SETTING FINES TO DISCOURAGE COMPETITION LAW VIOLATIONS POLICY GUIDANCE TO STRENGTHEN THE INDONESIAN COMPETITION FRAMEWORK 1 March 2, 2018 SUMMARY • One of the main objectives of a competition framework is to discourage anticompetitive practices that can harm market performance, consumers and inclusive economic growth. Sanctions for infringers seek to incentivize compliance with the law but this can only be achieved if sanctions are stringent enough to deter anticompetitive business practices (sanctions outweigh payoffs from anticompetitive conduct), proportionate to avoid unnecessary negative effects on firm operations, and transparent to avoid excessive discretion that can undermine competitive neutrality among firms. • In Indonesia, the low maximum value for administrative fines (IDR 25 billion), the silence of the law on the principles to set fines, and the lack of clarity on the institutional arrangement to impose sanctions weaken the effectiveness of the competition law. • The Indonesian competition framework would be enhanced if the following amendments to the competition law are considered: 1. Align the maximum administrative fine value to international standards by setting a maximum of 10% of annual turnover of the business actor (whole economic group) in the year preceding the KPPU decision. 2. Clarify the definition of business actor so it comprises all legal entities which operate as a single economic unit in the market. 3. Introduce a provision in the law to state the elements to be considered by KPPU when setting fines: affected turnover, duration and nature of the infringement, aggravating factors, and mitigating factors. 4. Clarify in the law that KPPU has the power to set administrative fines and execute them. 5. Introduce the concept of settlement to improve the efficiency of the enforcement process • Once the competition law is amended, the respective regulations and guidelines for setting fines need to be updated. 1Thi s note was prepared by the World Bank Group’s Ma rket and Competition Policy Team under the ongoing World Bank Group’s engagement wi th the Government of Indonesia to contribute to the current discussion on the amendments of the law No. 5 of 1999 concerning the ban on monopolistic practices a nd unfair business competition. 1 A. Background The main objective of imposing fines for competition law violations in most jurisdictions is deterrence. Deterrence can be intended to dissuade violators from engaging in the same conduct in the future ( specific deterrence), as well as to dissuade other potential infringers from violating the competition law ( general deterrence).2 Other goals in imposing fines include the need to punish infringers (particularly cartel participants) 3 , recover any unlawful gains obtained through violation of the competition law 4 , restitution5 or retribution6. Setting appropriate sanctions for infringements of competition law is key to encourage compliance with the law, and requires certain conditions regarding the contents of the law and stakeholders’ understanding of its implementation. Four essential conditions for effective competition law enforcement include: a) competition law must be clear on the actions that qualify as infringements, b) the law must provide for the threat of appropriate sanctions, c) businesses that intend to infringe must perceive a high risk of detection by competition authorities given the powers granted to the authority, and d) there must be transparency and predictability to the greatest extent possible regarding the jurisdiction’s competition law enforcement, so that market players can predict with a high degree of certainty what the consequences will be if they carry out actions that contravene the law. The amount of the penalty necessary to deter depends on the profitability of the behavior in question; however, in practice, proxies are considered to set fines that are proportionate and effective. Optimal deterrence requires that the fine for a criminal violation be set at the social cost of the violation in question times the ex-ante probability of detection by the authorities. 7 Since the necessary inputs into this equation cannot generally be calculated with certainty and without expending substantial costs in empirical analysis, the use of rough proxies for ability to harm the economy —such as a percentage of annual turnover— may be employed instead as a reference to set an appropriate fine. In most jurisdictions, fines are one of a range of sanctions available to competition authorities: others include criminal or civil sanctions, which may be levelled against firms and or individuals, depending on the jurisdiction. Fines (financial penalties) are the main administrative sanction available under most jurisdictions, but there are other administrative sanctions - such as blacklisting for public procurement, recommendations to deny subsidies or tax exemptions, or banning managers of cartelized firms from managing another company for a number of year - available in different jurisdictions. Administrative 2 Deterrence (general and/or specific) has been i dentified as one of the overarching objectives of the fining policy by the a gencies of the EU, USA, Ca nada, Japan, Germany, the Netherlands, Switzerland, Brazil, France, Austria among others. Accordi ng to international best practices, antitrust fines should pursue a twofold policy objective: (1) to i mpose penalties on i nfri nging undertakings; and (2) to ensure that the threat of penalties will deter both the infringing undertakings a nd other undertakings that may be considering a nti-competitive activities from engaging in them. 3 For i nstance, the EU, USA, Germany, Brazil, Mexico, Korea and Austria. 4 For exa mple, in Korea, recovery of illicit gains i s quoted as the main objective of fining policy, a longside punishment. 5 Restitution i s the concept of vi ctim recovery – US a nd Ca nadian courts consider the need to provide restitution to a ny victims of ca rtels when determining appropriate fines. 6 Retribution i s the concept of restorative justice that proportionate punishment is a n a cceptable response to cri me, regardless of whether the punishment ca uses a ny ta ngible benefits. Retribution i s a feature of the EU, Swiss, Italian a nd Jordanian fine s etting fra meworks, particularly i n the ca se of ca rtels. 7 Ga ry S. Becker, Crime and Punishment: An Economic Approach , 76 J. Pol i t. Econ. 169 (1968). 2 sanctions are usually issued directly by the competition authori ty. Though rarely imposed, criminal sanctions typically include incarceration of individuals involved in cartels 8, and have as their objective increasing deterrence by focusing the attention of company managers on the extreme personal consequences of participating in cartels. Criminal sanctions can also include criminal fines. Criminal sanctions are typically issued by courts, upon application by the competition authority. Civil/private sanctions may be available in certain jurisdictions9 to recover damages for injured parties’ monetary loss, either during the enforcement proceeding by the competition authority or separately in a civil action. To be successful, claimants must be able to prove the damage they suffered and the causality with the infringing party, which is often difficult. In some jurisdictions, competition authorities 10 or courts11 can impose fines on natural persons (individuals), that is the specific individual who committed the infringement, in addition to fining the undertaking. This approach also aims to enhance deterrence. In order to ensure proportionality and avoid negative consequences of an excessively high penalty the common practice is to set a maximum limit for fines as a percentage of the turnover of the infringer’s economic group. This cap aims to set fines that are too high and cannot be paid or that can jeopardize the viability of the company. Only in seldom cases, competition authorities have set a fine that reaches the maximum allowed fine for an undertaking. Defining a clear and consistent methodology to determine individual fines for infringers ensures impartiality, enhances transparency and increases legal certainty for the private sector. The issue of transparency is not only related to good enforcement practice and openness of information but also to other factors such as the relationship between the predictability of sanctions and deterrence. Establishing a clear methodology to determine fines reduces the discretion of the authority and allows companies to assess ex-ante the consequences of breaching the competition law. In addition, a certain degree of predictability allows parties to be aware of the rationale and reasoning that led the authority to impose a specific fine, thus helping to make it more “acceptable” for its recipient. Furthermore, explaining the methodology used for the quantification of sanctions as part of the authority’s decision facilitates full and effective judicial review if necessary. B. Determining a fine Fines for an infringement are generally calculated considering the harm caused by the anticompetitive practice under certain boundaries to ensure proportionality. Common methodologies to calculate fines tend to establish a number of sequential steps such as (1) calculating the baseline fine based on the gravity and duration of the infringement; (2) increasing this amount on the basis of aggravating circumstances; (3) decreasing the resulting amount on the basis of mitigating circumstances; (4) assessing whether the fine to be imposed respects the maximum level determined by the law; and, finally, (5) ap plying the discounts corresponding to the leniency program, settlements or due to the inability to pay ( see Table 1). 8 Pri s on terms available for ca rtel offences usually run for a maximum of 5 years’ imprisonment (e.g. Brazil, Canada, Hungary). Some jurisdictions i nclude i mprisonment with work (e.g. Japan). 9 Pri va te actions are mainly used in Brazil, Ca nada, Ireland (the civil action can be taken in alternative or in addition), New Zealand, US, Swi tzerland and Japan. 10 For exa mple, in Brazil, Ca nada, a nd Ireland fines for procedural breaches of the competition law can be imposed by the a uthorities on i ndividuals. 11 Courts i n Ja pan, Jordan, South Korea, Mexico, Netherlands, New Zealand, Serbia, Turkey, USA a nd France can impose fines on i ndividuals. 3 Table 1: Elements for setting individual fines and related legal instruments Elements for setting individual fines Usual instrument used to define the elements for a jurisdiction Ba s ic Fine Proporti onal to s ales i n the relevant market for the Competition regulations or guidelines i nfri ngement, dura tion of i nfri ngement, gra vity of i nfri ngement Increased by a ggra vating For exa mple, being a repeat offender, obstructing the Competition regulations or guidelines fa ctors i nvestigation Decreased by mi tigating For exa mple, encouraged by government Competition regulations or guidelines fa ctors l egislation/regulations Subject to overa ll cap Generally, a percentage of a nnual turnover of the Competition law (ma xi mum fi ne) per pa rent company (economic group) i nfri ngement Fi ne reduction Due to l eniency, settlement, i nability to pay Competition law, and regulations or gui delines Source: Adapted from WBG Markets and Competition Policy Assessment Tool i. Overall cap for fines Generally, competition laws state a maximum level of fine per infringement as a percentage of turnover or similar measure. The main advantage in setting fines as a percentage of turnover is that this tends to have a greater deterrent effect: particularly for larger undertakings, financial gains from the anticompetitive conduct may outweigh the maximum fine. Still some few jurisdictions such as Philippines and Myanmar ( see Table 2), place a specific monetary cap on fines, although it has the disadvantage of becoming outdated due to inflation or economic growth and being less effective for larger firms, therefore reducing its effect as a threat for potential infringers. In most jurisdictions, there are no minimum limits 12 . Setting a minimum for fines might affect a competition authority’s ability to set fines proportional to the harm caused by the infringement considering the affected market and the type of infringement. Setting minimum fines at a relatively high level could also affect the viability of the companies, especially those in sectors where net profit margins are generally lower. The legal fine cap is set as a percentage of turnover, usually 10% of turnover, in most jurisdictions (See Table 2), but the definition of turnover can vary. It is important that the law is clear on: which entity’s turnover it refers, what year or period it covers, and the scope of the turnover it involves. There are additional characteristics to define the concept of turnover more narrowly, for example whether it refers to the product-related turnover of the perpetrator of the offence, the total turnover of this company in the jurisdiction at hand, or even to the world-wide consolidated turnover of the group to which the perpetrator of the offence belongs. • Firm turnover The approach generally adopted across jurisdictions is to impose sanctions – mainly fines – on specific firms engaged in unlawful agreements, including liable parent companies. In several jurisdictions - including the EU, Hungary, South Korea, Switzerland and Turkey - a firm (undertaking or economic group) includes several different legal entities which by their structural and contractual links operate as a single 12Where minimum fi nes are provided, percentages or va lues tend to be l ow. For example, it is 1% of the relevant amount in Chi na and Russia, a nd 0.1% i n Bra zil. In Germany, the mi nimum is EUR 5. 4 economic unit in a specific market. The consequence of this is two-fold: first, when attributing liability for an infringement, several legal entities belonging to the same undertaking or economic group may be held liable for the infringement. Second, any maximum fines apply to the whole undertaking (parent and subsidiary companies) and not to the individual company engaged directly in the infringement. The advantage of this approach is its deterrent effect, and it prevents the possibility of larger groups infringing the competition law via one of their smaller subsidiaries. • Global or local turnover Competition laws vary in terms of how they define turnover; in middle income economies thresholds are set in terms of the turnover generated in the country. Some jurisdictions, especially those where many global firms operate and where the turnover of the jurisdiction is important, use global turnover of the firm to set the fine threshold. This is the case in the EU and some European countries (e.g. Germany, UK, Netherlands, France). In most middle-income countries, the turnover refers to the turnover in the country. In the case of South Africa, the law even states that turnover includes local turnover and exports. In some few countries, the turnover threshold refers only to the product aff ected by the infringement. In order to increase transparency and clarity on the maximum fine, countries usually use the consolidated turnover for a firm according to its financial statements. • Period of the turnover It is important to define the period of the turnover considered as a threshold. Competition laws generally set the fine threshold in terms of the latest annual turnover in financial statements at the time of issuing the final decision. Some other jurisdictions consider the annual turnover the last year of the infringement or the year before initiating the investigation. Either option can work as long as it is clear in the law. Table 2: Comparison of maximum fines for firms Countries Fine threshold for firms The greater of $10 m (a pproximately US$7.5 m); or three ti mes the total va lue of the benefits Australia obta ined i f reasonably a ttributable to the conduct; or 10% of a nnual turnover a ttributable to Aus tra lia i n the preceding 12 months 20% of gros s revenue of the fi rm (economic group) i n the economic s ector a ffected by the Brazil conduct, i n the year prior to the beginning of the i nvestigation China 10% of the a nnual turnover of the previous fiscal year EU 10% of the a nnual turnover of the previous fiscal year Germany 10% of the a nnual turnover of the previous fiscal year India 10% of the a verage turnover for the last three fi nancial years Admi nistrative between Rp. 1 billion and Rp. 25 billion (approximately, US$70k and $1.85 million, Indonesia res pectively) 10% (l a rge, manufacture), 3% (large, retailer), 2% (large, wholesale) of the sales amount of the Japan rel evant goods or s ervices up to 3 yea rs 10% of the turnover generated by the sale of relevant goods or s ervices during the period of a Korea vi ol ation Malaysia 10% of the turnover over the period during which a n infringement occurred Mexico 10% of the previ ous year net i ncome Myanmar Around US$11,000 $6.8 m; three ti mes the total va lue of the benefits obtained and reasonably a ttributable to the New Zealand conduct; or 10% of a nnual turnover a ttributable to NZ 5 Countries Fine threshold for firms Philippines Around US$5 million Russia 15% of the a nnual turnover of the previous fiscal year in the relevant market 10% of the turnover of the business of the undertaking in Singapore for each year of infringement, Singapore up to a ma ximum of 3 yea rs South Africa 10% of the a nnual turnover of the previous fiscal year Thailand 10% of the a nnual i ncome i n the year that the offence is committed Turkey 10% of the a nnual turnover of the previous fiscal year UK 10% of the a nnual turnover of the previous fiscal year US$100 m for a corporation (may be increased to twice the gain derived from the criminal conduct USA or twi ce the loss suffered by the vi ctims if greater than $100 m) Vietnam 10% of the a nnual turnover of the previous fiscal year Source: WBG Markets and Competition Policy Database, as of November 2017 Recommendations for Indonesia 1) Set a maximum fine of 10% of turnover of the infringing business actor in the year preceding KPPU decision and replace the current absolute maximum and minimum values. Indonesia’s current framework sets maximum and minimum limits for administrative fines of one billion and twenty-five billion rupiahs respectively. It is recommended that the minimum fine be removed to allow KPPU flexibility to issue proportionate fine, including token fines for smaller infringements. It is also recommended that the maximum fine be amended from an amount, to a percentage of total turnover, in line with international best practice. This will ensure gre ater proportionality between the infringement and the fine. 2) Clarify the definition of “business actor” in the law (Article 1(5)) in order to account for parent liability when setting a fine. In Indonesia’s law it is not clear whether the definition of business actor accounts for several different legal entities which operate as a single economic unit in the market. Making this adjustment in the law will enhance the deterrent effect of the fining structure but also facilitate the analysis of anticompetitive practices using the principle of single entity. The law could adopt the definition included in the UNCTAD Model Law on Competition 13: “[Business actor] means firms, partnerships, corporations, companies, associations and other juridical persons, irrespective of whether created or controlled by private persons or by the State, which engage in commercial activities, and includes their branches, subsidiaries, affiliates or other entities directly or indirectly controlled by them.” ii. Other elements to calculate the fine for a specific infringement Aside from setting a maximum fine, some competition laws specify general principles of how to set fines. This includes stating that the fine has to consider the scope (turnover in affected market), duration (some countries cap the maximum number of years) and nature of the infringement (cartels usually imply a higher proportion of the affected turnover), and that aggravating and mitigating factors can be considered. Most of the details on the steps for calculating fines are included in regulations or guidelines. 13 Ava i lable a t http://unctad.org/en/conferences/UN-Set/7th-Review/Pages/Model-Law-on-Competition.aspx 6 The European Union Fines Guidelines provide an example of how the considerations and criteria outlined in this note are used to set fines (see Box 1). A more detailed description of mitigating and aggravating factors can be found in Annex 1. Box 1: European Union Fines Guidelines – DG Comp Source: http://ec.europa.eu/competition/antitrust/compliance/factsheet_fines_nov_2011_en.pdf Recommendations for Indonesia 3) Incorporate a provision in the Law stating that the individual fines will be calculated considering the scope, duration and nature of the infringement as well as aggravating and mitigating factors; 4) Update current fining regulations and guidelines that explain the rationale, basis and methodology KPPU use to set fines: this would increase legal certainty about the factors to be used to determine fines and ensure greater objectivity, impartiality and predictability. Per Indonesia’s competition guidelines, KPPU considers several aggravating and mitigating elements after determining the basic fine. Aggravating elements include continuation of the offence, recidivism, refusal to cooperate, and a party’s role in the offence i.e. whether they were the leader or initiator of the violation. Mitigating elements include termination of the violation, proof that the violation was not deliberate, limited participation, effective cooperation with KPPU, state action defense, and statements of willingness to change behavior by the parties involved. The inability to pay is an additional factor considered by several jurisdictions, including Indonesia – however it is important to note that provisions setting maximum fine levels at a certain percentage of turnover in Indonesia are understood as a method to consider ability to pay. The framework could be strengthened by reviewing (and expanding where appropriate) the range of aggravating and mitigating factors considered in setting the fine . 7 C. Interplay between fines, settlements and leniency Settlements are an advantageous tool for administrative efficiency of competition authorities and to stop anticompetitive practices. Settlements allow for the termination of unlawful conduct re ported by a perpetrator or under investigation and fine reductions. One of the advantages of settlement procedures is also to save human and financial resources that would have been invested by the competition authority to detect, find, and fine infringers. These resources are freed to deal with other cartel investigations, further increasing deterrence. Settlements also help stop anticompetitive conduct and limit harm for consumers. Admission of the infringement by firms can also eliminate the possibility of costly court cases. However, when considering the option of introducing settlement procedures, it is necessary to balance their possible drawbacks in terms of moral justice and deterrence, since infringer may be seen by the public as escaping appropriate punishment, with the expected benefits which can be gained through settlements. Transparency and predictability in settlement policy and process are critical to dispelling this public concern. In particular, penalties and sanctions imposed in settlement should continue to adequately reflect the seriousness of the settling party’s conduct. In jurisdictions where a reduction in fine cannot be obtained for leniency applicants other than the first, a settlement system must provide additional incentives, beyond that provided for under the leniency program, to induce firms to stop anticompetitive behavior. However, the possible reductions of fine that can be obtained from leniency and from settlement must be carefully balanced in order to ensure consistency and reciprocal strengthening between the two instruments. Should the reduction in fines for settlement be too high, compared with the one offered under the leniency program, cartel participants would refrain from applying for leniency. They would instead wait to see if the competition authority can bring a case against them. In the affirmative, they could always be in time to accept a settlement offer. In the negative, there would be no case. This is not an optimal situation from the policy point of view that a cartel should be found and sanctioned. Recommendations for Indonesia 5) Introduce a settlement framework in its competition law to strengthen the overall speed and efficiency of the enforcement process. D. Other sanctions In addition to fines for firms, competition laws can establish fines and sanctions for individuals as well as criminal sanctions. i. Fines on individuals In some jurisdictions, competition authorities 14 or courts15 can impose fines on natural persons, that is the specific individual who committed the infringement, in addition to fining the undertaking. This approach aims to enhance deterrence. In general, a distinction may be drawn on the one hand between cases where pecuniary sanctions can be imposed on any natural persons involved in cartel activity, and 14 For exa mple, in Brazil, Ca nada, a nd Ireland fines for procedural breaches of the competition law can be imposed by the a uthorities on i ndividuals. 15 Courts i n Ja pan, Jordan, South Korea, Mexico, Netherlands, New Zealand, Serbia, Turkey, USA a nd France can impose fines on i ndividuals. 8 those jurisdictions which target specific conduct of individuals. For instance, the Dutch agency may impose fines on natural persons giving instructions or exercising de facto leadership regarding antitrust infringements, including cartels. In Switzerland, pecuniary sanctions can be imposed on individuals whenever they intentionally fail to comply with an amicable settlement, a legally enforceable decision of the competition authority or a decision of an appeal body. In France, only those indivi duals that have played a major, fraudulent role in the infringement are liable to be fined by the courts. The Brazilian agency can impose administrative fines on managers directly or indirectly responsible for a cartel where their company was involved. While in some jurisdictions, such as Jordan, Ireland and Canada, individuals involved in cartel activity face the same fines as undertakings, in most cases pecuniary sanctions imposed on individuals are statutorily capped at a lower level, often at a fixed fi gure. Recommendations for Indonesia 6) Clarify in the Law which sanctions apply to business actors and/or to individuals; Indonesia’s Competition Law defines business actor as “an individual person or company, in the form of legal or non-legal entity establi shed and domiciled or engaged in activities within Indonesia”. However, some sanctions (particularly those in Article 49) appear to apply to individuals rather than business actors. ii. Administrative and criminal sanctions In some jurisdictions, criminal sanctions can also be imposed in case of a competition law contravention. In these cases, there is need clarity on whether the administrative procedure or criminal procedure have to be completed first in order to set final sanctions, or whether they are independent. It is also important to clarify how can a criminal investigation start. In some jurisdictions, the competition authority requests a criminal investigation to be opened. Recommendations for Indonesia 7) Clarify in the Law under what conditions a criminal investigation can be started and adjudicated, and through regulations or guidelines whether criminal and administrative fines can be imposed concurrently. For example, the law could state that criminal sanctions be issued by the courts upon application of KPPU. This is particularly relevant to facilitate the implementation of leniency and settlements if they are included in the law amendments. 8) Remove or adjust section 46 (2) of the current law to clearly state that KPPU will directly issue final, binding administrative sanctions The fact that currently the enforcement of the KPPU decision is done by the District Court (i.e. the execution of KPPU’s decision must be requested from the District Court), affects the efficiency of the enforcement process and seems contradictory to article 47 of the current law. 9 iii. Complementary administrative sanctions Other administrative sanctions can be applied in addition to fines. A common ancillary administrative sanction is debarment from bidding for public procurement contracts for a certain period – for example, in Brazil 16 , South Korea17 and Peru18. Several jurisdictions including Brazil, France and South Korea consider the publication of infringement findings as an additional measure to punish an offender. For example, in France, the Competition Council may order the publication, broadcasting or posting of its decision or of an extract in the manner it defines, and also order the inclusion of the decision or of an extract in the company’s own annual report – with costs of publication borne by the company. Several jurisdictions including Australia, Hong Kong, Lithuania, Mexico and Russia include provisions for disqualification of a former or current managing director from occupying certain posts or carrying out certain activities for a stated period. It is very uncommon for withdrawal of business licenses to be included as ancillary fines for antitrust violations – typically license revocation is a sanction for health, safety, or consumer protection violations. Moreover, from a competition perspective, such a sanction is generally not considered effective as it would exogenously reduce the number of competitors in a market. In the case of Brazil, the competition authority can also debar infringers from obtaining funds from public financial institutions for up to five years and recommend tax authorities to block the infringer from obtaining tax benefits. Such approach increases the potential losses of an infringer and therefore can enhance deterrence. Finally, other jurisdictions offer the possibility of issuing ancillary orders that aim at addressing the harm caused by the infringement.19 Several jurisdictions provide for ancillary administrative or criminal sanctions over and above administrative fines. Table 3 provides examples of available ancillary sanctions from selected jurisdictions. Table 3: Comparison of ancillary sanctions for firms Countries Ancillary sanctions Australia Di rector disqualification Debarri ng from pa rticipating i n public procurement procedures a nd eligibility for subsidies, Brazil recommending withdrawal of ta x exemptions China Di rector disqualification EU × Germany Debarri ng from participating i n public procurement procedures India × Korea Debarri ng from participating i n public procurement procedures 16 Arti cl e 24 of La w No. 8,884/94 17 Arti cl e 76.1 (3) of the Enforcement Decree of the Act on Contracts to Which the State is a Pa rty 18 Arti cl e 237 of the Regulations of the State Procurement La w 19 In the case of UK, the ancillary orders are issued by a judge or ma gistrate. They depend on the s eriousness of the offence an d ci rcums tances of the offender a nd a re i n most cases a pplied once s entencing/liability has been proven. The Sentencing Council of the UK defines a ncillary orders as ‘ other orders in addition to sentence imposed, that are aimed at redressing the harm caused by an offender, such as compensation orders; while others aim to prevent future re-offending, or repeat victimization including criminal behavior orders and exclusion orders .’https ://www.sentencingcouncil.org.uk/about-sentencing/types-of- s entence/ancillary-orders/ 10 Countries Ancillary sanctions Malaysia × Mexico Di rector disqualification Myanmar Temporarily or permanently cl ose a business New Zealand Di rector disqualification Philippines × Russia Di rector disqualification Singapore × South Africa Di rector disqualification Thailand × Turkey × UK Di rector disqualification USA × Revoca tion of the bus iness regi s tration certi ficates; depriva tion of l i censes a nd pra cticing Vietnam certi ficates; confiscation of exhibits a nd means used for committing vi olations Indonesia Cri mi nal: revocation of business permit; director disqualification for a maximum of 5 years Source: WBG Markets and Competition Policy Database, as of November 2017 Recommendations for Indonesia 9) Replace the current provisions in the Law of revocation of business permit with other administrative sanctions, as debarment for public procurement tenders, inability to access government subsidies, investment incentives or tax incentives. These additional sanctions are likely to increase the deterrence effect while not forcing the exit of the firm from the market, as it would be the case with the current option to revoke the business permit. for competition infringements. 11 References European Commission. 2011. “Fines for Breaking EU Competition Law What Should Fines Achieve?” http://ec.europa.eu/competition/cartels/overview/factsheet_fines_en.pdf ICN. 2008. “Setting Fines for Cartels in ICN Jurisdictions.” In Report to the 7th ICN Annual Conference Kyoto. International Competition Network. http://www.internationalcompetitionnetwork.org/uploads/library/doc351.pdf . Sentencing Council for England and Wales. 2018. “Ancillary Orders.” Accessed January 10. https://www.sentencingcouncil.org.uk/about-sentencing/types-of-sentence/ancillary-orders/. UNCTAD. 2017. Model Law on Competition. Accessed January 10. http://unctad.org/en/conferences/UN-Set/7th-Review/Pages/Model-Law-on-Competition.aspx 12 Annex 1: Aggravating and mitigating factors Different jurisdictions consider a range of qualifying aggravating and mitigating factors which adjust the basic fine amount. Aggravating and mitigating factors may appear in the laws or in guidelines detailing the application of these fine-tuning aspects. Aggravating factors work to increase the basic amount, while mitigating factors have the effect of reducing the fine. The main aggravating 20 and mitigating21 factors are summarized in Tables 3 and 4, including a selection of jurisdictions that take them into account. Table 3: Aggravating factors considered in setting fines Source: Setting Fines for Cartels in ICN Jurisdictions – International Competition Network 2008 20 Some jurisdictions consider other a ggravating factors including: whether the offence i nvolved vulnerable victims (e.g. USA and Ca na da); the degree of premeditation (e.g. Mexico); the high ranking or s eniority of the personnel involved (e.g. South Korea and New Zea land); the importance of the affected product or the overall financial/economic s trength of the offender (e.g. Turkey); a nd, i n Brazil, the “extent of da mages or potential damages to competition, to the Bra zilian economy, to cons umers or to third p a rti es.” 21 Addi tional mitigating factors considered i n s ome jurisdictions i nclude: early a dmission of liability (e.g. New Zealand); the size of the fi rm (e.g. Ja pan); a nd a ny measures a iming a t reducing the a nticompetitive i mpact a re considered a ttenuating fa ctors in Ita l y. 13 Table 4: Mitigating factors considered in setting fines Source: Setting Fines for Cartels in ICN Jurisdictions – International Competition Network 2008 14