SHOPEE ADMITS TO VIOLATING COMPETITION LAW IN INDONESIA

The Competition Supervisory Commission ("KPPU") has begun holding a Preliminary Examination Panel Session on Case Number 04/KPPU-I/2024 concerning Alleged Violation of Article 19 letter d and Article 25 paragraph (1) letter a of Law Number 5 Year 1999 Related to Delivery Services (Shopee) 5 Year 1999 Related to Delivery Services (Courier) on the Shopee Platform, on 28 May 2024 at the KPPU Head Office.  The hearing was led by KPPU Deputy Chairman Aru Armando as Chairman of the Commission Panel, accompanied by KPPU Members Gopprera Panggabean and Budi Joyo Santoso as Members of the Commission Panel with the agenda of Exposure of Alleged Violation Report ("LDP") by the KPPU Investigator and Examination of Completeness and Appropriateness of Evidence (in the form of letters and supporting documents) in the LDP.

The case originating from the KPPU initiative involves 2 (two) Reported Parties, namely PT. Shopee International Indonesia (Reported Party I) and PT Nusantara Ekspres Kilat (Reported Party II). All attorneys of the Reported Party I and Reported Party II were present in the KPPU courtroom at the first hearing. In the LDP, the Investigator stated that the relevant market in this case is the Electronic Trading System (ETS) or marketplace platform provider in all regions of Indonesia. marketplace platform providers in all regions of Indonesia. In this market, there are several business actors, including Shopee, Tokopedia, Lazada, Bukalapak, and Blibli.

For information, during the first quarter of 2020 to the second quarter of 2022 in percentage, Shopee, and Tokopedia's monthly web visit traffic has increased significantly, while the others experienced a decline. Based on these indicators, Tokopedia and Shopee together control more than 60% (sixty percent) of the marketplace market in Indonesia since the first quarter period of 2020 and even more than 75% by the second quarter period of 2022.

The Investigator considers that Shopee has a dominant position in the marketplace, which is shown from the results of the marketplace, which is shown from the results of a consumer survey which shows that 69.33% of almost a thousand respondents indicated Shopee as the top of mind or first choice for the marketplace. So even though Shopee's market share does not reach more than 50%, based on monthly web visit traffic, Shopee has a dominant position in the marketplace. Shopee has a greater financial capability because of its net revenue because of its highest net revenue in 2022 compared to its closest competitor.

The KPPU Investigator also presented various findings that lead to the following Alleged Violation of Article 19 letter d and Article 25 paragraph (1) letter a of Law Number 5 Year 1999. The alleged findings include:

• The algorithm system has been discriminatorily set up by Reported Party I to prioritize Reported Party II in every package delivery to consumers (buyers).
• The Reported Party has carried out discriminatory behavior in determining the delivery service companies, namely J&T and Shopee, which are activated automatically in bulk on the Seller dashboard. These two companies were selected to be activated based on the statement from the Reported Party I because both companies have good service performance. However, there is a fact that other shipping service companies still have good service performance, but were not selected for mass auto-activation. Based on this, the Reported Party I is alleged to have discrimination in the selection of delivery service companies that are activated automatically in bulk on the Seller dashboard.
• Implementation of standardization in the delivery service company selection system by eliminating the option of selecting couriers and shipping costs.
• Appointment of Handika Wiguna Jahja, Director of PT Shopee International Indonesia, as Director of PT Nusantara Ekspres Kilat (SPX) on 27 June 2018. This affiliation relationship through concurrent positions may affect the behavior of affiliated business actors and competition because they can ensure and control the policies or behavior of both Companies.

The Investigator suspects that the various findings of violations have had direct harm to consumers as well as exclusionary practices by favoring Shopee Express, an affiliated company, in the competition for delivery services in the Shopee marketplace.

Later in the Panel Session conducted on Thursday, 20 June 2024, PT Shopee International Indonesia and PT Nusantara Express Kilat filed a request for a change of behavior. In the previous hearing, the Reported Parties submitted responses to the Alleged Violation Report (LDP) in writing and submitted a request for a change of behavior. In the 20th June hearing, the Commission Panel approved the request for a change of behavior. For this reason, the hearing continued with the reading of the points of the Integrity Pact for Change of Behaviour as well as the terms and obligations of the change of behavior for each of the Reported Parties. The points in the Pact in principle contain that each of the Reported Parties accepts the Alleged Violation Report (LDP) submitted by the Investigator admits the acts as described in the LDP and applies for an opportunity to Change Behaviour to the Commission Panel of the case a quo with conditions and obligations.

The Commission Panel also conveyed that if in the future evidence is found of the same violation by the Parties, the Commission is authorized to handle such violations, "If after the supervision period, the same violations are found,  the case will be processed as usual," said Chairman of the Commission Panel.

A week later, both Reported Parties accepted the points of the Pact, including admitting the alleged violations described in the LDP. Hence, this case is pending the signing of the integrity pact and monitoring of the implementation of their change in behaviors.

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