KPPU Turning Up The Heat Over Alleged Cooking Oil Collusion

The Business Competition Supervisory Commission announced last week that it would investigate 21 cooking oil producers after some of them ignored summons from the antimonopoly body to answer cartel allegations. But oil makers have maintained that there is no price-fixing in the industry.

The allegations were driven by cooking oil prices soaring 83 percent to Rp 11,000 ($1.18) per kilogram this month from Rp 6,000 in May. The rise flies in the face of declining prices for crude palm oil ­— the raw material for cooking oil — dropping 30 percent to 2,186 ringgit per ton over the period.

Last month, Ahmad Junaidi, communications director for the commission also known as the KPPU, said it had found evidence of a cartel to control prices among the nation’s major producers of cooking oil. The agency invited the suspected producers to its offices, with hearings in October and early this month.

“But not all had come and responded to our invitations for clarification and provide relevant business documents as required by our investigators. The companies are showing indications of market domination by controlling supply and setting their own prices which are high even though crude palm oil prices have gone down over the past few months,” Junaidi told the Jakarta Globe on Thursday. He added that all but three firms had honored the summonses.

The suspected producers include PT Musim Mas, PT Smart,  PT Asia Agro Industri, PT Tunas Baru Lampung, PT Inti Benua, PT Agro Makmur Raya, PT Mega Surya, and Wilmar International, Junaidi said. The KPPU suspects the producers are stockpiling to lift prices by keeping supply artificially low. The agency says cooking oil distribution is controlled by the producers.

Derom Bangun, chief of the Indonesian Palm Oil Board (DMSI), which counts the suspected cooking oil producers as members, acknowledged on Friday that CPO prices had fallen but denied oil makers were manipulating prices by controlling distribution. “We are not so connected in terms of distribution and at the retail level, so we cannot influence the market price as the KPPU said.”

Max Ramajaya, a business development manager at Wilmar International, which sells the Fortune brand, said the KPPU’s allegations were groundless and funny.
“Competition in selling products is like a war. There many cooking oil producers who are competing to be the market leader here.How can they said we are practicing oligopoly [when a commodity is controlled by a small number of cooperating producers] that affects market price, while we are in fact competing,” Max said. Adding that Wilmar controlled about 19 percent of the 4.5 million ton annual market for cooking oil.

Max added that an oligopoly was not necessarily bad as long as traders did not burden consumers. “Prices for electronics and rice are similar from one product to another. So why it the KPPU just chasing us?” Max said.

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