Procurement Service Unit of the Hulu Sungai Selatan Regency ("Party 4"), (together, the "Parties").

The ICC previously found that the Parties had conspired on the outcome of the tender, including Party 4 who was aware of "various indications of conspiracy" between tender participants during the tender process. 

Accordingly, the ICC:

• imposed a penalty of IDR 1.35 billion (c. USD 94,000) on Party 1;
• imposed a prohibition on Parties 2 and 3 from participating in tenders funded by the State Revenue and Expenditure Budget and Regional Revenue and Expenditure Budget for two years; and
• made recommendations to the head of Party 4 to prohibit relevant staff who were involved in the tender from being involved in the relevant procurement work unit for one year

Party 4 appealed the ICC's decision against it to the Commercial Court of Surabaya. The Commercial Court found Party 4 had not engaged in conduct in violation of Article 22, however this view was superseded by a subsequent decision of the Supreme Court of Indonesia which upheld the ICC's original decision.

Concluding remarks

Actions against entities engaging in forms of collusive bid-rigging conduct have accounted for a significant proportion of the ICC's historical enforcement activity. This is an area anticipated to continue to be at the forefront of the ICC's enforcement priorities in 2022.  

Beyond the imposition of significant monetary penalties we are now also observing the ICC impose non-monetary penalties such as prohibitions against colluding party participation in future tenders for specified periods – sending a strong message of deterrence to participants of government funded tenders in Indonesia.