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GUIDELINES FOR MERGERS, CONSOLIDATIONS, AND ACQUISITIONS – KPPU

17 Jun

On 18 October 2010, the Business Competition Supervisory Board (“KPPU”) promulgated Regulation Number 13 Year 2010 concerning Guidelines for Merger or Consolidation of Business Entities and Acquisitions of Company’s Shares which May Result in Monopolistic Practices and Unfair Business Competition (“Rule 13”), as an implementing regulation of Law Number 5 of 1999 concerning Prohibition of Monopolistic Practices and Unfair Business Competition (“Law 5“) and Government Regulation Number 57 of 2010 concerning Mergers or Consolidations of Business Entities and Acquisitions of Company’s Shares which May Result in Monopolistic Practices and Unfair Business Competition.

Rule 13 is aimed at guaranteeing a legal certainty, keeping mergers, consolidations, and acquisitions economically effective and efficient as one of the ways to enhance the national welfare, and most importantly to prevent monopolistic practices and/or unfair business competition as the result of those actions. Rule 13 basically provides for actions and steps to be taken prior to implementing mergers, consolidations and acquisitions and it specifies in great detail notifications and consultations regarding mergers, consolidations, or acquisitions, and the assessment of mergers, consolidations, or acquisitions including detailed criteria. Rule 13 also regulates the case handling and sanctions for any violations of the rules.

Rule 13 obliges a company to notify KPPU of its merger, consolidation, or acquisition plans and consult KPPU about the mergers, consolidations, or acquisitions. The requirements, duration, and procedures are provided in Rule 13. Based on the notification and consultation, KPPU will make an assessment analyzing market concentration, barriers to market entry, potential anti-competitive behavior, efficiency, and/or insolvency. The KPU will inform the company in writing of the result of its assessment and the above mentioned analysis and will then issue an opinion whether the plan needs merger, consolidation, or acquisition will cause monopolistic practices and/or unfair business competition. If KPPU says that the merger plan will cause such practices or competition, mediation to solve this problem is possible. If the Company nevertheless goes ahead with the merger, consolidation or acquisition resulting in monopolistic practices and/or unfair business competition, the sanctions in Law 5 will apply.

 

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