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Palm giants Wilmar, Indofood, RGE fined over Indonesian cooking oil shortage

Mongabay - May 31, 2023

Hans Nicholas Jong, Jakarta – Subsidiaries of some of the world's biggest palm oil companies have been found guilty by Indonesia's anticompetition watchdog of restricting sales of cooking oil amid acute shortages last year.

Indonesia is the world's biggest producer of palm oil, the most widely used vegetable oil for cooking oil, yet consumers across the country faced long lines and empty supermarket shelves when trying to buy cooking oil for several months in late 2021 and early 2022. Even when supplies were available, prices were multiples of what the product would usually retail for.

Amid claims of cartel-like practices by the palm oil industry, the Indonesian government's business competition watchdog, the KPPU, launched an investigation into 27 cooking oil producers in 2022. The investigation concluded that seven of the companies were guilty of restricting distribution of their branded cooking oils after the government imposed a retail price cap in early 2022.

The companies intentionally hoarded their cooking oil rather than sell at a steep discount, the KPPU said.

"The fact is that when the retail price cap was removed, packaged cooking oil immediately became available again in the market with relatively higher prices compared to the retail prices during the temporary cap," the KPPU said.

In light of this, it has ordered the seven companies to pay fines totaling 71.28 billion rupiah ($4.75 million).

The seven companies include Salim Ivomas Pratama, a unit of Indonesia's largest food company, Indofood Group; refinery operators PT Multimas Nabati Asahan and PT Sinar Alam Permai, both subsidiaries of the Wilmar Group, one of the world's biggest palm oil traders; and PT Asianagro Agungjaya, a unit of Apical, the palm oil arm of another commodities giant, Royal Golden Eagle.

Salim Ivomas was hit with the biggest fine, at about $2.73 million.

The seven companies have 30 days to pay their fines, according to KPPU spokesman Deswin Nur, but can still challenge the ruling all the way to the Supreme Court.

Rikrik Rizkiyana, a representative of Wilmar's legal team, said the company is disappointed with the ruling and that it's considering taking legal action against it since avenues of appeal are still open.

"Right now we're reviewing the KPPU's ruling," he said as quoted by news outlet Media Indonesia. "There are still legal means that [we] can take."

Hoarding isn't the only thing Wilmar is accused of doing during the cooking oil shortage.

In early 2022, an executive from Wilmar subsidiary Wilmar Nabati Indonesia, together with executives from two other companies – the Permata Hijau Group and Musim Mas – conspired with a top Indonesian trade ministry official. The deal would allow the companies to reallocate their palm oil for the domestic market, where prices were capped, and sell it abroad, where they could get a much higher price.

For deliberately violating their domestic palm oil obligations, all the co-conspirators were convicted and jailed at the start of this year. Master Parulian Tumanggor, a board member at Wilmar Nabati Indonesia, was sentenced to 18 months in prison, while the other defendants in the case – Pierre Togar Sitanggang, general manager at Musim Mas; Stanley M.A., senior manager of corporate affairs at Permata Hijau Group; and Lin Che Wei, founder of economic policy think tank Independent Research & Advisory Indonesia – each got a year in prison. Indrasari Wisnu Wardhana, the former director-general of foreign trade at the Ministry of Trade, received a three-year sentence.

Pushback to KPPU ruling

The KPPU also investigated the 27 cooking oil producers for price fixing, but the commission found none of the companies to be guilty of this. It concluded that the price surge during the shortage was caused by an increase in production costs.

Sahat Sinaga, executive director of the Indonesian Vegetable Oil Refiners Association (GIMNI), said the KPPU's ruling was questionable as it's not clear how the commission came up with the figure of 71 billion rupiah in fines.

A Wilmar spokesperson said the company believes the KPPU might have misconstrued the facts. They said Wilmar didn't intentionally hoard cooking oil during the scarcity, but was instead the victim of severe supply chain issues that impacted its operations and delivery of cooking oil in early 2022.

"Notwithstanding such difficulties, we did put in our best effort to meet the increased demand and urged our distributors to do the same," the spokesperson told Mongabay in an email. "The fact that our cooking oil products were mostly available during that period is evidence of our and our distributors' efforts to support the Indonesian Government."

Mongabay has reached out to representatives of the other companies for comment, but received no response as of the time this article was published.

Source: https://news.mongabay.com/2023/05/palm-giants-wilmar-indofood-rge-fined-over-indonesian-cooking-oil-shortage