KPPU Penalises Parties for Bid Rigging
Overview
On 17 July 2023 the Indonesia Competition Commission (Komisi Pengawas Persaingan Usaha, KPPU) rendered Decision 17/2022[i] on a tender conspiracy[ii] (bid rigging) allegation case relating to the construction work for the third stage of the Taman Ismail Marzuki revitalisation project (TIM Project S3). By using “indirect evidence”, the KPPU ultimately found each of the three reported parties to have engaged in tender conspiracy in breach of the Indonesian Competition Law.
As a result of the KPPU’s finding of tender conspiracy, two of the reported parties were fined (approximately US$1.1 million and US$732,000 each), whereas the third reported party
(the Tender Committee, referred to below) was penalised with administrative sanctions.
What was this case about?
- During the first tender for the TIM Project S3, PT Wijaya Karya Bangunan Gedung, Tbk. (PT WKBG) was ranked highest by the tender committee, PT Jakarta Propertindo (Perseroda) (Tender Committee), at the end of the technical and price evaluation/negotiations stages.
- However, instead of announcing the tender winner, the Tender Committee announced to all the tender participants, including PT WKBG, that the first tender was cancelled and that a new tender has been ordered on the basis of the Tender Committee’s general affairs officer’s findings of “indications of unfair competition and collusion”.
- PT WKBG filed an objection in response to the Tender Committee’s cancellation of the first tender (in which PT WKBG had the highest ranking). Responding to PT WKBG’s objection, the Tender Committee stated in part that:
- it has the authority to cancel the tender at any time before it has determined the tender winner;
- it is not obliged to explain the basis of its decision to cancel the tender; and;
- the first tender had indications of unfair competition and collusion between some Tender Committee members and tender participants, where a discount had been applied to the TIM Project S3 price.
- Although the Tender Committee’s response to PT WKBG’s objection was based on the Tender Committee’s general affairs officer’s findings of indications of unfair competition and collusion, no evidence supporting such indications was offered.
- Following cancellation of the first tender, the Tender Committee held a new tender for TIM Project S3 and a consortium (Consortium) consisting of PT Pembangunan Perumahan (Persero), Tbk. (PT PPP) and PT Jaya Konstruksi Manggala Pratama, Tbk. (PT JKMP), both tender participants, won.
- The case was initiated by the KPPU based on a public report, following which KPPU investigated the following three reported parties:
- the Tender Committee;
- PT PPP; and
- PT JKMP.
What were the KPPU’s legal considerations in deciding there was tender conspiracy?
In Decision 17/2022, the KPPU found that the Tender Committee, together with the Consortium, had conspired to rig the tender for the TIM Project S3. In particular, the KPPU found sufficient evidence to prove that the Tender Committee had improperly:
- facilitated the Consortium becoming the tender winner after cancelling the first tender, as evidenced by: (i) the intervention of the Tender Committee’s general affairs officer when the tender process was still running; and (ii) the Consortium requesting the Tender Committee to provide detailed technical assessment data during the first tender, which was then followed up by cancellation of the first tender without a proper basis; and
- revised the tender documents to impose a new requirement on the tender participants to submit a list of similar work they had carried out over the last 10 years. The impact of the new requirement significantly improved the Consortium’s chances of winning the new tender (since the Consortium’s technical documents’ value[iii] became much higher, compared to its technical documents’ value under the first tender).
Although the KPPU did not find any direct evidence in the form of specific communications between the Tender Committee and the Consortium, KPPU found that the matters referred to in the above two points constituted “indirect evidence” that was sufficient to prove that the Tender Committee, together with the Consortium, had committed tender conspiracy.
The use of “indirect evidence” in competition cases
The KPPU has often used indirect evidence (bukti tidak langsung) in business competition cases, especially for tender conspiracy cases. Several important KPPU tender conspiracy decisions handed down by the Supreme Court have relied on indirect evidence to determine the elements of “conspiracy” as set out under Article 22 of the Indonesia Competition Law[iv].
In the example of Supreme Court Decision No.182 PK/Pdt.Sus-KPPU/2018, which was a Judicial Review of the Computed Tomography (CT) Scan tender case, the Supreme Court determined that indirect evidence was “indicative”. However, the Supreme Court also determined that only indirect evidence that has a causal relationship with other (main) evidence can be accepted by the court.
In the current case, the KPPU’s decision to use indirect evidence is consistent with a recent KPPU regulation on case handling procedures[v] and is also consistent with the principles in the above Supreme Court case, which gave indicative evidence a very broad scope[vi].
In Decision 17/2022, the KPPU deemed that the main evidence[vii] did not have sufficient strength as independent evidence to prove that a tender conspiracy had occurred between the reported parties. However, by analysing the indirect evidence (referred to in the above two points),
the KPPU were able to connect the main and indirect evidence to determine that a tender conspiracy between the relevant parties had occurred.
Conclusion
The KPPU found that the TIM Project S3 Tender Committee had acted unfairly (from a Competition Law perspective) by colluding with two tender participants in a tender conspiracy and improperly naming the Consortium as the winning bidder. In deciding the case, KPPU examined all the evidence that was submitted during the hearing, finding that the indirect evidence examined had causal links to the main evidence, that enabled the KPPU to conclude that the reported parties had violated the prohibition on tender conspiracy under the Competition Law.
The KPPU ultimately decided that the Tender Committee and the Consortium had violated Article 22 of the Indonesia Competition Law and imposed sanctions on: (i) the Tender Committee, in the form of administrative sanctions[viii]; and (ii) the Consortium, in the form of fines.
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As a postscript, all three reported parties have formally appealed to the commercial court against KPPU Decision 17/2022, as indicated in the commercial court’s case and information tracker system.
We are monitoring the progress of the appeals and will issue further updates as more information on the appeals becomes available.
[i] KPPU Decision No.17/KPPU-L/2022 (Decision 17/2022).
[ii] Conspiracy is a form of cooperation undertaken by more than one business with the intention of controlling the relevant market in the interests of the conspiring businesses (see Article 1(h) of Law No.5 of 1999, as amended) (Indonesian Competition Law).
[iii] The technical documents’ value is determined by the Tender Committee, which assesses the value of the participants’ required tender documents that can be in the form of rankings, scores and grades. The tender’s technical documents can be corporate documents, licences, experience and other documents/information required for the tender.
[iv] Article 22 of the Indonesian Competition Law states that businesses are prohibited from conspiring with other parties with the aim of determining tender winners that may cause unfair business competition.
[v] KPPU Regulation No.2 of 2023 on the Procedure for Handling Monopolistic and Unfair Business Practice Cases, particularly Article 12.
[vi] Supreme Court Decision No.182 PK/Pdt.Sus-KPPU/2018 indicates that indirect evidence can broadly consist of “actions, events, statements or data that indicate the existence of an alleged violation of law” (as long as it has a causal relationship with other main evidence).
[vii] In Decision 17/2022, the main evidence consisted of: (i) the tender documents; (ii) testimony of the Tender Committee’s general affairs officer; and (iii) expert testimony.
[viii] The administrative sanctions were mostly in the form of directions from KPPU for the Tender Committee to refrain from discriminatory actions and anti-competitive behavior.
*This section is provided in collaboration with Soemadipradja&Taher
