Teguh Prasetyo & Aditya Wikrama – Indonesia's competition regulator on Tuesday ruled that the Indonesian subsidiary of French retail giant Carrefour was guilty of breaching antitrust laws, fining it Rp 25 billion ($2.6 million) and ordering it to sell most of its stake in a local retailer.

The Business Competition Supervisory Commission (KPPU) ruled that PT Carrefour Indonesia had violated the 1999 Anti-Monopoly Law by dominating the wholesale supplier market and forcing unfair trading terms on its suppliers following its acquisition of PT Alfa Retailindo in 2008. The acquisition gave the company an effective 58 percent share in the national retail market, the KPPU said.

Carrefour must sell its 79 percent stake in Alfa Retailindo within a year, said Dedie S Martadisastra, the head of the KPPU's legal tribunal.

"Since its Alfa Retailindo acquisition in 2008, the French retailer has been in control of the retail market nationwide with a 58 percent share, an increase from 46.3 percent in 2007," he said.

"The KPPU decision to sanction Carrefour has been made after a long investigation and with an objective analysis of evidence, including information from witnesses and relevant business partners such as the suppliers of Carrefour."

Dedie added that Carrefour's Rp 25 billion fine had to go into the state coffers through a state-owned bank.

Irawan D Kadarman, Carrefour's corporate affairs director in Indonesia, said the retailer was likely to appeal the ruling. Carrefour believed that the verdict was not based on the proper research and lacked a legal basis, he said.

"We still maintain the KPPU was not objective in its decision. Its verdict is groundless without the strong support of evidence or proper fieldwork."

Carrefour had strongly denied all charges about its relations with suppliers and, citing an AC Nielsen survey, maintained that the Alfa Retailindo acquisition only garnered it a 17 percent share of the national retail market.

KPPU Chairman Benny Pasaribu, who is also member of the legal tribunal, said the commission had also found evidence that Carrefour had violated another law on mergers and acquisitions.

"However, the commission dropped these charges because there are yet no government regulations implementing this law," he said.

Nugroho Setiadharma, a member of the Association of Indonesian Retailers (Aprindo), said the ruling could jeopardize both existing and future foreign investment in the retail sector.

Natalia Sutanto, a retail analyst at PT Ciptadana Securities, said the decision was unlikely to change the competition among the large supermarket retailers.