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Chapter Five Conclusions in:

Dian Parluhutan

The Implementation of Circumstancial Evidence pursuant to the European Union Competition Law, the German Cartel Law and the Indonesian Competition Law, page 293 - 304

1. Edition 2019, ISBN print: 978-3-8288-4127-7, ISBN online: 978-3-8288-7337-7, https://doi.org/10.5771/9783828873377-293

Tectum, Baden-Baden
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Conclusions The Judicial Praxis in the European Competition and the German Cartel Laws First, pursuant to the European Competition and German Cartel Laws as well as the Indonesian Competition Law Number 5/1999, the procedural law of cartels prohibition enforcement proceedings has been of profoundly important in order to safeguard ‘the due processes of law’. This concept refers to the guarantee of constitutional and fundamental rights, which mandates that all legal proceedings will be fair and that one will be given notice of the proceedings and an opportunity to be heard before the public administration or governmental acts (‘audi alteram et parte’) to take away one’s life, liberty, or property. Also, a constitutional rights guarantee that a law shall not be unreasonable, arbitrary or against the proportionality principle. Principally, according to the European Competition and German Cartel Laws, the guiding principles of the procedural law play a very important role and have been regarded as the acquis commune constituting the legal foundations of the European Laws. These principles have been developed both by the Court of Justice of the EU in their duties of guaranteeing that ‘the law is observed’ pursuant to Article 19 (1) TEU as well as by other EU Organs through the respective legislations. Furthermore, according to Article 2 TEU (Article 6(1) EU): “The Union is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities. These values are common to the Member States in a society in which pluralism, non-discrimination, tolerance, justice, solidarity and equality between women and men prevail”.876 Chapter Five 5.1 876 876 Consolidated version of the Treaty on European Union,Title I Common Provisions OJ C 236, 7th August.2012 293 Thereby, these procedural law principles have profoundly substantial roles in the implementation of the EU Competition laws because of three reasons. First, the principles provide the basis for the fair and efficient administrative decision-making processes by ascertaining that the officials perform their duties independently and make decisions rationally a proportionally. Second, the principles shall operate as the guarantee for individuals or affected parties against arbitrary administrative acts by imposing the duty to provide reasons and the protection of fundamental and human rights. Third, the principles shall promote the accountability of the administrative acts towards the public, for example accessibility and transparency principles. Equally important is the principle of presumption of innocence (in dubio pro reo). Although, the principle of in dubio pro reo is not enshrined in the Competition legislations, its application, however, has been emphasised in the provisions of Article 6 (2) of the European Convention of Human Rights (ECHR) and Sec. 261 of the German Code of Criminal Procedure (StPO).877 Furthermore, according to Lianos and Genakos, the principle of ‘in dubio pro reo’ literary means ‘when in doubt, in favour of the accused’ or the presumption of innocence. This principles is incorporated in the Article 48 (1) of the Charter of Fundamental Rights of the European Union (ChFR-EU), which requires that ‘any doubt in the mind of the Court must operate to the advantage of the undertaking to which the decision finding an infringement was addressed’, in particular for decisions with fines in the competition law cases. Thus, in the Rhône-Poulenc case, it has been strongly argued as regards the ‘in dubio pro reo’ principle: “Considerable importance must be attached to the fact that the competition cases of this kind (cartels) are in reality of a penal nature, which naturally suggests that a high standard of proof is required (…). There must be a sufficient basis for the decision and any reasonable doubt for the benefit of the applicants according to the principle of in dubio pro reo.” This principle is essentially important in the competition case presenting indirect (circumstantial) evidences, namely the economic evidences of a concerted practice of alleged undertakings. The European Courts 877 877 The German Code of Criminal Procedure (Strafprozeßordnung-StPO) of 23rd April 2014 Chapter Five Conclusions 294 have been reluctant to simply conclude the existence of concerted practices based upon merely price parallelism. Thus, the European Court demands a relatively higher standard of proof in order to prevent the false-positive error (type 1 error), by judging the oligopolistic interdependence as a cartel infringement against the Article 101 (1) TFEU. Second, as regards to the evidentiary requirement standard in cartels cases, the German Cartel law in the civil, administrative and administrative fines (Bußgeldverfahren) prerequisites more sophisticated or higher evidentiary requirement standards than of the European competition law. In the German Cartel law, pursuant to the principle of unfettered consideration of evidences (freie Beweiswürdigung), to successfully prove an existence of cartels, a ‘probable’ or a ‘large probability’ were not adequate or insufficient, instead there must be ‘personal certainty or assurance (persönliche Gewissheit)’ as to the elements of cartels violation. Furthermore, in the German Cartel law, according to Sec. 81 of the GWB, the principle of ‘in dubio pro reo’ has primacy over the European rules on burden of proof in the Regulation 1/2003. This juridical stance has been embraced by the Federal Republic of Germany in the Protocol to Article 2 of the Regulation 1/2003.878 Nevertheless, the evidentiary requirement principles of the German Cartel law have invited several opposing opinions, that is to say, these could jeopardise or cause detrimental effects to the collectively ‘coherent’ implementation of the European competition laws. Accordingly, the European Court of Justice was of the opinion that the German Cartel law principles could be justified, provided these would not be contrary to the principle of "effectiveness" or “effet utile", which means the European laws shall be interpreted by the Member States ‘as to ensure that the provisions retains their effectiveness’, as has been stipulated in Article 4 para.3 of the Treaty European Union (TEU). Third, with regard to the “plus-factors” and proving cartels infringement, the precedents of the Antitrust law have established that according to Section 1 of the Sherman Act, the Courts would not judge mere parallelism of actions of undertakings on a relevant market as 878 Bundesrepublik Deutschland, ‚Protokollerklärung der Deutschen Delegation zu Art. 2 der Verordnung‘ (v. 10th December 2002, 15435/02 ADD 1, RC 22). 5.1 The Judicial Praxis in the European Competition and the German Cartel Laws 295 cartels and thus punish these parallel behaviours. Furthermore, the Courts prerequisite the existences of evidences which ‘tends to exclude the possibility that the alleged conspirators acted independently. In other words, plaintiffs must show that the inference of conspiracy is reasonable in light of competing inferences of independent action or collusive action that could not have harmed plaintiffs.’ Hence, the Courts in the Antitrust cases, require the existence of ‘plus-factors’ in addition to the parallel actions on the relevant market in order to satisfactorily prove conspiracy or cartels by the undertakings. Moreover, the existence of ‘plus-factors’ has following drawbacks, as follows: “two basic problems have attended judicial efforts to identify and evaluate plus factors. Firstly, courts have failed to establish any analytical framework that explains why specific plus factors have stronger or weaker evidentiary value or to present a hierarchy of such factors. Antitrust agreement decisions rarely rank plus factors according to their probative merit or specify the minimum critical mass of plus factors that must be established to sustain an inference that conduct resulted from concerted acts rather than from conscious parallelism. Nor do courts ordinarily devote great effort to evaluating the economic significance of each factor. This ad hoc approach makes judgments about the resolution of future cases problematic and gives an impressionistic quality to judicial decision making in agreement related disputes.“879 Fourth, the application of indirect (circumstantial) evidences and the Leniency programme for detecting cartels, which ‘generally has secret nature of evidence’ have not been an effective and comprehensive antitrust policy. An ideal Cartel law or policy aims both to provide the deterrence effect and desistence impact to collusive practices by undertakings. The application of indirect (circumstantial) evidences and the Leniency programme were only complementary instruments to the cartels detection policy. Accordingly, the Cartel or Competition law Authorities should employ the proactive measures, for instance periodical market screenings focusing upon particular sectors (industries) and/or markets, in order to: identify alleged conduct on the market, determine competition rules violated and know groups of products or services concerned. Moreover, as regards to effective cartel detection policies or instruments, the Cartel or Competition law Authorities should take into considerations following principles: First, they sup- 879 Chapter Five Conclusions 296 posed to have potential capability to detect and deter cartels. Second, they could not be easily circumvented. Third, they shall take into account institutional capacities of competition law authorities. Fourth, they are supposed to consider a limited availability of public information. Fifth, as regards to the European competition law, the ECJ, in the Woodpulp case requires a firm, precise and consistent body of evidences to substantiate the existence of agreement in the form of concerted practice.880 This means: First, the parallel conduct of the undertakings like the prices parallelism in the market is not an evidence of concerted practice if the conduct of undertakings can be explained by market characteristics. Consequently, in accordance with the burden of proof principle the Court of Justice requires the Commission to demonstrate that the burden of proof cannot be shifted simply by finding of parallel conduct. Second, the Court of Justice asserted that cartel prohibition of Article [101 TFEU] “does not deprive economic operators of the right to adapt themselves intelligently to the existing and anticipated conduct of their competitors” or known as the oligopolistic interdependence.881 Third, the Court of Justice requires the comprehensive appraisal of plausible explanations to parallel conduct, which are: (1) price leader- 880 These evidentiary standards have been improved in the Dresdner Bank Case v. Commission (2002) whereas the General Court prerequisites a precise and and consistent evidence to substantiate a cartel infringement under Article 101 (1) TFEU. In other words, the more sophisticated economic analysis over the market structures and the behaviour of business operators together with the Plus factors such as network of joint ventures coordinated by a parent company, common board members, association of enterprises, and disclosure of decided course of conducts in the market to the competitors shall increasingly constitute the principal evidentiary requirements under Article 101 TFEU. cf. Geradin, Farrar and Petit, EU competition law and economics (n 33) 3.54 – 3.59. 881 In the ratio decidenci of the Court of Justice of the EU stated as follows: [71] In determining the probative value of those different factors, it must be noted that parallel conduct cannot be regarded as furnishing proof of concertation unless concertation constitutes the only plausible explanation of anticompetitive conduct. It is necessary to bear in mind that although Article [101] of the Treaty prohibits any form of collusion which distorts competition, it does not deprive economic operators of the right to adapt themselves intelligently to the existing and anticipated conduct of their competitors. 5.1 The Judicial Praxis in the European Competition and the German Cartel Laws 297 ship and (2) market structures.882 In the Woodpulp Case, the market structures comprise (1) nature of products, (2) the size and the number of undertakings and (3) the volume of the market in question were evaluated through the economic expertises for obtaining plausible explanation to determine the existence of concerted practices or conscious prices parallelism in the affected market.883 Moreover, in the Adalat Case the Court of Justice required the ‘requisite legal standards’ to the existence of concurrence of wills.884 In the praxis of German Cartel law, the Bundesgerichtshof and the Bundeskartellamt have been very careful to implement the circumstantial evidences particulary the economic evidence to the concerted practice under Sec. 1 GWB.885 In the Benzinmarktoligopol Case, the Bundesgerichtshof considered not only the periodical price parallelism in the petrol filling market as the primary prima facie evidence of cartel practice, but moreover the facilitating practices and the economic 882 In the competition theory the price leadership is classified into two parts: First, dominant price leadership. In this scenario an undertaking which having a dominant market share is able to act independently of its competitors, knowing that they would almost certainly follow suit. Second, barometric price leadership, whereas an undertaking as the leader is not dominant but is widely accepted as the best performing undertaking which is able to meet the demand and to adapt to evolving market conditions like cost increases. See Allenesalazar, Rafael, Oligopolies, Consicious Parallelism, and Concertation (n 751) 5–7. 883 In the ratio decidendi, the Court of Justice stipulates as follows: [70] Since the Commission has no documents which directly establish the existence of concertation between the producers concerned, it is necessary to ascertain whether the system of quarterly price announcements, the simultaneity or near simultaneity of the price announcement and the parallelism of price announcements as found during the period from 1975 to 1981 constitute a firm, precise and consistent body of evidences of prior concertation. [72] Accordingly, it is necessary in this case to ascertain whether the parallel conduct alleged by the Commission connot be explained otherwise than by concertation., by taking account of the nature of products, the size and the number of the undertakings and the volume of the market in question, 884 The Court of Justice repeals the Commission Decision and thus stipulated: [77] In those circumstances, in order to determine whether the Commission has established to the requisite legal standard the existence of a concurrence of wills between the parties concerning the limitation of parallel exports, it is necessary to consider whether, as the applicant maintains, the Commission wrongly assessed the respective intentions of Bayer and the wholesalers. cf. Linklaters, A03700992/0.1/08 Jan 2004, p.1. 885 BGH, 06.12.11, KVR 95/10 Benzinmarktoligopol (n 861). Chapter Five Conclusions 298 evidences prudently, which encompass: Firstly, the restricted access to the gasoline refinery supply. Secondly, market transparency particularly concerning the price. Thirdly, the product’s homogeneity. Fourthly, sanction mechanism for collective compliance and also the direct and indirect communications such as about the prices between the competitors as one of the “Plus factor”. Thus, the Bundesgerichtshof in the Benzinmarktoligopol Case dissented with the “partial examination” of the OLG Düsseldorf which not considered the market structures of the gasoline and petrol-filling stations within the affected period in Germany as a whole.886 The Judicial Practices in the Indonesian Competition Law Number 5/1999 Embarking from the judicial practices in Indonesia in particular amongst KPPU as the Competition Authorithy and the District Courts (PN) and the Indonesia Supreme Court (MARI), several comprehensions can be inferred which are as follows: The Implementation of Circumstantial (Indirect) Evidence versus the Real Economic and Business Circumstances in Indonesia According to Iwantono, a current representative from the Indonesian Chamber of Commerce (KADIN) and former KPPU Commissioner, argued that the implementation of circumstantial or indirect evidences of the Law No.5/1999 in the competition law enforcement could largely endanger the current economic and business activities because they do not reflect or explain the real business and economic conditions faced by Indonesian companies, notably as follows: First, prices parallelism. The real businesses conditions frequently show that price parallelism indicate an intensive competition, instead of cartel practice. The price parallelisms have often resulted from ‘business shocks’ from the 5.2 5.2.1 886 Bundeskartellamt, Sektoruntersuchung Kraftstoffe (n 864). See also Gleave, Benzinpreise – Marktmacht, Preissetzung und Konsequenzen (n 863). 5.2 The Judicial Practices in the Indonesian Competition Law Number 5/1999 299 demand and from the supply sides in the market. Second, the entry barriers to market. Due to the incredible ‘sunk costs and fixed costs’, several industries faced by huge natural entry barriers to market. Third, the excessive profits. Cartel practices are not, indeed the only viable way to obtain extraordinary profits, but moreover they largely resulted from efficiency, accurate business strategies, and profits from interests, et cetera. Fourth, the market multi-contacts. Naturally, companies with homogenous products will often make market multi-contacts with the competitors and vice versa. Fifth, production capacities and stocks. The companies often deliberately do not conduct full productions due to reserved industrial machineries. Sixth, the Common Board Members or Holding Company. It is reasonably normal for the companies integrated to a holding company to carry out business policies which are subject to instructive policies of a parent company.887 The Additional KPPU Regulation Related to Circumstantial or Indirect evidences to Complement Article 42 of the Law Number 5/1999 Article 42 of the Law No.5/1999, particularly letter (d) provides no elaborative explanations as to the clues or indications. Therefore, in 2006 KPPU released the Regulation No.1/ 2006 amended by KPPU Regulation No.1/2010 on Procedure for Cartel Enforcement Proceeding, which regulated the circumstantial or indirect evidences. Subsequently, KPPU issued Regulation No. 1/2010 concerning the Implementation of Article 11 on cartel infringement, whereas Article 36 of the Regulation No.1/2010 stipulates, among others: (1) documents or verbatims of meetings as to the price, quota and market zone cartel agreements, (2) comparation of conscious parallelism towards the price, quota and market zone cartels, (3) testimonies of the employees 5.2.2 887 S Iwantono, ‘Kartel Dalam Perspektif Pelaku Usaha di Indonesia’ (UPH Law Faculty National Seminar “Eradicating Cartel Practices in Indonesia: The Challenges of Indirect Evidence", Lippo Karawaci, 20th January 2012) 3–5. Chapter Five Conclusions 300 and relevant parties knowing the cartel practices.888 Furthermore, KP- PU issued Regulation No.4/2011 on Implementation of Article 5 on price fixing, whereas KPPU is of the opinion that evidentiary rules of Article 5 largely applied to Article 11 rules of evidences on cartel. According to KPPU Regulation No.4/2011 section 4.4, there are two types of evidences to substantiate Article 5, which are: First, direct evidences. Second, indirect or circumstantial evidences.889 The Contentious Implementation of Indirect or Circumstantial Evidences in the Indonesian Legislation and Court Practice From the normative point of view, the implementation of circumstantial evidences under the Law No.5/1999 creates a contradiction and legislative overlapping particularly with the rules of evidence in Article 5.2.3 888 Article 36 of the KPPU Regulation No.4/2010 mentions the following circumstantial evidences: documents or verbatims of meetings as to the price, quota and market zone cartels; documents or prices list records by the business actors; data on the prices, production volume and total sales fluctuations; production capacity data; data on operational profits and excessive profits; data results on conscious parallelism towards the prices coordination, quota production, market zone partitions; financial statements of the alleged companies in the cartel infringement; testimonies of relevant parties knowing the communication, coordinations and information exchanges between the cartel participants; testimonies of Kesaksian para pelanggan atas keseragaman dan keselarasan harga; Kesaksian karyawan atau mantan karyawan perusahaan. See also Anggraini, ‘Indirect Evidence Dalam Pembuktian Kartel (n 799) 2–8. 889 According to the KPPU Regulation No.4/2011: “Indirect or circumstantial evidences are evidence instruments which indicate the price fixing agreement. This type of evidences can be used as the admissible evidences to support an allegation on cartel infringements. The circumstantial evidences comprise: Firstly, Communication evidence but which directly show a concurrence of wills. Secondly, Economic evidence, whose aims are to dismiss the possibility of an independent price fixing by the business actors. Thus, the circumstantial evidences which are appropriate and consistent with the market conditions and collusion can not serve as the complete evidence to the infringement against Article 5 of the Law No.5/1999.” See Rizkiyana and Iswanto, Eradicating Cartel (n 28) 5–8. 5.2 The Judicial Practices in the Indonesian Competition Law Number 5/1999 301 184 section 1 of the Indonesian Criminal Proceedings Code (KUHAP) and Article 1866 of the Indonesian Civil Code (Burgerlijk Wetboek – KUHPerdata).890 KUHAP and KUHPerdata provisions acknowledge the clues or indicators which correspond to circumstantial or indirect evidences. Nevertheless, for the District Court, this kind of evidence has insignificant evidentiary values and asserted that a mere evidentiary instrument is not an admissible evidence before the court in accordance with the unus testis nullus testis principle.891 However, in the Indonesia Supreme Court (MARI) Decision No. K/Pdt.Sus/2009 stated that “In Competition Law Perspective, a violation of the law could be based on some indirect evidence that correlated one another […].”892 Moreover, from the business practice point of view, the implementation of circumstantial evidences causes a misleading analysis in the cartel law enforcement.893 The Premature and Anomaly Decisions of the Circumstantial or Indirect Evidences in KPPU and the Court Praxis In the Pharmacy Cartel Case No. 17/KPPU-I/2010, KPPU made an erroneous decision which overly relied upon the prices parallelism of Amlodipine antihypertension therapy medicine between several pharmaceutical companies notably Pfizer as the indirect evidence, but not investigating comprehensively to substantiate the existence of prices 5.2.4 890 The Law No.8 year of 1981 on Criminal Procedure („KUHAP“) and the Indonesian Civil Code (Kitab-Undang-undang Hukum Perdata 1848). 891 Hukumonline, Proving Cartels Requires Extensive Investigations (n 874). 892 In other words, for the Indonesian Supreme Court (MARI) the circumstantial evidences serve two functions in competition law case: First, to support the direct evidences. Second, as the preliminary evidence to cartel agreement whenever the direct evidences are absence. See Rizkiyana and Iswanto, ‘Eradicating Cartel: The Use of Indirect Evidence’ (n 28) 10. 893 According to Rizkiyana and Iswanto, “Indirect evidence if the only evidence possessed in a cartel investigation has potentially negative consequences such as among others, in case of misleading analysis, may cause the contradiction between the result of economic analysis and the real fact or condition.” ibid. Chapter Five Conclusions 302 cartel agreement.894 Subsequently, the KPPU’s decision was recently annulled by the Indoneian Supreme Court (MARI) on June 2012.895 In addition, this decision was in contrary with the KPPU decision on SMS Cellular Telecommunication Case No.26/KPPU-I/2007 whereby KPPU was initially able to substantiate the SMS interconnection agreements between the incumbent telecommunication operators and the new entrants companies. Subsequently, KPPU investigated the circumstantial or indirect evidences of cartel practices notably the periodical price increases and interlocking directory in Indosat and Telkomsel, which belonged to the same holding Singaporean company.896 Nevertheless, in the Cement Cartel Case No. 01/KPPU-I/2010 KPPU made an unsual decision whereby KPPU found adequate indirect evidences such as prices parallelism and market zone partition facilitated by the Indonesian Cement Associaton (ASI) but not discovered sufficient documentary evidences to substantiate the allegation. KPPU deemed that price, production volume information exchanges and the marketing zone partition facilitated by ASI were allowed but instructed the dissolvement of ASI. Finally, KPPU decided that cartel infringement did not exist.897 The Leniency Programme’s Implementation in the Indonesia Competition Law and the Institutional Strengthening of KPPU for Eradicating Cartels Having comprehensively analysed and commentated on the jurisprudences concerning the cartel infringement substantiation, KPPU Commissioner and Indonesian competition law scholars have come to common argumentations, as follows: 5.2.5 894 KPPU stipulates in the Pharmacy Decision: "That relates to parallel pricing, the Commission concludes there is a trend of rising prices the same between the Reported Party I (PT Pfizer Indonesia) and Reported Party II (PT Dexa Medica) against Norvask products and Tensivask“, cf. Rizkiyana and Iswanto, ‘Eradicating Cartel: The Use of Indirect Evidence’ (n 28) 38–39. 895 Rizkiyana & Iswanto Number I/XII/ 02 ‹http://www.ri-advocates.com/files/R&I% 20Newsletter%20I-XII-02.pdf› accessed on 20th July 2015. 896 KPPU Decision on the Short Message Service (SMS) Cartel (n 8). 897 KPPU Decision on the Industry Cement Cartel (n 6). 5.2 The Judicial Practices in the Indonesian Competition Law Number 5/1999 303 First, the Indonesian Competition Law No.5/1999 does not provide definitive and clear-cut provisions concerning the Leniency Programme.898 The implementation of the Leniency Programme in Indonesian Competition Law is highly urgent because it has been very difficult to obtain a sound quality of direct evidences in cartel practices mainly due to ‘reticence or silent code of ethic’ between the cartel participating business actors. Thus, the Leniency Programme is the key to demolish this reticence practices by giving the proper incentives to the whistleblowers. Moreover, the implementation of Leniency Programme shall: (1) improve collection of intelligence and hard evidence, (2) increase difficulty of creating and maintaining cartels, (3) lower costs of adjudication, (4) provide restitution to injured parties. Second, the Indonesian Competition Law No.5/1999 shall give more judicial competences to obtain direct evidences for instance to seize, down raid, tape and power to search and to responsible mainly for the Leniency Programme’s implementation. 898 Silalahi and Parluhutan, Circumstantial Evidence in the Substantiation Mechanism against Cartel Infringements in Indonesia (n 5) 12–17. Chapter Five Conclusions 304

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Abstract

Notwithstanding the two decades that have passed since the implementation of Law Number 5 on the Prohibition of Monopolistic Practices and Unfair Business Competition in 1999, the Indonesian Competition Authority or Komisi Pengawas Persaingan Usaha (“KPPU”) continues to face profound difficulties in uncovering cartel activities and thus in imposing penalties. Therefore, the KPPU strives to use circumstantial (indirect) evidence in its judicial practice to prove cartel transgressions. In German Cartel Law, EU Competition Law and in the US Antitrust practice, the courts also employ indirect (circumstantial) evidence, namely ‘facilitating practices’ and ‘plus-factors’, to substantiate cartel infringements. This book compares the different approaches to implimenting indirect (circumstantial) evidence in the Indonesian Competition Law to the German and European Competition Law, both from a procedural as well as a substantial law perspective.