The long-overdue reform for Indonesia’s rusty competition law
The decades-old law struggles to keep up with digital era challenges—why haven’t we done anything?
If you’ve been following the news, you’ve probably heard about the speculated Grab-GoTo merger, a potential 7.1 billion US dollar deal that would unite two ride-hailing giants and reshape everyday life for millions of Indonesians. Beyond sheer value, the deal has revived old questions: is Indonesia’s decades-old competition law still capable of protecting fair play for consumers and businesses in today’s economy?
The uncomfortable truth is that Indonesia’s Law No. 5/1999 has struggled for years to keep markets open and fair. The digital economy didn’t cause these cracks, it simply made them impossible to ignore. Platform dominance, data-driven markets, and algorithmic pricing now test the limits of a law written long before these realities existed.
In this edition of The Reformist, we are taking a closer look at why our current antitrust law failed to tackle today’s rapidly growing digital-era challenges:
The weak enforcement of the law,
The missing digital economy regulatory framework, and
The lack of public awareness and political momentum to update the law.
Towards the end, we will also discuss what should change—what reforms should be done—in the upcoming revision of the competition law.
However, to understand both the criticism and necessary reforms to our antitrust law, we have to first delve into how Law No. 5/1999 came to be.
A law born out of crisis
Competition law (or antitrust law) exists to promote fair competition, prevent monopolies, and protect consumers by guaranteeing choice, reasonable prices, and product quality.
Indonesia’s Competition Law No. 5/1999 itself emerged as a response to the 1998 Asian Financial Crisis. In an era marked by monopolistic practices under the New Order regime, the law was seen as a crucial reform to level the playing field. It was once a bold step forward. Back then, it helped unlock foreign investment — from around US$1.9 billion in 2004 to over US$8 billion the next year.
It also established the Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha, or KPPU) as an independent authority to prevent abuses of anti-competitive conduct such as restrictive agreements and market dominance. Under the law, the KPPU can impose fines of up to 50% of relevant profits and 10% of relevant parties’ turnover during the infringement period. Additionally, KPPU can declare agreements void, award damages, and order business actors to cease practices that infringe upon Law No. 5/1999.
Yet 25 years on, the landscape has shifted. Our economy is now digitized, decentralized, and increasingly dominated by ecosystems where a handful of players control data, platforms, and consumer access all at once. Meanwhile, the legal tools we have to deal with this new reality remain stuck in the past.
Let’s take a look at the problems:
Problem 1: Enforcement is weak
Technically, KPPU can impose steep fines, void unfair agreements, and order businesses to stop anti-competitive practices. But real-world enforcement has proven far weaker. Here are some problems:
First, overlapping mandates and legal contradictions weaken the KPPU’s rulings. For example, in April 2021, the Supreme Court overturned the KPPU sanction (fines totaling IDR 49 billion) on Grab Indonesia, which had been fined for giving a leasing company special terms that harmed competitors. This case was seen as a “victory” for Grab; underscoring limits to how KPPU can exercise authority in this digitized economy. In this sense, it is hard to deny that anti-monopoly enforcement fails in Indonesia, with legal processes stunted by unfamiliarity with complex technological knowledge.
Second, enforcement gaps keep recurring. KPPU has been releasing publications about anti-competitive practices in Indonesian industries, but there has been no further action. For example, KPPU’s own publication flags cartel-like practices in the taxi industries; wherein minimum fares were jointly set by business associations rather than regulators. While its publication identified this collusion and offered policy recommendation, it ultimately lacked the authority or tools to intervene – meaning this research just stayed intangible, with little follow up.
Problem 2: No specific regulatory framework on digital economy
Unlike the EU’s Digital Markets Act (DMA)—which specifically defines and regulates powerful digital “gatekeepers”—Indonesia’s competition law remains silent on how to tackle the unique realities of today’s digital economy.
Over the past decade, digital technologies have reshaped nearly every aspect of business. This has sparked a global wave of new rules and enforcement actions — from headline-grabbing antitrust cases against Big Tech in Europe and the US to the EU’s DMA and Digital Services Act (DSA), and new digital competition frameworks across Asia-Pacific economies. These efforts reflect a growing global consensus: competition law must evolve to address data-driven dominance, algorithmic exclusion, and hidden self-preferencing by platforms.
In contrast, Indonesia has tried to keep up through isolated actions like the Google Pay Billing investigation, the Shopee Express case, the TikTok Shop ban, and scrutiny of the GoTo merger. But the legal framework itself has yet to be modernized. There are no ex-ante tools, no platform-specific rules, and no binding guidelines to proactively govern digital conduct. This leaves Indonesia’s regime reactive rather than forward-looking; forced to chase problems after they appear instead of setting the guardrails upfront.
For example, while Law No. 5/1999 prohibits price-fixing, it does not address algorithmic collusion, where software automatically adjusts prices across competitors, evading traditional enforcement methods. As a result, algorithmic pricing practices and “autonomous” collusions are often unregulated, which would facilitate automatic price-fixing that evades traditional law enforcement approaches. This blind spot leaves space for unfair digital practices to flourish.
Basic consumer safeguards that help keep markets open are also missing. For instance, Indonesia still doesn’t have phone number portability — a simple but powerful tool that lets consumers keep their number when switching mobile providers. As a result, consumers face a hassle if they want to leave Telkomsel or other big players. The EU’s DMA explicitly bans this kind of lock-in.
These gaps mean that KPPU’s oversight remains too general for today’s digital challenges — leaving dominant players free to tighten their grip at the cost of consumer choice and innovation.
The consequences are visible. In 2019, AirAsia pulled its tickets from Traveloka, accusing the platform of giving preferential treatment to rival airlines Lion Air and Garuda. AirAsia warned that such favoritism could squeeze suppliers and limit choices for travelers — but there was no clear legal tool to address this kind of digital gatekeeping.
KPPU’s own market studies have repeatedly emphasized the risks of highly concentrated e-commerce and digital market dominance. But without updated, digital-specific powers, these warnings rarely lead to decisive action.
Problem 3: Limited awareness, weak political will
And without a clear public narrative connecting fair competition to economic growth, innovation, and everyday fairness, even a good legal rewrite risks falling flat.
For all its clear gaps, reforming Indonesia’s competition law has never been an easy sell. Public support is thin, political will is fragile, and industry interests run deep.
A major amendment was drafted a few years ago to raise fines, introduce pre-merger reviews, and add a leniency program, but it ultimately stalled. KPPU has tried to build understanding through forums and studies, but these efforts haven’t sparked real public debate. Many people still don’t see how fair competition shapes their everyday life, from lower prices and better services to new opportunities for SMEs.
Predictably, any push for reform faces quiet resistance from businesses that benefit from the current light-touch rules. For them, stronger enforcement means new constraints.
Part of the problem is structural. One reason stakeholder awareness remains low is because the benefits of antitrust law may not always be directly felt by the public. This is an example of the logic of collective action—a phenomenon wherein despite stronger enforcement preventing collusion, the advantages are dispersed across many consumers that it is hard to build widespread support. At the same time, collusive arrangements continue to substantially benefit large players.
And without a clear public narrative connecting fair competition to economic growth, innovation, and everyday fairness, even a good legal rewrite risks falling flat.
An institutional puzzle still unsolved
It’s not just the legal language that’s outdated; the wider system is too. KPPU’s mandate does not include pre-screening new sectoral rules that can distort markets. It lacks leverage over SOEs, even though they hold dominant positions in many strategic sectors. Local licensing and procurement practices can quietly undercut fair competition, yet KPPU’s reach doesn’t always extend there.
These gaps leave the regime fragmented and reactive—the kind of terrain that dominant players know how to navigate.
Good news: the bill to amend the law is now on table
Despite these challenges, momentum for change hasn’t vanished completely. The House of Representatives has now listed the revision of Law No. 5/1999 as a priority in the 2025 National Legislation Program (Prolegnas). Current proposals aim to amend the competition law so that it can be aligned with an overarching goal to facilitate economic growth and further fall under the “dynamics of competition in the digital era” worldwide.
KPPU leaders have openly warned that the law has grown “rather obsolete” for today’s economy. The KPPU chairperson raised these issues to the House and called for tangible amendments to the current competition law: clearer merger reviews, stronger authority to tackle digital-era dominance, and better tools to close enforcement gaps.
In addition, the government seeks to increase funding for KPPU operations to strengthen it, so that KPPU can be more effective in supervising business competition for the digital era. A level playing field is important to ensure a healthy business climate, which in turn was important for a healthy national economy.
Furthermore, Indonesia’s aspiration to join the OECD gives the effort new teeth; because in the OECD club, credible, modern competition policy is not a box to tick, but a baseline for membership.
Other countries aren’t standing still. Australia, Singapore, South Korea, Japan — they’ve all modernized their frameworks to keep up with digital power plays and ecosystem dominance. The EU’s DMA has become a global benchmark. Meanwhile, Indonesia’s market credibility risks falling behind if it keeps using outdated tools while promising modern governance.
Whether this revision finally delivers where past attempts fell short will depend on more than new clauses on paper. It will require real political backing, enough budget to match ambition, and a clear public narrative that fair competition is not just a legal matter — but a foundation for a healthier, more dynamic economy.
What reform must be delivered?
Reform cannot just mean tweaking a few articles. It must close digital loopholes and strengthen merger review. It should clarify how KPPU works alongside other regulators while giving it modern tools; from stronger investigative powers, raids, and a functioning leniency program to real authority to tackle algorithmic collusion, hidden price-fixing, and platform self-preferencing that quietly squeezes out smaller players.
It also means ensuring KPPU has the funding, data capabilities, and specialized talent needed to handle complex rapid-evolving cases, not just publish reports that go nowhere. Sectoral ministries, local governments, and SOEs must be brought under clearer rules so they can’t quietly block fair play through loopholes or special treatment.
Equally important, reform needs a story people can believe in: that fair competition isn’t just extra red tape — it’s a safeguard that keeps prices fair, forces big players to keep improving, and gives SMEs the chance to grow without being edged out by secret deals or closed ecosystems. A clear public narrative helps build the broad base of support needed to keep momentum alive — so stronger rules don’t die quietly in committee, but deliver real impact in the daily economy.
A wake-up call—and a test
The digital economy didn’t break our competition law—it forced us to see its cracks clearly. Stronger competition and vibrant innovation already exist in Indonesia, but they shouldn’t have to fight uphill against outdated rules. Getting this reform right is how Indonesia proves to the public, investors, and businesses it’s serious about fair play, credible markets, and long-term growth in a digital-first age.
The world is moving. Our entrepreneurs and new players are moving too. The only question is whether we’ll match their pace—or let an old framework hold them back.