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DECISION Case Number: 03/KPPU-L/2008
The Business Competition Supervisory Commission of the Republic of Indonesia (hereinafter referred to as the Commission ) that examines the alleged violation of Article 16 and Article 19 letter a and letter c of Law Number 5 Year 1999 concerning Prohibition of Monopolistic Practices and Unfair Competition (hereinafter referred to as the Law Number 5 Year 1999 ) in connection with the Broadcasting Rights for Barclays Premier League of 2007-2010 season, conducted by: ------
1. PT Direct Vision (“PTDV”) , having office address at Citra Graha Building 9th Floor, Jalan Jenderal Gatot Subroto Kavling 35-36 Jakarta 12950, Indonesia, hereinafter referred to as the “Reported Party I”; ------2. Astro All Asia Networks, Plc (“ AAAN ”), having office address at All Asia Broadcast Centre, Technology Park Malaysia, Lebuhraya Puchong Sungai Besi, 57000 Kuala Lumpur, Malaysia, hereinafter referred to as the “Reported Party II” ; ------3. ESPN STAR Sports (“ ESS ”), having address at 151 Lorong Chuan, #03-01 New Tech Park, Singapore 556741, hereinafter referred to as the “Reported Party III” ; ------4. All Asia Multimedia Networks, FZ-LLC (“AAMN”), having office address at Dubai World Center 6th Floor, Dubai, United Arab Emirates, and having Branch office at All Asia Broadcast Centre, Technology Park Malaysia, Lebuhraya Puchong Sungai Besi, 57000 Kuala Lumpur, Malaysia, hereinafter referred to as the “Reported Party IV” ; ------has made a Decision as follows: ------Commission Assembly : ------Upon perusing the letters and documents of this case; ------
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Upon hearing information from the Reported Parties; ------Upon hearing information from the Witnesses; ------Upon hearing and perusing information from the Experts; ------Upon perusing the Investigation Report (hereinafter referred to as the IR );------
ABOUT THE FACTS OF THE CASE
1. Considering that the Commission has received a report concerning an alleged violation of Article 16 of Law Number 5 Year 1999 conducted by Astro All Asia Networks, Plc and PT Direct Vision with ESPN STAR Sports and Article 19 letter a of Law Number 5 Year 1999 conducted by Astro All Asia Networks, Plc and PT Direct Vision in connection with Exclusive Broadcasting Rights for Barclays Premier League; ------2. Considering that after the Commission has made investigation, clarification, and filing, the said report is declared as complete and clear; ------3. Considering that with respect to the complete and clear report aforesaid, the Commission Meeting on 24th January 2008 decided to follow up the said report in the stage of Preliminary Examination; ------4. Considering that thereafter, the Commission issued a Resolution Number 12/KPPU/PEN/I/2008 dated 28th January 2008 concerning Preliminary Examination of the Case Number 03/KPPU-L/2008, as of 29th January 2008 up to 13th March 2008 (see the evidence A1); ------5. Considering that in order to conduct the Preliminary Examination, the Commission issued a Decision Number 19/KPPU/KEP/I/2008 dated 28th January 2008 concerning the Assignment to the Commission Members as the Examining Team in the Preliminary Examination of the Case Number 03/KPPU-L/2008 (see the evidence A2); ------6. Considering that thereafter the Executive Director of the Commission Secretariat issued a Letter of Assignment Number 18/SET/DE/ST/I/2008 dated 28th January 2008 that assigned the Commission Secretariat to assist the Examining Team in the Preliminary Examination (see the evidence A3); ------7. Considering that in the Preliminary Examination, the Examining Team has heard information from the Reporting Party, the Reported Party I, the Reported Party II,
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the Reported Party III, and the Government Agency (see the evidence B1, B5, B7, B8, B9) ; ------8. Considering that after conducting the Preliminary Examination, the Examining Team found that there were sufficient preliminary evidences of an alleged violation of Article 16, Article 19 letter a and Article 19 letter c of Law Number 5 Year 1999 yang dilakukan oleh Reported Parties (see the evidence A56); ------9. Considering that based on the Preliminary Examination results, the Examining Team has given a recommendation to the Commission to follow up the examination to the stage of Advanced Examination, enhancing the alleged violation of Article 19 letter c of Law Number 5 Year 1999 and decided All Asia Multimedia Network, FZ-LLC as the Reported Party (see the evidence A56); ------10. Considering that based on the recommendation of the Preliminary Examination Team aforesaid, the Commission agreed in the Commission Meeting on 11th March 2008 and issued a Decision of the Commission Number 41/KPPU/PEN/III/2008 dated 12th March 2008 concerning Advanced Examination of the Case Number 03/KPPU-L/2008, as of 12th March 2008 up to 6th June 2008 (see the evidence A57); ------11. Considering that in order to conduct Advanced Examination, the Commission issued a Decision Number 108/KPPU/KEP/III/2008 dated 12th March 2008 concerning the Assignment of the Commission Members as the Advanced Examining Team in the Advanced Examination of the Case Number 03/KPPU- L/2008 (see the evidence A58); ------12. Considering that thereafter the Executive Director of the Commission Secretariat issued a Letter of Assignment Number 133/SET/DE/ST/III/2008 dated 12th Marche 2008 assigning the Commission Secretariat to assist the Advanced Examining Team in the Advanced Examination (see the evidence A59); ------13. Considering that after conducting the Advanced Examination, the Advanced Examining Team deemed necessary to conduct the Extension of Advanced Examination; ------14. Considering that thereafter the Commission issued a Decision Number 186/KPPU/KEP/VI/2008 dated 9th June 2008 concerning the Extension of Advanced Examination for the Case Number 03/KPPU-L/2008, as of 9th June 2008 up to 18th July 2008 (see the evidence A93); ------
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15. Considering that in order to conduct the Extension of Advanced Examination, the Commission issued a Decision Number 187/KPPU/KEP/VI/2008 dated 9th June 2008 concerning the Assignment to the Commission Members as the Advanced Examining Team in the Extension of Advanced Examination for the Case Number 03/KPPU-L/2008 (see the evidence A94); ------16. Considering that thereafter the Executive Director of the Commission Secretariat issued a Letter of Assignment Number 507/SET/DE/ST/VI/2008 dated 9th June 2008 assigning the Commission Secretariat to assist the Advanced Examining Team in the Extension of the Advanced Examination (see the evidence A95); ------17. Considering that in the period of the Advanced Examination and the extension thereof, the Examining Team has heard and perused the information from the Reported Parties, the Witnesses, the Experts, and the Government; ------18. Considering that the identities and information of the Reported Parties, the Witnesses, the Experts, and the Government have been recorded in the IR and Minutes of Meeting with the Government, the truth of which has been admitted and each of which has been signed by the parties concerned; ------19. Considering that in the Preliminary Examination and the Advanced Examination the Examining Team has obtained, investigated, and assessed a number of letters and documents, IR, and other evidences already obtained during the examination and investigation; ------20. Considering that after conducting Advanced Examination, the Examining Team made an Advanced Examination Report containing the facts as follows: ------20.1. About the Identities of the Reported Parties; ------20.1.1. PT Direct Vision (hereinafter referred to as “PTDV”) is a business entity in the form of a legal entity, which is a Limited Liability Company established under the laws and regulations of the State of the Republic of Indonesia, with Articles of Association the last amendment of which was drawn up by virtue of Deed Number 119 by Notary Sutjipto, S.H., the shares of which are owned by PT Ayunda Prima Mitra in the amount of 49% and Silver Concord Holdings Limited in the amount of 51% where PT Ayunda Prima Mitra is owned by PT Broadband Multimedia, Tbk (now PT First Media, Tbk) that is one subsidiary of Lippo Group, currently domiciled at Citra Graha Building 9th
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Floor, Jalan Jenderal Gatot Subroto Kavling 35-36, Jakarta 12950, Indonesia, engaged in business activities in the field of pay-TV operation by virtue of the Letter of the Director General of Post and Telecommunication Number 14 February 2005 concerning permit for pay-TV multimedia telecommunication service operation, and engaged in business activities since 28th February 2006 in the territory of Indonesia using the trademark of “ASTRO”; ------20.1.2. Astro All Asia Networks, Plc (hereinafter referred to as “AAAN”) is a business entity in the form of a legal entity, which is an open company, registered in England and Wales and engaged in business activities in Malaysia under the Company Act 1985, Memorandum and Article of Association of Astro All Asia Networks, Plc dated 22nd July 2003, the shares of which are owned by Usaha Tegas Group in the amount of 42%, Khazanah in the amount of 20%, the government trust of Malaysian Government in the amount of 10%, and the public in the amount of 28%, currently domiciled at All Asia Broadcast Centre, Technology Park Malaysia, Lebuhraya Puchong Sungai Besi, 57000 Kuala Lumpur, Malaysia, constituting a holding company that has a variety of subsidiaries engaging in business activities in the field of pay-TV business, radio broadcasting, TV content production and distribution, and a number of other businesses in the field of media; ------20.1.3. ESPN STAR Sports (hereinafter referred to as “ESS”) is a joint venture entity in the form of general partnership between ESPN and STAR Sports, incorporated in the United States of America under the law of the State of Delaware with its branch office registered in Singapore based on the Certificate of Registration of Foreign Company (Form 83 The Companies Act, Cap. 50, Section 371), Company No. F 05357E registered in Singapore on 25th June 1997 signed by Miss Tan Shook Yng (Acting Deputy Registrar of Companies and Businesses Singapore), the shares of which are owned by ESPN in the amount of 50% and STARTV
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in the amount of 50%, where the majority of ESPN is owned by Disney Corporation and the majority of STARTV is owned by News Corp, currently domiciled at 151 Lorong Chuan, #03-01 New Tech Park, Singapore 556741, engaged in business activities in the field of sport program production development, channel distribution and sales, and broadcasting rights in the territory of Asia and subcontinent of India, including to pay-TV companies in Indonesia; ------20.1.4. All Asia Multimedia Networks, FZ-LLC (hereinafter referred to as “AAMN”) is a business entity in the form of a legal entity, which is a limited liability company established in April 2006 in Dubai, United Arab Emirates, the shares of which are 100% owned by AAAN, currently domiciled at Dubai World Center 6th Floor, Dubai, United Arab Emirates, and having a branch office at All Asia Broadcast Centre, Technology Park Malaysia, Lebuhraya Puchong Sungai Besi, 57000 Kuala Lumpur, Malaysia, engaged in the primary business activities to acquire contents, make television channels of Indonesian and Malaysian languages to be supplied to pay-TV operators operated by Astro whether at PTDV in Indonesia, MBNS in Malaysia or “Kristal Astro” in Brunei Darussalam, and engaged in secondary business activities in the procurement of decoders to be supplied to PTDV in Indonesia; ------20.2. About Relationship among the Reported Parties; ------20.2.1. The relationship between PTDV and AAAN was as follows ( see IR of PP PTDV, IR of PP AAAN, IR of PPL PTDV, IR of PPL AAAN, Annual Report of AAAN Year 2007): ------20.2.1.1. AAAN was planning to make investment at PTDV through its subsidiaries based on a Joint Venture Agreement that has not been agreed until today; ------20.2.1.2. The subsidiaries of AAAN related to planned investment as PTDV were among others MEASAT Broadcast Network Systems Sdn. Bhd. (MBNS), All Asia Multimedia Network FZ-LLC (AAMN), Astro
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Nusantara International B.V. (ANI), dan Astro Nusantara Holdings B.V. (ANV); ------20.2.1.3. The use of “ASTRO” trademark by PTDV in the territory of Indonesia was based on the Trademark Licence Agreement signed by PTDV and MBNS on 28th February 2006; ------20.2.1.4. Joint Venture Agreement in the form of Subscription and Shareholders Agreement in 2005 between PTDV and AAAN was supported by Channel Supply Agreement between AAMN and PTDV, Technical Agreement between MBNS and PTDV, Set Up Box Supply between AAMN and PTDV, and IT Service and Broadcast Service Control between MBNS and PTDV. When this Report is being prepared, all of the aforesaid agreements have not been agreed; ------20.2.1.5. Initially, AAAN planned to make share investment in the form of equity at PTDV in the amount of 51% through Astro Overseas Limited consisting of ANI and ANV, but pursuant to the provision of Article 17 paragraph (2) of Law No. 32 Year 2002 concerning Broadcasting and Article 28 paragraph (2) of Government Regulation No. 52 Year 2005 concerning the Operation of Pay Broadcasting Institutions, the capital originating from foreign legal entities was limited to maximum 20% only, so when this Report is being prepared, the Subscription and Shareholders Agreement between shareholders and prospective investors has not been reached; ------20.2.1.6. In order to comply with the provision on ownership of shares by foreign investors up to maximum 20% aforesaid, the Capital Investment Coordinating Board had granted approval for investment at PTDV in the amount of 20% through Astro Overseas Limited, i.e. through ANH in the amount of 10% and ANI in the
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amount of 10%, but the said plan has not been agreed by shareholders and prospective investors; ------20.2.1.7. The cooperation between PTDV and subsidiaries of AAAN had so far been entered into based on each agreement prepared by each party; ------20.2.1.8. Even though PTDV has not until today made any payment whatsoever for the services provided by the subsidiaries of AAAN, but as a form of accountability for the cooperation, PTDV had submitted monthly reports to the subsidiaries of AAAN aforesaid; ------20.2.2. The relationship between PTDV and AAMN was as follows (see IR PP PTDV, IR of PL AAMN, IR of PPL PTDV, IR of PPL AAMN, Draft Channel Supply Agreement): ------20.2.2.1. AAMN was the primary channel and content supplier for PTDV; ------20.2.2.2. The channels supplied by AAMN to PTDV among others were ASTRO CERIA, ASTRO AWANI, ASTRO XPRESI, ASTRO KIRANA, ASTRO TARUNA and other international channels (see Exhibit A - List of Channels, Draft Channel Supply Agreement); ------20.2.2.3. The cooperation relationship between PTDV and AAMN was based on the Draft Channel Supply Agreement dated 30 th June 2006 as amended on 7 th July 2006 and has not been signed when this report is being prepared; ------20.2.2.4. Specifically for BPL broadcasts of 2007-2010 season, PTDV did not get them from ESS but from AAMN; ------20.2.2.5. PTDV submitted monthly reports to AAMN about the growth of PTDV’s subscribers, but PTDV had never made payment on the use of AAMN channels;------20.2.3. The relationship between PTDV and ESS was as follows (see IR of PP PTDV, IR of PP ESS, IR of PPL PTDV, IR of PPL ESS, Broadcast Affiliation Agreement ): ------
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20.2.3.1. The cooperation relationship between PTDV and ESS was set forth in a Broadcast Affiliation Agreement signed on 28 th February 2006, the last known amendment of which was by means of the Eighth Supplemental Agreement on 25 th January 2008; ------20.2.3.2. The payment by PTDV to ESS was made based on the number of subscribers multiplied by a certain value 1 with Minimum Guarantee system; ------20.2.3.3. Barclays Premier League (“BPL”) broadcasts were not included as the content promised in the Broadcast Affiliation Agreement between PTDV and ESS, but were one of Special Programs that could be offered by ESS to pay-TV operators, including PTDV, which was additional in nature; ------20.2.3.4. The BPL Broadcasts of 2007-2010 season received by PTDV in the channels of ESPN and STAR Sports were not from ESS, but from AAMN; ------20.2.4. The relationship between AAAN and ESS was as follows (see IR of PP AAAN, IR of PP ESS, IR of PPL AAAN, IR of PPL ESS): ------20.2.4.1. The relationship between AAAN and ESS could be seen from the relationship between two subsidiaries of AAAN, i.e. MBNS and AAMN, each of which had business relationship with ESS; ------20.2.4.2. The business relationship between MBNS and ESS was set forth in the Broadcast Affiliation Agreement signed on 11 th May 2005 that was retroactively applicable as of 1 st July 2004; ------
1 The information on this value is kept confidential.
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20.2.4.3. The agreement as referred to in letter b covered the channels of ESPN and STAR Sports, in which BPL content was included; ------20.2.4.4. For BPL agreement of 2010-2013 period, MBNS and ESS had prepared a Draft Broadcast Affiliation Agreement that had not been signed; ------20.2.5. The relationship between AAAN and AAMN was as follows (see IR of PP AAAN, IR of PL AAMN, IR of PPL AAAN, IR of PPL AAMN): ------20.2.5.1. AAMN was a subsidiary, the shares of which were 100% owned by AAAN; ------20.2.5.2. That there were multiple positions of one of the personnel who worked at AAAN, AAMN, and MBNS, namely Grant Scott Ferguson who had position as Chief Financial Officer of AAAN, Director of AAMN, and Director of MBNS, besides also having positions at ANI and ANH; ------20.2.5.3. The examination of AAAN in the Preliminary Examination, the examination of AAMN in the Advanced Examination, and the examination of AAAN and AAMN in the extension of the Advanced Examination were attended by Grant Scott Ferguson; ---- 20.2.5.4. Grant Scott Ferguson was also a party of AAMN who negotiated with ESS related to the purchase of BPL broadcasting rights of 2007-2010 season for the territory of Indonesia; ------20.2.6. The relationship between ESS and AAMN was as follows (see IR of PP ESS, IR of PL AAMN, IR of PPL ESS, IR of PPL AAMN): ------20.2.6.1. After ESS had won the exclusive rights for BPL broadcasts from FAPL for the territory of Indonesia,
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AAMN had initiative to negotiate with ESS in order to buy the said broadcasting rights; ------20.2.6.2. ESS and AAMN reached an agreement on the sale of the said broadcasting rights based on the Heads of Agreement that has not been signed until this report is being prepared; ------20.2.6.3. AAMN has paid the license fee related to the said Head of Agreements for the period of 2007-2008; ------20.3. About Barclay Premiere League (BPL): ------20.3.1. BPL as a TV Show in Indonesia : ------20.3.1.1. That those referred to as the English League, the England Premiere League (EPL), and the Barclay Premiere League (BPL) are of the same content ; ------20.3.1.2. Before 2004: Initially the English League in Indonesia was broadcast by free-to-air TV by SCTV station around the year of 1991 when the said content was not yet popular in the eyes of television consumers in Indonesia, especially soccer lovers, as it was still less popular that the Italian League; ------20.3.1.3. Period of 2004-2007 : The tender for the England Premiere League (EPL) of 2004 – 2007 competition season for the territory of Indonesia held by the Federation Association of England Premiere League (FAPL) was won by TV7 (now Trans7) with the value of (USD XXXX) 2, where the rights covered broadcasting rights in pay TV as well as free-to-air TV. But as TV7 had constraints in the process of Barclays Premier League broadcasting from FAPL to
2 The information on this value is sensitive for business; at the request of the witness, this information is kept confidential by the Examining Team.
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Indonesia, then TV7 offered ESS to buy EPL broadcasting rights special for pay-TV in the territory of Indonesia with compensation: ESS would assist in distributing the said broadcasts from FAPL to Indonesia; ------20.3.1.4. FAPL asked TV 7 not to sell directly to ESS, but return the said pay-TV EPL broadcasting rights to FAPL. FAPL reprocessed the sale of EPL broadcasting rights special to pay-TV in Indonesia. ESS won the said broadcasting rights; ------20.3.1.5. Besides technically assisting in distributing EPL broadcasts from FAPL to TV7, ESS also sold the said content to pay-TV in Indonesia (Indovision, ASTRO, Kabelvision, Telkomvision, and IM2) and included in one package in the sport content so that in the period of 2004-2007, EPL was one of the programs in the package of ESPN and Star Sports; ------
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Diagram 1. The purchasing pattern of Broadcasting Rights for the English Premier League 2004-2007
Source: IR of TV7, ESS; processed data .
Musim 2004-2007 = 2004-2007 Season Hak Siar EPL TV Berlangganan Pay TV = Broadcasting Rights EPL Pay-TV Hak Siar: EPL Indonesia = Broadcasting Rights: EPL Indonesia Hak Siar: EPL Indonesia di Pay TV = Broadcasting Rights: EPL Indonesia at Pay- TV Support Teknis = Technical Support Memasok EPL = Supplying EPL TV BERLANGGANAN INDONESIA = INDONESIA’S SUBSCRIPTION TVs
20.3.1.6. Period of 2007-2010: For BPL broadcasting rights in the period of 2007-2010, FAPL conducted an open tender for the public in various territories of the world. In the said tender, ESS won the BPL tender with a
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certain price 3 for several territories in Asia, namely: Malaysia, Brunei, Indonesia, Macau, South Korea, the Philippines, Vietnam, Cambodia, Laos, Myanmar, and Taiwan; specially in the territory of Indonesia, the BPL tender was participated by ESS, MNC Group (RCTI), AAMN, and Indovision; ------20.3.1.7. Based on the e-mail dated 23 rd November 2006, ESS was stated to win the tender for BPL broadcasting rights for the territories of Indonesia, Malaysia, South Korea, and Individual Country Blocks. After knowing that the exclusive rights for Barclays Premier League in the territory of Indonesia was won by ESS, then AAMN had initiative to negotiate with ESS to buy the said exclusive broadcasting rights that were specifically distributed to PTDV in Indonesia; ------20.3.1.8. The said negotiation resulted in an agreed certain price 4 with compensation that AAMN was entitled and/or authorized to manage the English League, or in other words, AAMN was granted the authority to select a television operator that may broadcast the said English League in Indonesia; ------20.3.1.9. Based on the information in the Preliminary Examination on 29 th February 2008 of ESS, it was known that several Indonesian companies had contacted ESS in connection with the broadcasting rights for the English League, among others were Indovision, Telkomvision, Broadband Multimedia (First Media), TV7, RCTI, and SCTV. Based on the
3 The information on this value is kept confidential by the Examining Team. 4 The information on this value is kept confidential by the Examining Team .
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correspondence via e-mail sent by television operators, among others Indovision, Telkomvision, Kabelvision, IM2, ANTV, and RCTI, all of them questioned the status of BPL broadcasts for the period of 2007-2010 due to no confirmation from ESS about BPL broadcasts in Indonesia. In the said correspondence, ESS always refused to have discussion about BPL and never expressly replied or gave information whether BPL of 2007-2010 season would still be received by the said operators or not; ------20.3.1.10. But based on the experience during its running business in Indonesia, ESS considered that pay-TV operators in Indonesia (in this case were Indovision, Indosat Multimedia/IM2, and Telkomvision) did not have good performance in their commitment to develop pay-TV business, so that ESS chose to negotiate BPL broadcasting rights with AAMN; ------20.3.1.11. Thereafter, since an agreement had been achieved between ESS and AAMN, BPL broadcasts could only be consumed by PTDV’s consumers in exclusive manner; ------20.3.1.12. Because of the said exclusivity, the Ministry of Communications and Information of the Republic of Indonesia ( Depkominfo ) requested PTDV to give access of Barclays Premier League broadcasts to the public. The said request of Depkominfo was then followed up by PTDV giving access to AAMN and as a result, ESS held a limited tender by offering the content of the Barclays Premier League broadcasts to
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free-to-air TV operators in Indonesia that was finally won by Lativi (now TVOne) with the rights as follows: -----
• Rights of 1 (one) live broadcast match/week, to be determined by ESS; ------
• Rights of 1 (one) delayed broadcast match/week, to be chosen by Lativi; ------
• BPL Highlights; ------20.3.1.13. As the consequence of the said broadcasting rights for Barclays Premier League being granted to Lativi, the contract value between ESS and Lativi would be considered as a subtracting contract that must be paid by AAMN to ESS for the transaction of Barclays Premier League broadcasts in Indonesia; ------
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Diagram 2. The purchasing pattern of the Broadcasting Rights for the English League in the period of 2007-2010
Source: IR of PP ESS, IR of PP PTDV, IR of PL AAMN, IR of PP AAAN; processed data .
Musim 2007-2010 = 2007-2010 Season Hak Siar = Broadcasting Rights Korea Selatan = South Korea 100% Saham = 100% Shares ESS Tidak Memasok EPL = ESS does not supply EPL Berdiri tahun 2007 = Established in 2007 Perjanjian = Agreement
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TV Berlangganan di Indonesia = Subscription TVs in Indonesia Keterangan = Legend Aliran Transmisi Hak Siar = Transmission Flow of Broadcasting Rights Perjanjian Lain = Other Agreements Tidak Memasok = Does not Supply Penguasaan Saham = Control of Shares 20.3.2. BPL in the Perception of Indonesian Viewers as a Content : ------The survey conducted by MARS to the subscribers of subscription-TV 5 resulted in several conclusions as follows: ------20.3.2.1. The factors most considered by a person in selecting a pay-TV provider were: ------1) The quality of reception or pictures/voice; ------2) The channels or programs owned by a pay-TV; ------3) The subscription fee; ------20.3.2.2. Films and sports were the broadcasts that influenced someone’s decision the most in subscribing to a pay- TV; ------20.3.2.3. The reasons for subscription to each pay-TV; ------1) The subscribers of Indovision subscribed to Indovision because ‘its monthly subscription fee is cheap’, ‘its broadcasting quality is good’ and ‘the offered channels or programs are attractive‘; ------2) The subscribers of Telkomvision subscribed to Telkomvision because ‘its monthly subscription fee is cheap’; ------3) The subscribers of Kabelvision subscribed to Kabelvision because ‘it can be used for Internet’ dan ‘its monthly subscription fee is cheap’; ------4) The subscribers of ASTRO subscribed to ASTRO because ‘there are broadcasts of the English League', and the said reason was 50% of the background for ASTRO subscribers to churn from other pay-TVs; ------
5 In this Report, both terms of subscription-TV and pay-TV are used and referred to the same object.
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20.3.2.4. The most pay-TV packages taken by pay-TV subscribers was movies package, followed by sport package; ------20.3.2.5. The top 5 (five) pay-TV channels that were most oftenly watched were HBO, ESPN, Star Movies, Star Sports, and Cinemax; ------20.3.2.6. Star Sports and ESPN were channels that should be in the sport package; ------20.3.2.7. HBO, Star Movies, and Cinemax were channels that should be in the movies package; ------20.3.2.8. The top 5 (five) most favorite sport programs were UEFA Champions, Football Asia, Liga Inggris, sport news-score, and sport center; ------20.3.2.9. Soccer was the most favorite sport, and even 8.71% said that they would stop if ‘the soccer program is not broadcast anymore by pay-TV providers’; ------20.3.2.10. The English League had extraordinary attractiveness to pay-TV subscribers so that would voluntarily churn to the provider that broadcast the said league, with the empirical facts as follows: ------1) Two out of three respondents (67.94%) who like sport stated that the English League should be included in the sport package. It was mainly stated by the subscribers of ASTRO; ------2) As many as 64.99% of respondents who liked sport stated that the English League could not be replaced any other soccer leagues; ------3) If the English League was broadcast by another pay-TV, 62.22% of ASTRO subscribers would shift to the TV provider that broadcast the said English League; ------20.3.2.11. Meanwhile, the reason of most non-subscribers of ASTRO not to shift to ASTRO was because
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‘ASTRO’s broadcasting quality is not so good if the weather is bad; ------20.3.3. BPL in the Perception of Operators as Content : ------20.3.3.1. In the examination of the Reporting Parties on 11 th February 2008, the Reporting Parties considered BPL as an important content. The omission of the said content had resulted in loss to Telkomvision, Indovision, and IM2 in the form of lost subscribers so that Indovision had claimed indemnity of Rp 1.2 trillion; ------20.3.3.2. In the examination on 29 th February 2008, AAAN made a statement as follows: ------No. 70 Question: Is there any supporting document such as marketing research or consumer research stating that BPL is an attractive content? Answer: AAMN buys BPL only to be submitted to DV. Whether the research is there or not, it must be admitted by the whole world that BPL is a valuable content so that it is surely an attractive content in Indonesia. 20.3.3.3. Thereafter, in the examination on 12 th May 2008, AAMN made a statement as follows: ------No. 59 Question: What content is the most expensive content that has ever been bought by AAMN? Answer: BPL 20.4. About Downstream Market: Pay-TV Industry in Indonesia; ------20.4.1. About Pay-TV Industry in Indonesia in General : ------20.4.1.1. The broadcasting of television in Indonesia pursuant to Article 13 of Law No. 32 Year 2002 concerning Broadcasting recognizes 4 (four) categories of Television Broadcasting Institutions based on the types of their ownership, namely Public Television
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Broadcasting Institution, Private Television Broadcasting Institution, and Community Television Broadcasting Institution; ------20.4.1.2. Based on their source of income, there is a difference between Private Broadcasting Institution and the Subscription Broadcasting Institution. A Subscription Broadcasting Institution is a broadcasting institution whose income originates from its subscribers who pay for the service. On the other hand, a Private Broadcasting Institution is a broadcasting institution whose income does not originate from the viewers who enjoy their broadcasts, but from advertisers and other sources 6; ------20.4.1.3. Private Television Broadcasting Institutions are also frequently known as Free-to-air TVs where based on regulation, the distributed coverage of their broadcasting geography includes network TV and local TV stations. Currently, however, the government has not expressly applied the system of network TV stations so that, until 2009, there will still be national TVs whose broadcasting coverage is national in nature and local TV stations with narrower coverage. Technologically, Free-to-air TV stations are currently using radio frequency as the main media to distribute their broadcasts, where relay stations are useful to make broadcasting penetration; ------20.4.1.4. Currently, Indonesia’s subscription Television Broadcasting Institution three (3) technologies of its distributing medium (platform), namely 7: ------a. Terrestrial; ------
6 Article 19 in conjunction with Article 26 of Law No. 32 Year 2002. 7 Article 26 of Law No. 32 Year 2002.
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b. Cable; ------c. Satellite; ------20.4.2. The History of Pay-TV Industry in Indonesia (see the Report of CASBAA 2007) ; ------20.4.2.1. Since 1994 up to 2007, pay-TVs in Indonesia could at least be divided into two (2) periods, namely: ------a. The period of 1994-1999 where the government made a policy on Sole Pay-TV License, where a pay-TV company had to cooperate with PT Matahari Lintas Cakrawala (Indovision) or the holding company thereof; ------b. The period of 1999-2007 where the government already granted licenses to a number of pay-TV companies; ------Diagram 2. Chronological Development of Pay-TV Companies
Source: CASBAA 2007
20.4.3. Pay-TV Business Actors in Indonesia 20.4.3.1. The business actors of current Indonesia’s pay-TV broadcasting institutions that have obtained licenses are as follows: ------Table 1. List of Pay-TV Business License Holders
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Technologic al Source of Brand Company Platform Program
1 Indovision PT MNC Skyvision Satellite (Cakrawala Directly from (dh PT Matahari 1) Content Provider Lintas Cakrawala 2 ASTRO PT Direct Vision (PT Satellite (Measat 2) Directly from DV) Content Provider 3 First Media PT First Media (dh Cable (HFC) Directly from (previously PT Broadband Content Provider Kabel Vision) Multimedia 4 Telkomvision PT Indonusa 1 Satellite (Telkom Directly from Telemedia 1) Content Provider 2 Cable (HFC) 5 IM2 PT Indosat Mega Cable Directly from Media Content Provider 6 M2V PT Mentari Terresterial Directly from Multimedia (direct to vehicle ) Content Provider 7 Metra PT Multimedia Satellite Telkomvision Nusantara 8 Fasindo PT Fasindo Jaya Cable Telkomvision Kabel TV 9 Megavision PT Indonesia Cable Telkomvision Broadband Communication 10 Bali Interaktif PT Gemilang Putri Cable n. a. Nusantara 11 Visicom TV PT Tritutama Satellite Technical try-out Kominakom 12 Globalcom PT Globalcom Satellite Not yet in International operation 13 Global Vision PT Global Wisata Satellite Not yet in Mandiri Internasional operation 14 n. a. PT Adiwarta Perdana Satellite Not yet in operation 15 Yogyamedianet* PT Sarana Insan Cable Directly from Muda Selaras Content Provider and Kabelvision Source: Report of CASBAA; January 2007 and May 2008. *using multimedia license.
20.4.3.2. In pay-TV industry in Indonesia, 98% of pay-TV subscribers are controlled by four main business actors, namely Indovision, ASTRO, First Media, and Telkomvision (Source: CASBAA 2008); ------20.4.3.3. There are a number of business actors that have obtained permits in principle from the Ministry of
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Communications and Information to be pay-TV operators using satellite as their technological platform. The said permits in principle require business actors to operate commercially within a period of one year; ------
Table 2. List of Pay-TV Holders of Permits in Principle
Brand Company Affiliation Oke Vision PT Nusantara Vision MNC (Indovision) B-Vision PT Media Commerse Indonesia Bakrie I-Sky-Net PT Cipta Skynindo Skynet Group Citra TV PT Karya Megah Adijaya Penta Vision PT Global Comm Nusantara Source: CASBAA 2008 and Minutes of Meeting with the Directorate of Broadcasting of the Ministry of Communications and Information.
20.4.4. The Ownership Pattern of Pay-TV Operators : ------20.4.4.1. Indovision is a brand or trademark of pay-TV service provided by PT MNC Skyvision (previously PT Matahari Lintas Cakrawala), where the said company is affiliated to MNC Group by means of Global Mediacom Tbk.; ------20.4.4.2. ASTRO is a brand or trademark of pay-TV service provided by PT Direct Vision (PTDV). PTDV is a company owned by PT Ayunda Prima Mitra and Silver Concord Holding Ltd. PT Ayunda Prima is effectively 100% owned by PT First Media Tbk (previously PT Broadbrand Multimedia, Tbk) which is a part of Lippo Group’s business. PT First Media itself has a pay-TV service using the brand of First Media (previously Kabel Vision). The said relationship is outlined in the following diagram: ------
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Diagram The Ownership Relationship between PT DV and PT First Media
Source: Financial Statement of PT First Media Tbk 2008 , processed data d/h: Tahun 2005 = previously in 2005 Kepemilikan Saham Efektif = Effective Share Ownership Saham 49% = 49% Shares Saham 51% = 51% Shares BRAND TV BERBAYAR DI INDONESIA = PAY-TV BRANDS IN INDONESIA
20.4.4.3. The use of “ASTRO” brand by PTDV was based on a Trademark License Agreement. The said agreement along with the use of ASTRO technology was initially a part of joint venture cooperation plan between Astro Group and Lippo Group. However, until today the said plan has not resulted in any agreement between the two parties; ------
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20.4.4.4. First Media was established in 1994 with the name of PT Safira Ananda, and then changed into PT Tandjung Bangun Semesta that was changed again later into PT Broadband Multimedia, Tbk. and finally into PT First Media. The shareholders of PT First Media are Across Asia Limited (56.02%), PT Reksa Puspita Karya (32.67%), PT Datakom Asia, PT Indosat (2.29%), and the public; ------20.4.4.5. Telkomvision was a product of PT Indonusa Telemedia, which was established in 1997 and started operation in 1999. PT Indonusa Telemedia was initially owned by PT Telkom Indonesia, PT Telkominda Primabhakti, PT Rajawali Citra Televisi Indonesia, and PT Datakom Asia. In 2003, PT Telkom Indonesia became the main shareholder by controlling 98.75% of shares and the rest were owned by PT Datakom Asia. (source: www. telkomvision.com/about.php); ------20.4.5. Growth of Pay-TV Subscribers 20.4.5.1. Pay-TV subscribers can be classified into two main groups as follows: ------a. Residential ; ------b. Non Residential (SMATV and Hotel Room); ------20.4.5.2. The growth of pay-TV residential subscribers was as follows: ------Table 3. The Growth of Pay-TV Subscribers
Sep-06 Q4 2007 Q1 2008 Indovision 155000 305372 351400 Astro 35000 147000 140000 First Media 82000 114913 128000 Telkomvision 8000 22899 34700 IM2, M2V and others 4000 5000 6000 Total 284000 595184 660100
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Source: CASBAA 2007, 2008
20.4.5.3. The graph of pay-TV residential subscribers is as follows: Graph 1. Residential Subscribers
Source: Report of CASBAA 2008
20.4.6. Product : ------The packages offered by operators in December 2007 were as follows: ------Table 4. The Number of Packages of Each Pay-TV Operator (December 2007)
Source: Report of Casbaa 2008
20.4.7. Price Structure : ------20.4.7.1. The comparison of initial subscription fees in March 2008 was as follows: ------
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Table 5. Comparison of Initial Subscription Fees (March 2008)
Source: Report of Casbaa 2008
20.4.7.2. The subscription fees of satellite pay-TVs were as follows: ------
Table 6. Comparison of Monthly Subscription Fees of Satellite TVs
Source: Report of Casbaa 2008 20.4.7.3. The subscription fees of Cable TVs were as follows: ------
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Table 7. Monthly Subscription Fees of Cable TVs
Source: Report of Casbaa 2008
20.4.8. Regulation : ------The regulation related to pay-TV industry in Indonesia is contained in Law No. 32 Year 2002 concerning Broadcasting and Government Regulation No. 52 Year 2005 concerning Subscription Broadcasting Institutions; ------21. Considering that in the Report on the Advanced Examination Results the Examining Team made analysis as follows: ------21.1. The Market Concerned: ------21.1.1. The market concerned pursuant to Article 1 point 10 of Law No. 5 Year 1999 is the market related to a certain marketing coverage or area of a business actor of the same or similar goods and/or services or the substitution thereof; ------21.1.2. The market related to a certain marketing coverage or area in the law of business competition is known as a geographic market. On
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the other hand, the same of similar goods and/or services or the substitution thereof are known as a product market. Therefore, the analysis of the market concerned is conducted through the analysis of product market and geographic market; ------21.1.3. Product Market : ------21.1.3.1. Basically, the analysis of product market had the objective to determine the kinds of goods and/or services that were similar or dissimilar but the substitution thereof that were competitive against each other in a case. In order to conduct this analysis, a product must be reviewed from several aspects, namely: the use, the characteristics, and the price; ------21.1.3.2. The first stage of product market analysis was conducted to the broadcasting industry in general and then narrowed to the same or similar products or the substitution thereof; ------21.1.3.3. Broadcasting industry is a complex industry and consists of various kinds of business activities and is intermediary in nature. The intermediary nature of this broadcasting industry is indicated by the acquisition of content (input market) and the submission thereof to the audience (end product). This was confirmed by the written testimony of Dr. Dionisius A. Narjoko 8 and Janusz A. Ordover 9; ------21.1.3.4. In terms of end product, there are various kinds of broadcasting operators in Indonesia that, in the perspective of their ownership, are classified into public TV, community TV, private TV, public radio, community radio, and private radio. In terms of funding sources, broadcasting institutions are classified into private broadcasting institution and
8 Dr. Dionisius A. Narjoko, Expert Testimony Related to the Alleged Violation of Law No. 5/1999 for the Case No. 03/KPPU-L/2008, p. 1 9 Janusz A. Ordover, Preliminary Expert Report, p. 5
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subscription broadcasting institution. In terms of platform, broadcasting institutions are classified into terrestrial platform, satellite platform, and cable platform. In terms of input, there are advertising companies, advertising agents, content providers, etc.; ------21.1.3.5. The business market of a broadcasting operator is different from that of an input provider even though both of them are interdependent and difficult to be independent. It is simply evident that the business of a production house is not competitive with that of a radio broadcasting, and the business of a TV broadcasting is not competitive with that of an advertising agent, so that the market of a broadcasting operator and that of an input provider are different; ------21.1.3.6. In terms of use, broadcasting operators, both in the form of audio and audio visual, function as information and entertainment for their respective viewers, listeners, and subscribers. Therefore, in terms of use, broadcasting operators both in the form of audio and audio visual can substitute each other in providing entertainment and information; ------21.1.3.7. In terms of characteristics, audio broadcasting operators have characteristics clearly different from those of audio visual broadcasting operators so that they cannot substitute each other and, therefore, audio broadcasting operators and audio visual broadcasting operators have different markets; ------21.1.3.8. Audio visual broadcasting industry consists of terrestrial TV and pay-TV having their own characteristics different from each other’s. The main characteristic that differentiates a free-to-air TV from a pay-TV is the fee that must be spent by viewers. A
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free-to-air TV is a TV that can be watched by anyone without having to spend any fee whatsoever and whosesoever to the extent the broadcast is still receivable by a TV set. On the other hand, a pay-TV cannot be accessed by anyone but restricted to those who are willing to spend some fee regularly to have access to watch the said pay-TV broadcasts; ------21.1.3.9. Another difference of characters between a free-to-air TV from a pay-TV is evident in terms of content. A free-to-air TV operator may only broadcast one channel, while a pay-TV operator may broadcast up to tens of channels, including free-to-air TV channels. These different capacities would result in very different strategies in the selection of contents for free-to-air TV and pay-TV. The many channels provided by pay-TV operators make the contents more various for pay-TV subscribers compared to those provided by free-to-air TV operators. The many channels provided by pay-TV operators also enable repetitive broadcasts of one content up to several times providing higher flexibility to pay-TV viewers compared to free-to-air TV viewers who are very seldom getting opportunities to have repetitive broadcasts of one content in case the viewers concerned are prevented from watching it in the first opportunity. Another difference that we can see is in terms of advertisements. In pay-TVs, the number of advertisements is very little and almost none that is very different from free-to-air TVs whose incomes are very dependent upon the sale of TV ads spots so that they would display a lot of advertisements in their programs;------21.1.3.10. In terms of technological characteristics, the access to a pay-TV would require more equipment than to a
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free-to-air TV such as a decoder or a set up box, mini parabolic antenna, or cable. On the other hand, the access to a free-to-air TV would only require an outdoor antenna. The pay-TV technologies themselves are different from platform to platform. Broadly speaking, there are pay-TVs that are broadcast by means of satellite or transmitted by means of cable. However, at the level of end consumers, the said technological differences can only be seen in the extent of services provided by the operators and will be elaborated further in the analysis of geographic market below; ------21.1.3.11. In terms of price, there is a significant difference between a free-to-air TV and a pay-TV, which is the main difference of characteristics between the two. In order to access a free-to-air TV, it is not necessary to pay a certain fee, as the broadcasts of a free-to-air TV can be acquired free of charge. On the other hand, in order to access the broadcasts of a pay-TV, the consumers must pay monthly fees that are already fixed by the pay-TV operator concerned. The latest development would enable the services of a pay-TV to be paid in advance without necessity for continuity, which is popular with the term of pre-paid system using vouchers provided in many places. The difference of payment patterns among pay-TV operators would not omit the essence that the access to such pay-TV broadcasts would require payment of some price. Therefore, pay-TVs both with pre-paid system and subscription system would not result in separate markets among them; ------21.1.3.12. This approach is in line with that consistently used by the competition body in European Union as explained
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in the written testimony of Winfred Knibebeler 10 in this case; ------21.1.3.13. The argument that free-to-air TVs are the substitution for pay-TVs due to high cross-elasticity as explained by Janusz A. Ordover 11 cannot be accepted for at least two reasons: Firstly, free-to-air TVs are channels that are also broadcast in pay-TVs or, in other words, for pay-TVs, free-to-air TVs are one of the inputs in their business operation. Even if, quod non , free-to-air TVs are the substitution for pay-TVs, pay-TVs are not at all the substitution for free-to-air TVs so that there is no direct competition between pay-TVs and free-to-air TVs; ------21.1.3.14. Based on the whole description aforesaid, then downstream market for pay-TV products is different from free-to-air TV products; ------21.1.3.15. In terms of input, a program broadcast by a TV may originate from internal production of the TV concerned or from the purchase of a broadcasting right produced by a third party, either directly or through an intermediary institution; ------21.1.3.16. Such programs will then be the competitive advantage of each broadcasting institution to attract viewers or subscribers; ------21.1.3.17. The report on Preliminary Examination results has stated that the market of BPL broadcasts is different from that of other contents; ------21.1.3.18. AAAN and AAMN in their response, defense, and clarification stated that the market was based on relative and subjective considerations 12 . Meanwhile, the correct way to define an upstream market is by
10 Winfred Knibbeler, Expert Testimony of Freshfields Bruckhaus Deringer, p. 14 11 Janusz A. Ordover, Preliminary Expert Report, p. 15 12 Response, Defense, and Clarification of the Reported Party II and the Reported Party IV in the Advanced Examination of the Case No. 03./KPPPU-L/2008 p. 16, point 30.
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seeing whether there are alternative substitutions for other business actors to attract customers 13 ; ------21.1.3.19. The same thing was also conveyed in the examination on 23 rd June 2008 of the Expert Witness Prof. Dr. Ine. S. Ruky who stated as follows: ------No. 13 Question: What about the upstream? Answer: It is related to the agreement already entered into that should be observed in terms of supply (whether there are substitution products thereof) and demand (whether the supply can shift to other business actors or not). But the fact is that there is collective buying by the association. 21.1.3.20. Further, according to Winfred Knibbeler, the Law of Competition of the European Union regards the BPL market as a different market if 14 : “...BPL rights could not be regarded as substitutes for the media rights relating to other domestic and foreign football leagues – including for example the German Bundesliga, the Spanish Liga and the Italian Serie A – in terms of the ability to attract viewers and/or subscribers.” ------21.1.3.21. In line with the definition of product market, the Examining Team tried to assess the substitutability of broadcasting rights of other programs to those of BPL both in terms of supply (pay-TV operators) and demand (pay-TV consumers); ------21.1.3.22. That the Reporting Parties in this case that are pay- TV operators stated that BPL broadcasts are an essential content for their business operation; ------21.1.3.23. In addition, at the examination on 29 th February 2008, AAAN stated as follows: ------No. 70
13 Ibid . p. 16, point 31. 14 Winfred Knibbeler, Expert Testimony of Freshfields Bruckhaus Deringer, p. 16.
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Question: Is there any supporting evidence such as marketing research or consumer research stating that BPL is an attractive content? Answer: AAMN bought BPL only to be delivered to DV. Regarless of whether there is such a research or not, it must be admitted by the whole world that BPL is a valuable content so that it is certainly an attractive content in Indonesia. 21.1.3.24. Thereafter, at the examination on 12 th May 2008, AAMN stated as follows: ------No. 59 Question: What was the most expensive content that has ever been bought by AAMN? Answer: BPL. 21.1.3.25. That, therefore, in terms of TV operators, it is evident that BPL is an important broadcast for the business operation of TV operators, including Astro Group that has spent the highest cost for one content compared to other contents; ------21.1.3.26. This is in line with the opinion of Winfred Knibbeler stating 15 : It is generally accepted that the relevant upstream product market is based upon “the substitutability of media rights from the perspective of TV broadcasters in relation to the ability to attract viewers and/or subscribers”; ------21.1.3.27. The opinion of Winfred Knibbeler emphasizes on the “perspective of TV broadcaster” that is in this case consistently shown by both the Reporting Parties and Astro Group in considering BPL as an essential content to attract subscribers; ------21.1.3.28. The substitution from the perspective of the viewers is generally measured by the method of Small but
15 Ibid ., p. 12
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Significant Non-transitory Increase in Price (SSNIP) Test by representing a hypothetical condition where a product is experiencing a relative increase of 5-10% against another product; ------21.1.3.29. A survey conducted by MARS to pay-TV subscribers has not used the instrument of price increase but a hypothetical condition where BPL is not available and the subscribers are asked about substitution of other programs. The results of the survey conducted by MARS are as follows: ------Graph 2. The Results of a Survey on Favorite Soccer Leagues
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Liga Sepakbola yang Disukai = Favorite Soccer Leagues Semua responden yang menyukai olahraga = All respondents who like sport Pertandingan Sepakbola = Soccer Matches Liga Inggris = English League Liga Italia = Italian League Liga Spanyol = Spanish League Liga Jerman = German League Liga Perancis = French League Liga Jepang = Japanese League Tidak Dapat Digantikan = Unreplaceable Dapat Digantikan = Replaceable
21.1.3.30. Based on the said survey results, as many as 64.99% state that the English League cannot be replaced by other programs. Even though 35.01% of the customers state that the English League is replaceable, this hypothetical condition is more extreme than the SSNIP Test that has used the hypothetical condition of price increase. Therefore, if the survey is conducted using SSNIP Test, surely there will a shift of subscribers to other programs. Therefore, there is no substitution of the English League for pay-TV subscribers; ------21.1.3.31. It is also confirmed by the testimony of the Expert Witness Prof. Dr. Ine. S. Ruky in the examination on 23 rd June 2008 stating as follows: ------No. 59 Question: What is excluded? Answer: ... Furthermore related to the soccer consumers of the English League, there is no substitution in the said market, as the consumers of the English League would find the said program wherever it is broadcast.
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21.1.3.32. Based on the perspectives of operators and subscribers as described above, BPL broadcasting rights have created a different product market separate from that of other foreign leagues; ------21.1.3.33. At this upstream market, the competition has not only occurred among pay-TV operators but also with free- to-air TV operators, and even with business actors that are not TV operators such as advertising agents, content providers, or other companies; ------21.1.4. Geographic Market : ------21.1.4.1. The analysis of geographic market is aimed at explaining in which areas the product markets defined above are competitive with each other; ------21.1.4.2. That in terms of regulation, there are no restrictions for pay-TV operators, either through cable or satellite, to market their services in the whole territory of Indonesia to the extent that they meet the provided requirements. On the other hand, foreign pay-TV service operators are prohibited to market their services in the whole Indonesia. Government regulations stipulate that a broadcasting institution must be an Indonesian legal entity owned by an Indonesian citizen. Except for that, there are no restricting regulations for TV operators to buy foreign broadcasts including BPL broadcasting rights; ------21.1.4.3. In terms of technology, satellite pay-TVs have farther and more flexible reach compared to cable pay-TVs. The services of cable pay-TVs require infrastructure that is more difficult than that of satellite pay-TVs, so that the penetration of cable pay-TVs is slower than that of satellite pay-TVs. However, this matter would not impede cable pay-TVs to be the competitors of satellite pay-TVs at the national level; ------
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21.1.4.4. Based on the above description, the upstream market for the purchase of BPL broadcasting rights is not geographically restricted. In other words, whether through FAPL in England or through other wholesale channel companies whosesoever, TV operators may make purchases; ------21.1.4.5. On the other hand, in terms of regulations, the downstream market of pay-TVs is only limited in the territory of the Republic of Indonesia;------21.1.4.6. Therefore, based on the whole description on product and geographical markets aforesaid, then the market related to this case is: ------a. The purchasing market of BPL broadcasting rights for the territory of Indonesia without geographic limits; ------b. Pay-TV market throughout the territory of Indonesia; ------
21.2. Without Exception in Article 50 letter b of Law No 5 Year 1999; ------21.2.1. In Article 50 letter b of Law No. 5 Year 1999 it is stipulated that: “Exempted from the provisions of this Law shall be: b. Agreements related to Intellectual Property Rights such as licenses, patents, trademarks, copyrights, industrial product designs, integrated electronic assemblies, and trade secrets, as well as agreements related to franchise.” 21.2.2. In a written testimony to this case, Hikmahanto Juwana, PhD, has opinion as follows: “Law No. 5/1999 exempts the acquisition, possession, and utilization of an Exclusive Right. This is because the exclusive right for broadcasting of an event is, in fact, exclusively intended as one of the Intellectual Property Rights. In Article 50 paragraph (b) of Law No. 5/1999 it is stipulated that “agreements related to Intellectual Property Rights such as licenses, patents, …” In the said sentence there are words “such as” meaning they are not limited or restricted to the kinds of the
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Intellectual Property Rights mentioned, but including others. The other Intellectual Property Rights include Exclusive Rights in broadcasting. I regard Exclusive Rights in broadcasting as Intellectual Property Rights that may be possessed.” 16 ------21.2.3. In the response of AAAN and AAMN to the Report on Preliminary Examination Results, the Response, Defense, and Clarification of AAAN and AAMN in the Advanced Examination to the Case No. 03./KPPPU-L/2008 it is stated that the Agreement between ESS and AAMN on the the operation of BPL broadcasting rights program may be classified as “an agreement related to intellectual property rights”, which is copyright; ------21.2.4. In a written testimony to this case, Kurnia Toha, S.H., LL.M, Ph.D, has opinion: “That it is true indeed that agreements related to Intellectual Property Rights pursuant to Article 50 b are exempted from Law No. 5 Year 1999, but the said IPR protection only covers direct utilization of IPR and it shall not be justified if it is contrary to public interest, and other anti-competition measures that are violation of the use of Intellectual Property Rights (misuse doctrine)” 17 ------21.2.5. The Examining Team considers that exclusive broadcasting rights are not contrary to the law of competition. But the conduct to acquire the said exclusive broadcasting rights and the exploitation of the said exclusive broadcasting rights may be anti- competition in nature if the said acquisition or exploitation of rights is conducted non-competitively or would impede competition so as to result in impacts disadvantageous to consumers; ------21.2.6. It is universally applicable to other countries that have implemented the law of competition earlier. In European Union,
16 Hikmahanto Juwana, PhD, Opinion of Experts related to the Application of Article 16 and Article 19 (a) and (c) of Law No.5/1999, p. 7-8. 17 Kurnia Toha, S.H., LL.M, Ph.D, Legal Memorandum “Has there been any violation of Law No. 5 Year 1999, particluarly Article 14, Articles 16, 17, 18 and Article 19 a, c, and d of Law No. 5 Year 1999, when broadcasting rights for EPL were exclusively granted to Astro Malaysia and Direct Vision (Astro Indonesia), pp. 16-17.
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the existence of Intellectual Property Rights is acknowledged by the law of competition, but the exploitation of the said rights must comply with the law of competition. Therefore, agreements related to Intellectual Property Rights shall not be absolutely exempted but relatively exempted; 21.2.7. Absolute exemption of all agreements related to Intellectual Property Rights would give room to the holders to misuse the said rights for the sake of their maximum advantage by omitting potential competition, particularly when the said Intellectual Property Rights would be licensed or the utilization thereof would be commercially distributed; ------21.2.8. The application of the law of competition to the exploitation of Intellectual Property Rights in European Union is known as the exhaustion of right doctrine identical to the first sale doctrine known in the Law of Anti-Trust in the United States of America. Both doctrines show that the conduct as well as agreements related to Intellectual Property Rights are not immune to the application of the law of competition; ------21.2.9. That therefore, the Examining Team considers that if there is a misuse in the acquisition or exploitation of Intellectual Property Rights that injures competition and may result in impacts detrimental to consumers, the said conduct or the agreement that regulates it shall not be included in the article of exemption as referred to in Article 50 letter b of Law No. 5 Year 1999 and therefore KPPU shall have the right and authority to examine the alleged violation related to the said matter; ------21.3. About Jurisdiction of KPPU over the Reported Parties; ------21.3.1. KPPU is an institution mandated to supervise the implementation of Law Number 5 Year 1999 in accordance with Article 30 of Law No. 5 Year 1999. The duties and authorities of KPPU are further set forth in Articles 35 and 36 of Law No. 5 Year 1999. Therefore, KPPU may take measures in line with its duties and authorities to achieve the objectives required by Law No. 5 Year 1999; ------
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21.3.2. The subjects of Law No. 5 Year 1999 are business actors defined in Article 1 point 5 of Law No. 5 Year 1999. In performing its duties, KPPU may request information not only from business actors who are the subjects of Law No. 5 Year 1999 but also from the parties who are not included in the qualification of business actors, such as the government and business associations 18 ; ------21.3.3. Article 1 point 5 of Law No. 5 Year 1999 defines a business actor as follows: “ Every individual or business entity, either in the form of legal entity or otherwise, that is established and domiciled or conduct activities in the legal territory of the state of the Republic of Indonesia, either severally or jointly, running various business activities in economic sector”; ------21.3.4. As already described in the previous part, AAAN, AAMN, and ESS are not established or domiciled in Indonesia. Therefore, the jurisdiction of Law No. 5 Year 1999 over AAAN, AAMN, and ESS is based on the verification whether AAAN, AAMN, and ESS have conducted activities in the legal territory of Indonesia so that they may be qualified as business actors as referred to in Article 1 point 5 of Law No. 5 Year 1999; 21.3.5. The verification of element of conducting activities in the legal territory of Indonesia is approached by applying the Single Economic Entity Doctrine theory that, regarding the relationship between a holding company and a subsidiary, a subsidiary would have no independence to determine the policy direction of the company as an integrated economic entity 19 ; ------21.3.6. The independence level of a subsidiary can be seen from various factors, among others are the control of the holding company over the board of directors of the subsidiary, the profit enjoyed by the holding company from the subsidiary, and the compliance of
18 See Article 36 letters f and h of Law No. 5 Year 1999. 19 See Alison Jones and Brenda Sufrin, EC Competition Law, Text, Cases, and Materials , Oxford University Press, New York, 2004 p. 123
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the subsidiary to the policies made by the holding company, such as those related to marketing and investment 20 ; ------21.3.7. The consequence resulting from the application of this Single Economic Entity Doctrine is that business actors may be solicited for accountability for the measures taken by other business actors in an integrated economic unity, even though the first business actor is operating outside the legal jurisdiction of a state’s business competition, so that the law of business competition may be extraterritorial in nature 21 ; ------21.3.8. The considerant of letter c of Law No. 5 Year 1999 confirms the said perspective by stating that every person who is doing business in Indonesia must be in the situation of fair and proper competition. Therefore, as a general principle in the law of competition, Law No. 5 Year 1999 has jurisdiction over competition condition in the legal territory of the state of the Republic of Indonesia, without considering whoever and wherever the business actor that has resulted in the impact of the said competition condition; ------21.3.9. The terminology of “who is conducting activities“ or “who is doing business in Indonesia“ shall not promptly indicate that the said business actor must be in the market concerned. A company may conduct business activities in another country through establishment or acquisition of an existing company in the said country without directly doing business activities in the market concerned in the said country. In other words, a business actor may affect the competition condition in the market concerned without itself having to operate in the market concerned; ------21.3.10. This perspective is seen in the body of Law No. 5 Year 1999 that uses many terminologies of ”business actors or groups of
20 Ibid ., p. 135 21 Single Economic Entity Doctrine has become the basis for the European Community to apply the law of business competition to business actors that operate outside the territory of EC, see Alison Jones and Brenda Sufrin, op.cit p. 126
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business actors” in its articles. A group of business actors according to Knud Hansen, et. al is 22 :”Several independent business entities that merge to be an independent economic unity. Those independent business entities are under one same management showing outwardly that the holding company makes uniform planning for all of its subsidiaries”; ------21.3.11. Related to the relationship among AAAN, AAMN, and PTDV, the Examining Team considers the matter as follows: ------a. AAAN is planning to make investment at PTDV through its subsidiaries, namely ANH BV and ANI BV; ------b. That in the framework of the said investment at PTDV, AAAN has established AAMN to become a channel and content supplier for PTDV; ------c. In order to support the investment that will be conducted by AAAN aforesaid, AAMN has bought BPL broadcasts of 2007- 2010 season for the territory of Indonesia from ESS to be specifically broadcast by PTDV; ------d. In the framework of the said investment, AAAN through its subsidiary, namely MBNS, gave support in the granting of license for the use of ASTRO brand, technical support, and IT Service and Broadcast Service Control to PTDV; ------e. Referring to the provisions concerning foreign investment, the planned capital investment conducted by AAAN and AAMN had the objective to conduct business activities in the territory of the Republic of Indonesia;------f. In the IR of PL AAMN it is stated that PTDV operated as if a Joint Venture Agreement has been entered into. The said Joint Venture Agreement has enabled AAAN to recommend one person to have a position in the board of directors of PTDV; ------
22 Knud Hansen dkk., op.cit , hal. 52
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g. The Finance Director of PTDV, namely Sean Dent, was recommended by AAAN ------21.3.12. Furthermore, the relationship among AAAN, AAMN, and PTDV can be seen in the following diagram: ------
Diagram 3. The Form of Relationship between Astro Group and PTDV
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Bentuk-bentuk Hubungan Astro Group dan PTDV = Forms of Relationship between Astro Group and PTDV Kepemilikan Saham (tahap rencana) = Share Ownership (stage of planning) Penempatan Direksi = Placement of Board of Directors Placing David Butorac at PTDV to make content agreements with ESS in 2006 (See: Supply Content Agreement between PTDV and ESS dated 1 st October 2006) Trademark License Trademark License was entered into between PTDV and MBNS (a subsidiary of Astro) Trademark License enabled PTDV using the trademark of Astro in Indonesia Remarks: Until today PTDV has not made payment in any form whatsoever to Astro for the use of the said trademark. See: IR of PP, PTDV Share Ownership Share Ownership of Astro Group at PTDV was one form of implementation for the planned investment of Astro Group in pay-TV industry. Remarks: Until today Astro has not owned any shares at PTDV due to the regulation that restricts foreign ownership of shares in broadcasting companies to the amount of 20% (Government Regulation 52/2005) Supply Content PTDV acquired the content supplied by AAMN (a subsidiary of Astro) (See: IR of PL, PT Ayunda Prima) Remarks: Until today PTDV has not had any counter-performance liabilities to Astro on the content supplied by AAMN There is possibility the transaction value of supply content will be conversed into the ownership of Astro Group in PTDV Company Operation One of agreements on the planned joint investment between PT Ayunda and Astro Group in Pay-TV Industry is the operation of PTDV by Astro Group: 1. System 2. Technology
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3. Content (See: IR of PL. PT Ayunda Prima) 4. Know How (See: IR of PTDV)
21.3.13. Based on the above matters, the Examining Team concludes that AAAN, AAMN, and PTDV form an integrated economic entity so that even though AAAN and AAMN were not established and domiciled in Indonesia, both of them conduct business activities in the legal territory of the state of Indonesia through PTDV. Furthermore in this Report, AAAN, AAMN, MBNS, ANBV, and ANIBV are jointly referred to as “Astro Group”, except that one of them is specifically referred; ------21.3.14. Meanwhile, ESS, as previously described, has supplied channels to various pay-TV operators in Indonesia. The Examining Team shall put into consideration whether the said activities of supplying to the legal territory of Indonesia were adequate to be considered as conducting activities in the legal territory of Indonesia; ------21.3.15. The Examining Team considers that the sale and purchase activity just in the form of supply made by a party not domiciled in Indonesia to the territory of Indonesia is not sufficient to be considered as doing activities in the territory of Indonesia. The Examining Team avoids the controversy about the application of effect doctrine (US) or implementation doctrine (EU) in business competition that considers the law of business competition as extraterristorial in nature as long as the competition condition in the domestic market of the country concerned is disturbed by the conduct of a business actor outside the territory of the said country; ------21.3.16. Therefore, the Examining Team considers that ESS has not conducted business activities in the territory of Indonesia so that it does not meet the qualification of business actor as referred to in Article 1 paragraph 5 of Law No. 5 Year 1999; ------
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21.3.17. Thereafter, the Examining Team considers the fulfillment of elements in Article 1 paragraph 5 of Law No. 5 Year 1999 by each Reported Party as follows: ------21.3.17.1. PTDV; ------a. Element of ” every individual or business entity ”; ----- That PTDV pursuant to its Articles of Association is a business entity, so that this element is fulfilled; ------
b. Element of ” either in the form of a legal entity or otherwise ”; ------That PTDV pursuant to its Articles of Association is a legal entity in the form of a limited liability company, so that this element is fulfilled; ------
c. Element of ” established and domiciled or conducts activities in the legal territory of the state of the Republic of Indonesia ”; ------That PTDV is established and domiciled and conducts activities in the legal territory of the state of the Republic of Indonesia, so that this element is fulfilled; ------
d. Element of ”either severally or jointly through agreement” ; ------That PTDV conducts its business activities severally in Indonesia; ------
e. Element of “running various business activities in economic sector”; ------That PTDV conducts business activities in economic sector in the form of a pay-TV in Indonesia, so that this element is fulfilled; ------
f. Therefore, PTDV is proven to have fulfilled the element of business actor pursuant to Law No. 5 Year 1999; ------
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21.3.17.2. AAAN; ------a. Element of ” every individual or business entity” ; ----- That pursuant to the Company Act 1985, Memorandum and Article of Association, AAAN is a business entity, so that this element is fulfilled; ------b. Element of ” either in the form of a legal entity or otherwise” ; ------That AAAN is a business entity in the form of an open company, so that this element is fulfilled; ------c. Element of ” established and domiciled or conducts activities in the legal territory of the state of the Republic of Indonesia” ; ------That AAAN is registered in England and Wales, domiciled in Malaysia, and conducts business activities in Malaysia and in Indonesia based on the analysis of Single Economic Entity Doctrine, so that this element is fulfilled; ------d. Element of ”either severally or jointly through agreement”; ------That AAAN conducts its business activities severally through its subsidiaries in Indonesia;------e. Element of “running various business actitivies in economic sector” ; ------That AAAN conducts various business activities in economic sector in the form of pay-TV, radio broadcasting, TV content production and distribution, and a number of other businesses in the field of media, so that this element is fulfilled; ------f. Therefore, AAAN is proven to have fulfilled the element of business actor pursuant to Law No. 5 Year 1999; ------21.3.17.3. ESS; ------a. Element of ” every individual or business entity”; -----
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That ESS is a joint venture business entity in the form of a general partnership between ESPN and STAR Sports, so that this element is fulfilled; ------b. Element of ” either in the form of a legal entity or otherwise”; ------That ESS is a legal entity established based on the law of the state of Delaware, so that this element is fulfilled; ------c. Element of ” established and domiciled or conducts activities in the legal territory of the state of the Republic of Indonesia”; ------That ESS was established in the United States of America, domiciled in Singapore, and does not conduct business activities in Indonesia, so that this element is fulfilled; ------d. Element of ”either severally or jointly through agreement” ; ------That ESS conducts its activities severally; ------e. Element of “running various business activities in economic sector”; ------That ESS conducts activities in economic sector in the form of business in the field of sport program production development, channel and broadcasting rights distribution and selling, so that this element is fulfilled; ------f. Therefore, ESS is proven to have fulfilled the element of business actor pursuant to Law No. 5 Year 1999; ------21.3.17.4. AAMN; ------a. Element of ” every individual or business entity”; ----- That AAMN is a business entity, so that this element is fulfilled; ------
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b. Element of ” either in the form of a legal entity or otherwise”; ------That AAMN is a legal entity in the form of a limited liability company, so that this element is fulfilled; ------c. Element of ” established and domiciled or conducts activities in the legal territory of the state of the Republic of Indonesia”; ------That AAMN was established and domiciled in Dubai, Union Arab Emirate, conducts activities in the legal territory of Indonesia based on Single Economic Entity Doctrine; ------d. Element of ”either severally or jointly through agreement”; ------That AAMN conducts its activities severally; ------e. Element of “running various business activities in economic sector”; ------That AAMN operates various business activities in economic sector to acquire contents, make television channels in Indonesian and Malaysian languages to be supplied to pay-TV operators and procurement of decoders to be supplied to PT Direct Vision in Indonesia; ------f. Therefore, AAMN is proven to have fulfilled the element of business actor pursuant to Law No. 5 Year 1999; ------21.4. Barclays Premier League in the Relevant Market of Pay-TV; ------21.4.1. Is the Barclays Premier League an important content for Pay TV in Indonesia? In answering the above question, the Examining Team considers the supply and demand aspects. The data on the supply derives from the testimony of the Pay TV broadcaster. Data on demand derives from the survey conducted to the subscribers of Pay TV and data on the behaviors of the viewers
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free to air TV who are potential to be the subscribers of the Pay TV; ------21.4.2. Supply Aspect : Perspective of Pay TV Broadcaster. Indovision states that the Barclays Premier League is the most important content. It is shown by the facts that many subscribers had stopped subscribing due to the discontinuation of the program at Indovision. (see evidence B1). Such statement is supported by the change of the positions of Pay TV broadcasters in controlling the number of subscribers; ------21.4.3. The following tables and graphs indicate the position of the Pay- TV broadcasters in the market on the basis of the subscriber share for sport package containing the ESPN channel. In the period prior to July 2007, the ESPN channel at each operator equally broadcast the BPL. However, in their period after July 2007, only the ESPN on the ASTRO which broadcasted the BPL;---- Table 8. TV Pay’s Subscribers Share for Sport Package (Package containing ESPN channel)
TELKOM FIRST Year Month INDOVISION IM2 DV REMARKS VISION MEDIA Jan 55% 1% 3% 0% 41% Feb 56% 0% 2% 0% 41% Mar 57% 0% 2% 0% 41% Apr 58% 0% 2% 0% 40% May 59% 0% 2% 0% 38% Jun 60% 0% 2% 0% 37% ESS plans to make ESPN Channel and 2006 STAR Sport execlusive Jul 57% 0% 2% 5% 35% for ASTRO Aug 56% 0% 2% 6% 35%
Sep 57% 0% 3% 6% 34% Oct 57% 0% 3% 7% 33% Nov 57% 0% 3% 8% 33% BPL was Dec 56% 0% 3% 9% 32% broadcasted Jan 53% 0% 6% 10% 30% on TV7 and 2007 Feb 53% 0% 5% 12% 30% all TV Mar 52% 0% 5% 13% 29% broadcasters
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TELKOM FIRST Year Month INDOVISION IM2 DV REMARKS VISION MEDIA Apr 52% 0% 5% 14% 28% Subscribers May 52% 0% 5% 15% 27% Jun 53% 0% 4% 16% 26% Jul 54% 0% 4% 17% 25% Aug 48% 0% 4% 23% 24% Sep 42% 0% 4% 32% 23% BPL Oct 40% 0% 3% 35% 22% exclusive at ASTRO Nov 39% 0% 4% 36% 21% Dec 39% 0% 5% 36% 20% Source: ESS’s data, processed [[ Graph 3. Subscribers Share for Package Containing ESPN Indovision IM2 Pangsa Pelanggan Telkom vision Paket Berisi ESPN DV Liga Inggris 70% First Media Ekslusif di
60% Astro
50%
40%
ESS 30% Berencana
Persentase Mengekslusifk 20% an Channel di Astro 10%
0% Jan Feb Mar Apr May Jun Jul Ags Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Ags Sep Oct Nov Dec
2006 2007 Bulan Tahun
Source: ESS’s data, processed Pangsa Pelanggan Paket Berisi ESPN = Subscribers Share for Package Containing ESPN Bulan Tahun = Month Year
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Graph 4. Change to Subscribers Share for Sport Package Containing ESPN
Perubahan Pangsa Pelanggan Paket Sport 2006: ESS Agustus 2007: berencana Liga Inggris Mulai Siar 10% mengeklusifkan channel di ASTRO Eklusif di Astro DV, 8% 8% 6% DV, 5% 4%
2% 0%
-2% 1stMedia, -2% 1stMedia, -2% -4% Indovision, -3% -6% Indovision, -6% -8% Jan Feb Mar Apr May Jun Jul Ags Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Ags Sep Oct Nov Dec Indovision IM2 Telk V 2006 2007 DV Bulan Tahun 1stMedia
Source: ESS’s data, processed Perubahan Pangsa Pelanggan Paket Sport = Change to Subscribers Share for Sport Package Containing ESPN
Table 9. Change to Subscribers Share for Sport Package Containing ESPN
1st Tahun Bulan Indovision IM2 Telk V DV Media Jan Feb 1% 0% -1% 0% 0% Mar 0% 0% 0% 0% 0% 2006 Apr 1% 0% 0% 0% -1% May 1% 0% 0% 0% -1% Jun 1% 0% 0% 0% -1% Jul -3% 0% 0% 5% -2%
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1st Tahun Bulan Indovision IM2 Telk V DV Media Aug -1% 0% 0% 0% 0% Sep 1% 0% 1% 0% -1% Oct 0% 0% 0% 1% -1% Nov 0% 0% 0% 1% -1% Dec -1% 0% 0% 1% -1% Jan -3% 0% 3% 1% -2% Feb 0% 0% 0% 2% -1% Mar 0% 0% 0% 1% -1% Apr 0% 0% 0% 1% -1% May 0% 0% 0% 1% -1% Jun 1% 0% -1% 1% -1% 2007 Jul 1% 0% -1% 1% -1% Aug -5% 0% 0% 6% -1% Sep -6% 0% 0% 8% -2% Oct -2% 0% 0% 3% -1% Nov -1% 0% 1% 1% -1% Dec 0% 0% 1% 1% -1% Source: ESS’s data, processed
21.4.4. Based on the table on the change to Subscribers Share for Sport Package containing ESPN, it can be seen that significant change occurred in : ------a. July 2006, and ------b. August, September, and October 2007; ------21.4.5. In July 2006, the rise of the subscribers share was around 5% and the rise before and after the month was only 1%, indicating that the plan of ESS in 2006 23 to make some channel exclusively broadcasted by ASTRO had succeeded to leverage the beginning position of ASTRO in the market by obtaining the share of 5%. Such share kept increasing in the subsequent months up to 16% in June 2007; ------21.4.6. While, in August, September, October 2007, there were a significant increase of the ASTRO’s subscribers share compared to hat in the previous period, namely consecutive rise of 6%, 8%, 3%, compared to the increase in the previous months which was 1%; only ------
23 Such plan was stopped so the Commission only issues the decision on the case.
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21.4.7. It indicates that the strategy to exclusively broadcast the Barcklay Premier League has succeeded to increase the ASTRO’s subscribers share in the market. As a result from this strategy, ASTRO has been successful in strengthening its position in the market by controlling the sport package subscribers of 16% in June 2007 and to be 36 % in December 2007; ------21.4.8. The Indovision’s subjective perception which states that the BPL is a very important for the Pay-TV is supported by the facts that the subscribers share of Indovision has significantly lost after the BPL is broadcasted by ASTRO. It can be seen that the Indovision’s subscribers share dropped drastically from 53% in June 2007 to be 39% in December 2007; ------21.4.9. Therefore, the exclusive broadcasting of the BPL is very important for any TV operator as it can make more subscribers to move to subscribe to the stated Pay-TV which broadcast such sport program. On the contrary, the other Pay-TV operators suffer from the loss as their subscribers have moved to other Pay-TV operators as their main income deriving from the subscriptions paid by the subscribers ------; 21.4.10. AAMN states that the BPL is not an important content compared to other contents; however AAMN says that the purchase of the BPL broadcasting rights of the period 2007-2010 is the most expensive contents bought by AAMN compared to other contents; ------21.4.11. The willingness of AAMN to buy the exclusive broadcasting rights of BPL with more expensive price than the other contents is contradictory to its statement. The willingness to buy the content in more expensive price indicates that the operator’s subjective perception supports the idea that the BPL is an important content for current Pay-TV industry; ------
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21.4.12. Referring to the operators’ subjective statement as above mentioned, it can be concluded that the BPL content is important for the pay-TV operators in Indonesia. In addition, based on the data on the subscribers share of the package containing the ESPN, it is proven that the BPL content becomes a driver or the content which cause the subscribers churn to the other operator; ---- 21.4.13. Demand Perspective : Subscribers Point of View . In order to have a picture on the perception in the subscribers’ point of view, the Examining Team has considered the data obtained from the results of the survey on the pay-TV subscribers as follows; ------21.4.14. Based on the results of the survey on 689 subscribers of the pay- TV in the period of June 30–July 11, 2008 conducted in Jakarta, Surabaya, Medan and Pekan Baru, it can be identified that: ------21.4.14.1. Some 18,87% of subscribers states that ”the existence of sport channel” is the reason why people want to subscribes to pay-TV. The reason constitutes the second popular answer after the one on the “more channels” which is stated by 21,27% of subscribers; ------
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Graph 5. Results of Survey on Reasons to Subscriber to Pay-TV
n = 689
Channelnya banyak = it offers more channels Adanya channel untuk olah raga = offers sport channel Paket yang ditawarkan sangat menarik karena ada channel film – the package offered is very interesting as it offers film channel Agar bisa menonton channel luar = in order to be able to watch overseas channels Program acaranya banyak = it offers many programs Program acaranya mendidik = it offers educational programs Karena ada tayangan untuk anak-anak (film kartun) = it offers kids program/cartoon films Biaya berlangganan per bulan murah = month subscription is affordable
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21.4.14.2. ”Films” and ”Sports” contents have become the main reasons why people want to subscribe to Pay-TV. It can be seen that the pull factor of films is 38.03% and sports of 27,43% ; ------
Graph. 6. Resulst of Survey on Programs which Urged People to Subscribe to Pay-TV
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Programs which Urged People to Subscribe to Pay-TV
21.4.14.3. The pattern on ”decision making” in selecting the channels offered by the pay-TV can be seen from the channels most frequently watched by viewers. Therefore, it can be seen that channels of HBO, ESPN, Star Movies, Star Sports, Cinemax are the ones which are most frequently watched; ------
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Graph 7. Results of the Survey on Channels Watched by Decision Makers
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Channel yang Ditonton Decision Makers = Channels Watched by Decision Makers
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21.4.14.4. At the aggregate pattern of family favorite shows, sport is ranked 2 nd after films as most favorite show. 56.89% of them says that sport show cannot be replaced; ------Graph 8. Results of Survey on Shows Most Preferred by Families
Tayangan yang disukai Keluarga = Shows Most Preferred by Families Base : semua responden = base : all respondents (n=689) Jenis tayangan yang disukai = Type of shows most preferred; Olahraga = sport Tidak dapat digantikan = irreplaceable; Dapat digantikan = replaceable
21.4.15. The subscribers who state to prefer to the sport show (n=577, 84% out of the total respondents), it can be identified as follows; ----- 21.4.15.1. In responding to the question on which channels shall be available for the sport package, most respondents answer that these channels are Star Sports, ESPN, Eurosport; ------
Graph 9. Results of Survey on Channels which shall be available at the Sport Package
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21.4.15.2. The BPL is ranked 3rd of the shows which most watched by subscribers who prefer sports after the UEFA Champion and Foot Ball Asia. This has made the BPK as the favorite show as to when the survey was conducted, the BPL was only broadcasted by ASTRO, UEFA Champion and Foot Asia were broadcasted by ESPN dan Star Sport, in which all pay-TV operators broadcast the program; ------
Graph 10. Results of Survey on the Sport Show Most Frequently Watched
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PROGRAM ACARA = TV SHOW Liga Inggris = BPK Liga Itali = Italian League Biasa ditonton = commonly watched Paling Sering Ditonton = most frequently watched
21.4.15.3. Football is the most favorite branch of sports by
the respondents who like sports. 74% respondents
state that football show cannot be replaced by
other kinds of sports; ------
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Graph 11. Results of Survey on Branch of Sports Most Preferred
Cabang Olahraga yang Disukai = Branch of Sports Most Preferred
21.4.15.4. The Barklay Premier Liga is more preferred than
Italian League, Spain League, Germany League,
French League, Netherland League. 64.99%
respondents who prefers the sports state that the
BPL show is irreplaceable; ------
Graph 12. Results of Survey on Football Leagues Preferred
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21.4.15.5. More than 50% respondents who prefers the sport show offered by each operator states that the BPL is an important content, it shall be therefore included in the sport package ; ------
Graph 13. Importance of the Barclay Premier League in Sport Package
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21.4.15.6. To the subscribers who subscribe to the Barclay Premier League state that the BPL is important 62,22% out of ASTRO’s sport package subscribers say that they will churn if the BPL show losses from ASTRO; ------
Graph 14.
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Results of Survey on the Barclay Premier League as Driver of Subscriber Shifting
21.4.15.7. The subscribers who do not subscribe to the Barclay Premier League when the survey is conducted state that the BPL is important. More respondents say that ”the quality” (signal receiving, show variations) if compared to ” switching barrier” (price and registration process) has become the reasons why respondents do not shift to ASTRO; ------
Graph 15.
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Results of Survey on Reasons Why Subscribers Do Not Subscribe to ASTRO
Alasan Tidak Berlangganan Astro = Reasons Not to Subscribe to ASTRO Base : Semua responden yang tidak berlangganan Astro tapi mengatakan Liga Inggris Penting (n=212) = Base : all respondents who do not subscribe to Astro but state that the Barcklay Premier League is important. Jika cuaca buruk Astro sering ada gangguan = When the weather is bad, Astro frequently has a trouble. Acara-acara di TV berbayar yang lain sudah cukup bagus (ada Liga Inggris walau tidak selengkap Astro) jadi tidak pindah ke Astro = The shows broadcastd by other pay-TV are sufficiently good (despite they offer the Barcklay Premier League but not as complete as Astro), they do not therefore churn to Astro. Gambarnya kurang jernih = the picture is less clear Biaya berlangganan per bulan mahal = the monthly subscription fee is expensive Malas registrasi = Being lazy to register Tidak tahu tentang Astro (paket yang ditawarkan, harga, kualitas gambar dan pelayanan) = Not know about Astro (packages offered, price, picture quality and services).
21.4.15.8. Based on the data of the survey which indicate that the film and sport are the shows which mostly
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affect one’s decision in subscribing to pay-TV. The subscribers who like sports state that the BPL is the show which shall be available in the sport package; ------21.4.15.9. Therefore, based on the subscribers’ point of view, it can be concluded that the BPL show is an important one; ------21.4.15.10. Based on the above explanations, seen from the supply and demand aspects, it can be concluded that the Barclay Premier League is an important content for pay-TV industry in Indonesia; ------
21.5. Reported Parties’ Behavior; ------21.5.1. The first assumption of this case is the Misuse of ASTRO’s Monopolistic Position in Malaysia so that ESS, without the process of tender, transferred BPL broadcasting rights to Indonesian territory in order to be broadcasted using ASTRO Group in Indonesia; ------21.5.2. Based on the facts found in the series of investigating process, therefore the Examining Team analyzed that assumption as follows;------AAAN ; ------21.5.3. AAAN is the holding company which is the controller of Astro Malaysia (MBNS) and the de facto controller of ASTRO Indonesia (PTDV); 21.5.4. Through that process, AAAN can use its monopolistic position in Malaysia to win the competition in Indonesia unfairly. In this case, it performed an action which blocked ESS as the owner of BPL broadcasting rights in Indonesian territory in order to sell the BPL broadcasting control rights to AAMN to be directed through PTDV without giving the same opportunity as the other
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Pay-TV operators in Indonesia;------21.5.5. That hypothesis at least can be proven by two circumstances, i.e.: (1) the negotiation process occurred between AAAN or AAMN (as the buyer candidates from Astro group) and ESS about BPL broadcasting rights in Indonesian territory, (2) the purchasing price of BPL broadcasting rights in Malaysian and Indonesian territory; 21.5.6. The second method about the purchasing price previously is confirmed by the Expert Witness Haryo Aswicahyono in the investigation on 11 July 2008 which stated: ------No. 20; ------Question: Concretely, Astro Indonesia has affiliation or relationship with Astro Malaysia which monopolized Pay-TV market in Malaysia, therefore, can Astro Malaysia use its power to force in order to obtain definite content in another country’s market; ------Answer: It can happen and it is the monopoly power which will make that company, Astro, to obtain better price or term; ------21.5.7. The Examining Team did not obtain any negotiation evidences like the mail or e-mail correspondence between Astro group and ESS, which connects the broadcasting rights of Indonesian territory with the broadcasting rights of Malaysian territory or the MBNS and ESS correspondence, which connects the broadcasting rights of Malaysian and Indonesian territory. The statements of AAAN is as follows: ------No. 45 Question: Please explain about the way of Astro to obtain BPL rights. Answer: BPL broadcasting rights for Indonesia and Malaysia are owned by ESS. However, the broadcasting rights for Malaysia and Indonesia are completely different and separated.
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ESS obtains BPL rights for Malaysia. However, the right for Malaysia was not sold separately but it was the part of the channel supply agreement (including BPL content) which is done between ESS and MBNS. While the BPL broadcasting rights for Indonesia is completely different and separated from the BPL broadcasting rights in Malaysia. For Indonesia, the party which bought the BPL broadcasting rights from ESS is AAMN. In addition, the rights for Indonesia are rights for broadcasting BPL, which is separated from channel supply agreement. I myself (Grant Ferguson) was negotiating with ESS representing AAMN because I was responsible of Astro’s international business issue, but I was not involved at all in the negotiation between MBNS and ESS. No. 60 Question: There was no relationship between the purchasing of EPL from ESS by AAMN and the transaction between ESS and MBNS. Is it true? Answer: Yes. No. 61 Question: Can you give any evidence about that previously mentioned fact? That document can be tender invitation or proposal from AAMN to obtain the access EPL from ESS? Answer: That problem can be proven by the existing correspondence between two different groups. There were two different agreements arranged by different parties. Those were done with completely different contract structure and draft. 21.5.8. In order to check the answers from AAAN, the Examining Team asked the same questions to ESS in the investigation on 2 July 2008 as follows: ------No. 3 Question: Is there any relationship between ESS with AAMN and the agreement of ESS and MBNS related to broadcast affiliation? (the document was shown)
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That agreement was signed in 2005, in which there was special fee for the EPL payment for 6 (six) years. Could you explain it? Answer: That contract was arranged by ESS and MBNS for Malaysia territory for 6 years, however, because of the BPL was just for 3 years, therefore the arrangement about fee would be renegotiated if ESS obtained EPL. 21.5.9. Based on the documents obtained by the Examining Team, it is identified that the structure of BPL supply to MBNS is integrated with the supply channel of ESPN and Star Sport with single price while the BPL supply from ESS to AAMN is independent with distinct price; ------21.5.10. The contract value of MBNS with ESS for all channel supplies in Malaysia including the integrated supply in the period of BPL season 2007-2010 is US$ [XXX] 24 while the contract value AAMN with ESS for the BPL broadcasting in Indonesia is US$ [XXX] 25 . Whereas the contract value of MBNS with ESS for all channel supplies in Malaysia including the integrated supply in the BPL period 2004-2007 is US$ [XXX] 26 and the contract value of BPL in the period for the Indonesian territory, which was won by TV7 was as much as US$ [XXX] 27 ; ------21.5.11. Based on those numbers, it is recognized that there was an increase of BPL broadcasting value which was doubled in season 2007-2010 compared to season 2004-2007, which is shown by the contract in both Malaysian and Indonesian territory; ------21.5.12. The Astro Group party stated that they could not examine the BPL broadcasting only in Malaysia because in Malaysia, the BPL broadcasting rights selling was integrated to the supply channel. Nevertheless, based on the contract value of BPL in
24 The value is classified and only stated for AAAN and ESS. It is removed for public version. 25 The value is classified and only stated for AAMN and ESS. It is removed for public version. 26 The value is classified and only stated for AAAN and ESS. It is removed for public version. 27 The value is classified based on the request of TV7 witness.
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Indonesian territory in the previous season and the whole channels contract values in Malaysian territory, the Examining Team concluded that there was no abusive behavior done by Astro Group related to its monopolistic position in Malaysia to obtain the BPL exclusive broadcasting rights in Indonesian territory; ------21.5.13. The abusive behavior can be shown by the BPL contract value in Indonesian territory which irrationally smaller compared to the contract value in Malaysian territory. Although the BPL contract value in Indonesian territory cannot be compared apple to apple to the contract value in Malaysian territory because of the different selling structure, the indication of abusive behavior by Astro Group in AAAN issue can be eliminated by comparing the BPL contract value in Indonesia in the previous season, which was doubled; ----- AAMN ; ------21.5.14. AAMN is 100% the subsidiary of AAAN, which conducts the main business activity to obtain the content, to make television channel using Indonesian and Malaysian language in order to supply Pay-TV operated by Astro Group, either in PT Direct Vision in Indonesia, in MEASAT Broadcast Network Systems Sdn. Bhd. In Malaysia, or in Kristal Astro in Brunei Darussalam; ------21.5.15. Related to BPL broadcasting rights in the period 2007-2010, AAMN is a company is a company which has a duty to obtain and distribute it to PTDV in Indonesia. In this case, AANM is the party included in the agreement with ESS related to the BPL broadcasting control rights, which is owned by ESS; ------21.5.16. Although that agreement itself is in the form of Heads of Agreement between AAMN and ESS, but, in fact, the content supply has been conducted through PTDV exclusively; ------
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21.5.17. Basically, the exclusive agreement limits the access from the competitors to obtain the same products. The Violation Assumption Report has explained about that exclusive rights and does not concern about it. However, because it limits the competition, the way to obtain it must be synchronized to the competition term so that the competition existence is protected; ------21.5.18. That issue is supported by the Expert Witness, Prof. Dr. Ine. S. Ruky in the investigation on 23 June 2008 which explains: ------No. 16 --Question: How is the fair competition from the economic side? Answer: I think the fair competition must be viewed from its process where the customers’ condition is related to their choice, therefore, the competition is said to be fair if customers have many choices. Related to the exclusive issue in this case, the competition is about the way to obtain the exclusive rights itself. In that case, the competition is related to the access of information to obtain that rights, then we also have to observe the barrier to entry such as the capital requirement which is, in my opinion, high enough. Besides, there is an important thing; it is the timing, which will influence the value. 21.5.19. According to the fact obtained by the Examining Team, the BPL broadcasting rights selling from ESS to AAMN was not conducted in the competitive process as the transferring process from FAPL to ESS; ------21.5.20. According to the analysis of the BPL existence which is important for the Pay-TV; industry, the occurring transfer of rights must guarantee all Business Actors in that market in order to obtain the same opportunity and access without any discrimination; ------
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21.5.21. The fact shows that the competition process did not happen in the BPL transfer process in Indonesian territory from ESS to AAMN; --- 21.5.22. Therefore, although the exclusive agreement does not emerge the concern of competition injury, the process to promote competition must always keep the fair competition process; ------21.5.23. Consequently, the Examining Team considers the agreement made by AAMN can cause the anti-competition effect as it is elaborated further in part F about Economic Analysis; ------21.5.24. The exclusive BPL broadcasting rights supply to PTDV by AAMN limited the BPL broadcasting rights circulation in Indonesia. However, the Examining Team considers that limitation was consistent with the Examining Team’s previous analysis, which considered AAAN, AAMN, and PTDV as a economic entity so that, in this case, AAMN was the end user which was able to enjoy that exclusive rights without the responsibility to distribute it further to the other Pay-TV operators; ------21.5.25. Therefore, the Examining Team does not find anti-competition behavior in the limitation of BPL broadcasting rights circulation in Indonesia by AAMN; ESS ; ------21.5.26. ESS is the company that does the business activity in the development of sports program production, distribution, and the selling of channel and broadcasting rights in Asian territory and Indian sub-region; ------21.5.27. ESS supplied EPL in the period 2004-2007 for all Pay-TV operators in Indonesia and it was included in a package of sports content, so that during that period, EPL is one of ESPN
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and Star Sports channel programs broadcasted by all Pay-TV in Indonesia; ------21.5.28. In analyzing ESS behavior, it is focused on ESS qualification part C. Concerning the Commission Jurisdiction about the Reported Parties, the Examining Team sets ESS as the other overseas party in this analysis; ------21.5.29. According to the fact obtained by the Examining Team concerning the BPL broadcasting rights selling season 2007- 2010, ESS just conducted the negotiation with Astro Group and did not open any opportunity to negotiate with the other TV operator although those operators had contacted ESS to buy the BPL broadcasting rights season 2007-2010; ------21.5.30. In a production or marketing chain, the position of ESS has the intermediate character as the wholesaler/distributor because ESS did not directly use the contents bought, but they were distributed further to the retailer level; ------21.5.31. In distributing BPL broadcasting rights, ESS should keep the competition process in obtaining broadcasting rights in retailer level. It should be done because BPL broadcast is an important broadcast for Pay-TV industry in Indonesia. Except, quod non, ESS uses that broadcasting rights itself so that ESS position becomes a retailer and at the same level with the other TV operator or that broadcast is not an important one; ------21.5.32. Without competitive process, ESS later signed an exclusive agreement with AAMN about BPL broadcasting rights season 2007-2010. The Examining Team considers that agreement is not an anti-competition behavior, but the Examining Team considers the pre-agreement behaviors, which later triggered that agreement, cannot be separated from the existence of the
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current agreement and they must obey the valid terms of competition law; ------PTDV ; ------21.5.33. PTDV is an entity which organizes broadcast using “Astro” brand in Indonesia. Although AAAN or AAMN do not own PTDV share as explained previously, PTDV is a economic entities unity together with Astro Group; ------21.5.34. BPL broadcast season 2007-2010 is exclusively broadcasted under the PTDV shelter as a Pay-TV operator in Indonesia. That broadcast by PTDV in Indonesia is supplied by AAMN; ------21.5.35. In the investigation process, the Examining Team does not find any PTDV’s involvement in the negotiation process of BPL exclusive broadcasting rights with ESS or the existence of the another strategy initiated by PTDV. In this case, PTDV is a vehicle for Astro Group in realizing its business and strategy in Indonesia; ------21.5.36. Therefore, the Examining Team does not find any anti- competition behavior conducted by PTDV; ------21.6. The Economic Analysis; ------21.6.1. To analyze the existence of anti-competition behavior in the transaction of Barclays Premiere League season 2007-2010 exclusive broadcasting rights, the Examining Team proposes the main question: What is the effect of the reported party’s action toward upstream and downstream market of Pay-TV industry in Indonesia in short or long period; ------21.6.2. The Upstream’s effect: The Competitors’ Loss in Barclays Premiere League Broadcasting Rights Purchasing Market; ------21.6.2.1. As explained in part III.D paragraph 77 and 78, so the action conducted by AAMN and ESS has caused a loss suffered by AAMN’s competitors in
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Barclays Premiere League broadcasting rights purchasing in Indonesian territory; ------21.6.2.2. The loss, which is caused by the customers’ disappearance since the broadcasting of Barclays Premiere League exclusively by Astro, appears because of the move of the sports package customer to the Pay-TV. The customers disappearance is a loss for Pay-TV operator because the main income of the Pay-TV operator comes from the contribution paid by the customers; ------21.6.3. The Downstream’s Effect: the Pay-TV Industry; ------21.6.3.1. To measure whether the behavior conducted by the Reported Party influences the competition, the Examining Team considers Pay-TV market condition in the frame of short and long period. The short-term effect is measured based on the development condition of customers’ amount, Business Actors amount, the amount development of offered product, pricing structure change, and switching barrier level; The Number of Customers 21.6.3.2. Although Pay-TV has existed since 1994, the number of customers is just 50.000 until 1999. During 1999 to 2001, the number of customers increased to 125.000 triggered by the development of cablevision service reach. Until the mid of 2004, the number of customers was relatively static, and it started rising after Indovision cut The Initial Subscription fee into 87%. In 2006, the number of customers increased fast triggered by the involvement of Astro in the market and the activity conducted by Indovision (Casbaa 2007, page 21); -- --
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Figure 1. The Amount of Residential Subscribers
Source: CASBAA, 2008 The cause of the increasing number of customers is the increasing marketing aggressiveness of operator and media broadcast about Pay-TV so that it increased people’s awareness. (CASBAA, 2008, page 8); ------21.6.3.3. The number of sports channel customer provided by ESPN was also increased during years. it can be seen from the figure below; ------
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Figure 15. The Growth of Total Subscribers of TV Package containing ESPN Channel
The Amount Development of ESPN Channel Customers/Viewers
300000 ESS Exclusive Astro Channel Entered the Plan in 250000 Market, 28 Astro Feb 2006 Exclusive Barclays Premiere 200000Amount League was started in Astro
150000 Jul Jul Apr Oct Apr Oct Jun Jun Feb Mar Feb Mar Ags Ags Sep Nov Dec Sep Nov Dec May May Jan Jan
2006 Month and Year 2007
Source: ESS; the data is processed 21.6.3.4. The involvement of Astro and the strategy to make Barclays Premiere League exclusive influenced the whole amount of Pay-TV industry customer. It shows that the strategy did not only encourage new customers directly, but also encouraged ASTRO’s competitors to conduct a strategy as a response for ASTRO’s action indirectly which finally encourage new customers; ------21.6.3.5. Therefore, it can be concluded that in the phase before and after ASTRO obtains the exclusive Barclays Premiere League broadcast in Pay-TV, the number of customer increased and there was no barrier in customer development; The Number of Business Actors ; ------
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21.6.3.6. The developing number of Business Actors indicates the entity barrier level for entering in Pay- TV industry. Higher entity barrier shows the new Business Actors’ difficulty to enter the market. The new Business Actors’ difficulty will remove the competition pressure received by old Business Actors (incumbent). That condition will give more opportunities to incumbent to exploit market power. That market power exploitation will give worse effect for competition with higher entity barrier; ------21.6.3.7. Based on government’s information (see Minutes of meeting Dit. Penyiaran Depkominfo ) which states: ------a. There are 14 (fourteen) broadcasting institutions licensed by Ditjen Postel and/or Deppen. 10 of them are still operated under the brand: Indovision, IM2, Vision Cable (First Media), TelkomVision, M2V, and Metra which are operating nationally. Mega Vision and Fasindo are operating in West Java and Bali Interaktif in Bali; ------b. There are 5 (five) satellite subscription broadcasting institutions licensed principally, i.e.: ------
Table 2 The List of the Pay-TV Business Principe License Holders Brand Company Affiliation Oke Vision PT Nusantara Vision MNC (Indovision) B-Vision PT Media Commerse Indonesia Bakrie I-Sky-Net PT Cipta Skynindo Skynet Group Citra TV PT Karya Megah Adijaya Penta Vision PT Global Comm Nusantara
Source: BAP Dit. Penyiaran, CASBAA 2008, page 17
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c. There are 28 companies, which have applied for the license including Satellite, car, and terrestrial TV. Therefore, the approval process is delayed because they have to wait for government’s decision about the issue of migration from terrestrial analog technology to digital terrestrial; ------d. The development of potential number of Business Actors, which enters that market indicates that the entry barrier for Business Actors is not relatively high; ------The Development of Product ; ------21.6.3.8. The information about product development is used by the team to consider whether the customers obtain increasing advantage from the received service during the time comparing by the money spent. That consideration can be measured from the addition of the whole broadcasts amount and the variation caused by product differentiation; ------21.6.3.9. In December 2007, there was an increase of the total amount of channel in Indonesia Pay-TV. It became 6 channels if compared from December 2006. Those increases were in: Astro: 1 channel, First Media (Cable Vision): 11 Channels, while Telkomvision had a decrease for 6 channels. It is shown in the table below;
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Table 10 Total Number of Channels in Pay-TV Operator Channel’s Amount Dec-07 Dec-06 Indovision 55 55 PT DV 49 48 Telkomvision satellite 32 32 First Media digital 98 89 First Media analog 62 60 Telkomvision cable 38 44 IM2* n.a 57* Jogya Medianet* n.a 53* TOTAL 334 328
* Related to the comparison, the data from IM2 and Jogya Medianet in December 2006 was not included in total calculation because of the missing of IM2 and Jogya Medianet data in December 2007. Source: CASBAA 2008 and 2007
21.6.3.10. Therefore, in aggregate, there was the increase of channels amount in Indonesian Pay-TV although that increase was not too significant. It was about 1,8 %; ---- 21.6.3.11. Until the end of 2008, the TV operators generally have the same international turn around channel (Casbaa 2007, part 27). Therefore, the differentiation pattern started to be conducted by the
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5. Shopping Channel ------6. Style Channel ------21.6.3.12. In 2007 and 2008, the operators also conducted differentiations in the form of exclusive domination of sports program: EPL, PGA Golf, and American Tenis by PTDV. While the other operators owned broadcasting rights of new channels which had not been broadcasted by the others; a. Fox Crime, BBC Knowledge and Cbeebies by Indovision on April 2008; ------b. Ten Sports by Telkomvision in 2007; ------c. JCTV, Dragon TV and Smile of Chiled by First Media; ------21.6.3.13. Therefore, the service included in the Indonesian Pay-TV industry have the addition of variations which can be chosen by the customers or customer candidates; -- Subscription fee Structure 28 ------21.6.3.14. Subscription fee structure change to the lower level gives advantage for customer. Cheaper price for the same service amount and quality received by customer gives additional advantage for the customer and can indicate that in short period, the competition level moves toward the positive level; 21.6.3.15. Below is the information about the initial fee that must be paid by the customer. Before June 2004, 1. The initial fee of Satellite Subscription-TV: IDR 2,7 million 29 ; the initial fee of Cable Subscription-TV: IDR 0,- - IDR 500.000,-30 . In June 2004, Indovision
28 Casbaa 2008 and 2007 Report. 29 The purchasing of satellite receiver and decoder. 30 Alternatively, paying the 3 months subscription fee at once to receive the installation fee for free.
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cut the Initial Subscription fee into IDR 350.000,- 31 . In the middle of 2006, Astro entered the market by offering the Initial Subscription fee for IDR 182.000,- that fee is followed by Indovision; ------Table 11. The Initial Subscription Fee for Pay-TV (March 2008)
Source: Casbaa 2008
Table 12. The Initial Subscription Fee for Pay-TV (October 2006)
Source: Casbaa 2007
21.6.3.16. In satellite subscription-TV, the Initial Subscription fee for Indovision and Astro have not changed since October 2006. However, both operators often offer free three-month-trial or free monthly fee for I month
31 The decoder borrowing for customers, they are just asked to pay the installation fee and the administration.
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(Casbaa 2008, page 11); ------21.6.3.17. Telkomvision changed the initial fee subscription structure due to the service structure change offered. Starting from the middle of 2007, Telkomvision service became prepaid and postpaid. Before this, the Initial subscription fee was about IDR 3 – 5 million (installation, antenna, and decoder fee). After it becomes prepaid and postpaid, the Initial Subscription fee is about IDR 1,550,000.- to IDR 3,547,000.- (installation, antenna, and decoder fee);------21.6.3.18. For cable TV, in October 200(?), The Initial Subscription fee was IDR 500.000,-. While in March 2008, The Initial Subscription fee declined to IDR 250.000,------21.6.3.19. Hence, from the subscription fee, it tends to decline for satellite subscription TV because of the direct price competition strategy. While for cable subscription TV, the initial fee change is caused by the change of offered service/product restructuring; ------21.6.3.20. Hence, it can be said that the Initial Subscription fee tends to decline because of the competition pressure or product/service restructuring; ------21.6.3.21. Below is the information about monthly fee that must be paid by Pay-TV customer; ------21.6.3.22. For Satellite Subscription TV, the subscription fee of Indovision and Astro do not change significantly. The price change happens only in Oriental/Asia package in Indovision in 2006 from IDR 32.000,- to
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IDR 14.000,- in March 2008; ------
Table 13 The TV Operator Monthly fee
INDOVISION ASTRO KINDS OF PACKAGE 2006 Mar-08 2006 Mar-08 Basic 135000 135000 136000 137000 Movies 77000 77000 45500 45500 Sport 50000 50000 45500 45500 Oriental/Asian 32000 14000 45000 45500 NHK 50000 50000 Full Package 344000* 326000* 272000 255000 *sum of all packages
21.6.3.23. While Telkomvision, which restructured the service/product offered into prepaid and postpaid, changed the monthly subscription fee. In 2006, the subscription fee for Telkomvision is about: a. IDR 75.000,- (Silver Package = 6 channels) to b. IDR 15.000,- (Diamond Package= 195.000); ------21.6.3.24. In March 2008, the subscription fee for Post Paid package is about IDR 50.000,- (Silver Package = 6 channels) to IDR 250.000,- (Platinum Package= 18 channel). While, for the subscription prepaid package (there are 15 packages) is about IDR 27.500,- to IDR 159.000,------21.6.3.25. Based on the data in 2006 and 2008 previously, there are no significant price decline for customers in the monthly package price offered. However, the
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price decrease can be seen from the ARPU 32 which tends to decrease compared to previous year. It is caused by the promotion activity offered by ASTRO and Indovision. Asia-Pacific Pay-TV & Broadband Markets 2008 data 33 ; ------
Table 14 Monthly ARPU Pay-TV
ARPU’s monthly change 2004 2005 2006 2007 compared to previous month Satellite Pay-TV 7,7% 1,3% -10,4% -18,8% Cable Pay-TV 0,2% -3% -1,6% Source: ASIA Pacific PAY-TV & Broadband Markets 2008 21.6.3.26. The change value of negative ARPU/monthly in 2006 and 2007 means that the average operator income for each customer decrease compared to previous year. The decrease level of ARPU for Satellite Pay-TV indicates that there was a competition that encouraged operator to do the promotion by giving discount in order to attract new customer, keep old customer, or steal competitors’ customer; ------21.6.3.27. Based on the Initial Subscription fee and customer monthly fee, it can be concluded that Pay-TV industry tends to decrease the price; ------Customer’s Switching Barrier ; ------
32 ARPU as the competition indicator must be used carefully because lower ARPU’s value can be caused by new customer increase with its lower consumption/outcome level pattern compared to old customer group, not by price decrease. It can happen in the industry that starts to expand the customer segment from higher economic level to lower segment. This segment expansion pattern can be noticed in cellular industry so that ARPU cannot be used to measure the competition level in that industry. 33 Asia-Pacific Pay-TV & Broadband Markets 2008 data, page 275
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21.6.3.28. The anti-competition action conducted by Business Actor in the high-switching barrier industry is more dangerous than the low-switching barrier industry. In this industry, if the Business Actor conducts anti- competition action, it is hard for customer to avoid it by choosing the other competitors. The disappearance of the change for moving to the other operator which offers better price and quality makes the market cannot correct that action naturally; ------21.6.3.29. Lower switching barrier gives opportunity for customer to enjoy the positive effects of the competition pressure;------21.6.3.30. Switching barrier level can be measured from the amount of initial subscription fee that must be paid by the customer to each operator and the fee to stop the subscription. Below is the data that can explain that level: ------a. The Initial Subscription fee tends to decrease and the customers do not have to rent/buy the equipment (except Telkomvision customers); ------b. In fact, customers can avoid the penalty payment for stopping the subscription (see witness’ BAP : TN Nainggolan); ------c. More customers (which state that Barclays Premiere League is important but they do not move to Astro) state their reason which is about Astro’s quality compared to the price, which can be seen in the figure below: ------
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Figure 16 The Result of the Survey about the Reason not to Use Astro The reason for not Subscribing to Astro Base: All respondents who do not subscribe to Astro, but state that English League is important (n=212) In case of bad weather, Astro often experiences a disturbance 28.30% Programs in other Pay-TV are good enough (there is English League, 14.15% although not as complete as Astro), so they do not move to Astro The picture is not clear enough 10.38% The monthly subscription fee is expensive 10.38% Reluctant to register 10.38% Do not know about Astro (the offered package, price, picture quality 7.55% and service)
21.6.3.31. Therefore, it can be concluded that switching barrier in Pay-TV industry is low; ------21.6.3.32. Based on the development of customer amount, Business Actor amount, product, subscription fee and low switching barrier, the Examining Team considers that the reported party’s action do not present any bad effect for Pay-TV industry as its short-term effect; ------21.6.4. The Analysis of Long-Term Competition Level; ------21.6.4.1. In 2006, ESS and Astro Malaysia were involved in a case in the Commission (Case No. 07/KPPU- L/2006) because ESS did not want to extend the supply contract of 6 (six) channels, i.e.: ESPN, Star
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Sports, Star World, Star Movies, National Geographic, and Channel [V] to Indovision, Telkomvision,IM2 and just supplying those 6 (six) channels to Astro Group, which in this is PTDV; ------21.6.4.2. In that case, in the Preliminary Examination phase, ESS was willing to extend the contract with those operators so that it was appropriate with the Commission Regulation No. 1, 2006 about the Case Handling Manner in the Commission, the Commission has the authority to stop the case in the Preliminary Examination Phase if the Reported Party is willing to change its behavior so that the anti-competition effect can be omitted; ------21.6.4.3. Based on the survey that has been explained before, Pay-TV customers assume that the channels below are important: ------a. HBO; ------b. ESPN; ------c. Star Movies; ------d. Star Sports; ------e. Cinemax. ------21.6.4.4. ESPN, Star Movies, and Star Sports are the channels produced by ESS which now are not exclusively broadcasted in many Pay-TV operators in Indonesia; --- 21.6.4.5. Considering the Case No. 07/KPPU-L/2006 which was done by Astro and ESS Group previously and the behavior of both of them in this case, both Astro and ESS tend to repeat the same business strategy repeatedly in order to reach Pay-TV customer in Indonesia; ------
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21.6.4.6. The Examining Team considers that ESS potentially exploits its market power in possessing important channel in the development of Pay-TV in the future. The Examining Team considers that potency, which is always collaborated with Astro so far, to refer to their market share in Indonesia; ------21.6.4.7. Although there is no anti-competition effect in short period, the Examining Team thinks that there is enough grounds to consider that the same behavior will be conducted again in the future if the Commission Assembly does not state the recent behavior conducted by ESS and Astro Group as a behavior that breaks the competition law; ------21.6.4.8. Therefore, to avoid it in the future, the Examination Team considers that the Commission Assembly must state the ESS and Astro Group in this case as a behavior that breaks the competition law by considering the long-term effect that will happen in Pay-TV market; 22. Considering that in the Advance Examination Report, the Advance Examining Team presents Conclusion and Recommendation as follows: ------1. AAMN and ESS, without competitive process, has signed agreement related to BPL exclusive broadcasting rights in Indonesia which can cause monopoly practice in Pay-TV market in Indonesia; ------2. AAMN and ESS behavior previously cause some losses for PTDV competitors of Pay-TV market in Indonesia in short period and it is potentially starts an unfair competition in long period; ------
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3. The Examining Team does not find any enough evidence that shows AAAN and PTDV role related to the obtaining process of BPL exclusive broadcasting rights in Indonesia; ------4. The Examining Team does not find any enough evidence that shows the misuse of monopoly power by Astro Group in Malaysia to hold the PTDV competitors in the obtaining process of BPL exclusive broadcasting rights in Indonesia; ------5. The Examining Team does not find any enough evidence that shows the misuse of monopoly power by Astro Group in Malaysia to limit the circulation of BPL exclusive broadcasting rights in Indonesia; ------6. Therefore, the examining Team recommends the Commission Assembly to: a. State that there is a violation of Article 16 Law Number 5 Year 1999 which was conducted by All Asia Multimedia Networks FZ-LLC and ESPN STAR Sports; ------b. Give recommendation for government to set a regulation that control television exclusive content transaction; ------c. Punish All Asia Multimedia Networks FZ-LLC to pay the fine for the country and calculate and also set the compensation for the reporting party; ------d. State that there is no violation of Article 16 Law Number 5 Year 1999 which is done by PT Direct Vision and Astro All Asia Networks, PLC; ------e. State that there is no violation of Article 16 letter a and c Law Number 5 Year 1999 which is done by PT Direct Vision, Astro All Asia Networks, PLC , and All Asia Multimedia Networks FZ-LLC; ------23. Considering that the Advanced Examining Team has explained the Advanced Examination Report to the Commission, for conducting the Commission Assembly (see evidence A151); ------24. Considering that later, the Commission published the Establishment of Business Competition Monitoring Commission Number 159/KPPU/PEN/VII/2008 date 21 July 2008, to conduct the Commission Assembly effective from 21 July 2008 to 02 September 2008 (see evidence A153); ------25. Considering that for conducting the Commission Assembly, the Commission published the Decree Number 229/KPPU/KEP/VII/2008 date 21 July 2008 about
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Commission Member Duty as the Commission Assembly in the Congress of Commission Assembly Case Number 03/KPPU-L/2008 (see evidence A154); ----- 26. Considering that later the Commission Secretary Exclusive Director published the Job Letter Number 680/SET/DE/ST/VII/2008 date 21 July 2008 that order the Commission Secretary to assist Commission Assembly in the Congress of Commission Assembly (see evidence A155); ------27. Considering that the Commission Assembly has explained the Citation of Assembly Establishment and Advance Examination Report for the reported party (see evidence A157 until A160); ------28. Considering that the Commission Assembly has given opportunity to the Reported Party to check the case file ( enzage ) which has been scheduled on 31 July 2008 (see evidence A157 until A160); ------29. Considering the Reported Party, Reported Party II, and Reported Party IV were present to check the case file ( enzage ) on 31 July 2008 (see evidence B43, B47); 30. Considering that Reported Party III asks for rescheduling case file examination and was present to check the case file ( enzage ) on 04 August 2008 (see evidence B46) considering that on 24 July 2008, the Commission Assembly has called the Reported Party properly in the Congress of Commission Assembly I date 07 August 2008 for explaining the Respond/Written Defense to Commission Assembly (see evidence A171 until A174); ------31. Considering that on 24 July 2008, the Commission Assembly had called the Reported Party properly to be present in the Congress of Commission Assembly on 07 August 2008 for delivering the written Feedback/Argument for Commission Assembly (see evidence A171 until 174); ------32. Considering that in the Congress of Commission Assembly I on 07 August 2008, all Reported Parties were present and the Commission Assembly had received the oral or written either from Reported Party I and Reported Party III, and oral Argument from Reported Party II and Reported Party IV, while the written argument from Reported Party II and Reported Party IV was received by the Commission Assembly on 08 August 2008 (see evidence B42); ------33. Considering that on 07 August 2008, the Commission Assembly had received the written Feedback from Reported Party I as follows (see evidence 162): ------
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33.1. P.T. Direct Vision supports the Commission finding that P.T. Direct Vision was not involved in the process of obtaining Barclays Premiere League (BPL) exclusive broadcasting rights in Indonesia; ------33.2. P.T. Direct Vision agrees with the Commission finding that P.T. Direct Vision is just the carrier of BPL broadcast in Indonesia; ------33.3. P.T. Direct Vision states that P.T. Direct Vision is a company that takes the right steps according to Company’s Base Estimation of P.T. Direct Vision where the committee of P.T. Direct Vision is responsible to the shareholders. Therefore, P.T. Direct Vision is not a vehicle of either Astro All Asia Networks Plc or All Asia Multimedia Networks FZ-LLC and not a part of economic entity unity as explained in the Advanced Examination Report of Case Number 03/KPPU-L/2008 because now Astro is not one of the shareholders of P.T. Direct Vision; ------33.4. That P.T. Direct Vision is a law institute held in Indonesia which follow and obey the valid principles; ------33.5. P.T. Direct Vision supports the Commission’s finding that P.T. Direct Vision does not violate Article 16 and Article 19 letter (a) and (c) Law Number 5 Year 1999 about Prohibition of Monopolistic Practices and Unfair Competition; ------33.6. The Advanced Examination Report of the Commission, BPL content is not an essential content; it is in line with what is told by P.T Direct Vision. Table 9 about Advanced Examination Report of the Case Number 03/KPPU-L/2008 states that in November and December 2007, the customer share change of ESPN sports package was just about 1% that showed the decreasing trend and the same amount of percentage with Indovision, IM2, and First Media. This fact was supported by the customer data evidence of P.T. Direct Vision delivered to the Advanced Examining Team on 11 July 2008 that showed the decrease of the customer in sports package in December 2007 until April 2008; ------33.7. P.T. Direct Vision believes that the Commission Assembly will maintain the objectivity and consider all evidences, documents, and suggestions positively delivered to the Preliminary Examining Team and Advanced Examining Team of the Commission in the whole investigation process in
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the Commission in giving the decision for P.T. Direct Vision as done by the Advanced Examining Team of the Case Number 03/KPPU-L/2008. --- 34. Considering on 07 August 2008, the Commission Assembly had received the written argument from Reported Party III as follows (see evidence A164): ------34.1. THE EXECUTIVE SUMMARY : ------34.1.1 Article 16 Law Number 5 Year 1999 about Prohibition of Monopolistic Practices and Unfair Competition (Law No. 5/1999) is not applicable on this case because: ------34.1.2.1 There were no Indonesian Business Actors who become one of the parties of BPL agreement between ESS-AAMN. ok 34.1.2.2 Therefore, the Commission does not have any jurisdiction to apply Article 16 Law No. 5/1999 in the agreement between ESS-AAMN; ------34.1.2.3 One assumption of Article 16 violation is just about ESS and AAMN behavior when the signed the BPL agreement. While Article 16 is just valid for an agreement with anti-competition terms. The Advanced Examining Team (TPL) itself has stated that the BPL agreement does not have anti- competition characteristic; ------34.1.2 If it is assumed that Article 16 can be applied for ESS-AAMN agreement, quod non , there is no evidence about the violation done by ESS; ------34.1.2.1 The related upstream market must be defined as the premium TV content (not a market for obtaining BPL), and the related downstream market must also be defined as FTA (Free to Air) and Pay-TV (not just for Pay-TV); ---
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34.1.2.2 BPL Agreement Way is negotiated and BPL Agreement itself did not and will not affect any monopolistic practice or unfair competition (even when it is considered in narrow definition from the Commission about related markets); ------34.1.2.3 The Advanced Examination Report does not give any valid evidence that the way BPL Agreement negotiated and/or the BPL Agreement itself has caused or will cause monopolistic practices and unfair competition; ------34.1.3 If it is assumed that there has been a violation of Article 16 in this case, quod non ; ------34.1.3.1 The Commission has admitted that the Agreement between ESS and AAMN is a valid agreement; ------34.1.3.2 ESS which is an overseas party cannot be punished to pay the compensation or fine; ------34.1.3.3 There is no causal relation between the violation assumption and the loss claimed by the reporting party, remembering that the reporting party have experienced substantial development since BPL Agreement is started to be valid; ------34.1.3.4 The reporting parties do not have reason to believe that BPL season 2007-2008 will be available for them; ------34.1.3.5 The Advanced Examination Report (LHPL) focuses on the examination happened in the past and the risk of bad behavior appearance in the future. According to the principle of law certainty and due process of law, the decision in this case cannot be based on the
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fact in the past which is not the subject in the current examination, or in the hypothetical behavior in the future; ------34.2. DETAILED EXPLANATION; ------34.2.1 THE COMMISSION DOES NOT HAVE JURISDICTION TO APPLY ARTICLE 16; 34.2.1.1 LHPL states that ESS is not the Business Actor as in the Article 1 part (5). However, ESS is an overseas party as in the Article 16. ESS accepts this status; ------34.2.1.2 Hence, ESS assumes that Article 16 cannot be applied in BPL Agreement because there is no Indonesian Business Actor – which is Business Actor that is founded and has the domicile in Indonesia and not just a Business Actor that runs some activities in Indonesia – which is one of the parties in BPL Agreement. The involvement of a Business Actor in Indonesia is the requirement that Article 16 can be applied as explained in the Explanation 34 and stated by Professor Johannes Gunawan in his Expert Information; ---- 34.2.1.3 Even if AAAN and/or AAMN and/or MBNS are assumed as Business Actors caused by their activities in Indonesia, not one of them is Indonesian Business Actors because all of them are situated and were founded outside Indonesia . Therefore, they are foreign Business Actors so that they do not match the criteria of Article 16; ------34.2.1.4 One of the Reported Parties that is Indonesian Business Actor is PTDV. However, PTDV is not one of the parties in BPL Agreement and does not any
34 Explanation, points 96-112.
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rights based on that agreement. This opinion is also supported by Kurnia Toha – an expert witness of this case – who concludes that the only agreement that can be included in Article 16 is the agreement between AAMN and PTDV 35 . Besides, LHPL also has stated there is no violation evidence in Law No. 5/1999 about the agreement among the companies included in Astro Group and PTDV; ------34.2.1.5 With the assumption that LHPL is correct in considering that the Law No, 5/1999 that focuses on “the Business Actors group” gives room for the application of Single Economic Entity (SEE) doctrine, there is no focus on Article 16 about it. Article 16 just regulates about Business Actor and not Business Actors group. Therefore, there is no room for applying SEE doctrine related to Article 16; ------34.2.1.6 In addition, ESS understands LHPL that PTDV is the subsidiary that its share is owned entirely by Lippo Group 36 . Therefore, Astro Group and PTDV cannot be a SEE, considering PTDV is 100% owned by Lippo Group and it is fully controlled by Lippo Group, not by Astro Group: ------34.2.2 RELATED MARKET ; ------A. Upstream Market The Findings in LHPL ; ------34.2.2.1 The Advanced Examination Report concludes that related upstream market is the market for purchasing BPL media rights in Indonesia. In Explanation, ESS
35 Expert’s Report Kurnia Toha on 17 July 2008. 36 Advanced Examination Report, points 124-147.
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states that the related upstream market in this case, at least must covers the major sports contents (which are the major soccer matches, Formula 1, the major golf tournament, the major tennis tournament, etc) and maybe also covers the major common contents (which are the major sports events, major films, etc). 37 There are many evidences about it, including the feedback from CASBAA and Media Partners, also including the explanation from MNC Group to the Commission. Therefore, ESS considers that the definition of upstream market in PHPL is too narrow; ------34.2.2.2 The definition about related market that is given in LHPL is based on the findings that BPL content is unchangeable according to the reporting parties. AAMN states that BPL is a “valuable content” and the most expensive one that has been purchased. Besides, about 64,99% respondents in the MARS survey stated that they who like sports consider BPL as the unchangeable one. Those reasons are the very subjective reasons, non-conclusive, and not supported by real evidence at all; ------ESS Position ; ------34.2.2.3 In analyzing it, the Advanced Examining Team (TPL) has failed to see that the ability to change TV content, must be measured from whether the other contents have the same strength to attract the spectators/customers. As stated by Knibbler (which is wrongly understood by TPL), the changeability of TV content like BPL must be measured by “its ability to
37 Explanation, points 124-147.
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attract spectators and/or customers”. 38 If the customers like to watch – for example – BPL, UEFA Champions League, HBO, Cinemax, high-profiled serial movie in Indonesian language, etc. in the same portion, so that contents will form a relating market. The Commission’s Expert Witness – Dionisu Narjoko – also states that the only difference related to market definition is market content versus premium content. 39 This approach is also supported by MNC Group; ------34.2.2.4 Probably, MARS survey is created just to produce the relative BPL value – compared to the other broadcasts – which has been overexposed. Asking the sports addicts whether some high profile sports contents can be replaced by the other part from the other content is unnecessarily needed because the answer will always be negative. A Chelsea fan will not watch the AC Milan/Juventus Turin match as a replacement of the Chelsea/Arsenal match. Although it is does not mean that he will not watch Milan/Juventus match. This survey is – at least – asking the respondent to give the rating for all broadcasts provided in Pay-TV. However, the research is not based on the real behavior, and it is a speculation. The “emphasize” which is not explained on page 32 from MARS survey is the further evidence about the assumption to exaggerate BPL; ------34.2.2.5 Later, there are no conclusion that can be drawn about market definition based on the fact that 64,99% from MARS survey respondents, who state that they
38 Advanced Examination Report, Part III, point 22. 39 Written Statement of a Court Hearing Dionisius A. Narjoko with the Advanced Examining Team on May 2008. The Explanation for question number 4.
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like sports, also state that there is no replacement for BPL. The fact that a broadcast is not assumed – by sports fans – as a broadcast which can be replaced by the other one does not mean that the other programs do not have any attraction power for the same customer – or even more – according to the opinion of global Pay-TV customer. Watching BPL is not same as watching Hollywood’s blockbuster movies – although both of them can attract spectators equally so that they are considered as competing contents. 40 The attraction for the equal customer is the power to attract for Pay-TV when they arrange their content strategy. It is the main criteria related to the market definition. ------34.2.2.6 MARS survey shows that movies and sports channels are important for Pay-TV customer. Although the sequence of the three channels which are watched most are the movies channels, movie channels and sports channel nearly have the same portion. 41 Both of them are the biggest power to attract the Pay-TV customers. Therefore, movies and sports have the same power to attract customers. Pay-TV operators will decide the obtaining strategy for their contents properly. In the means of competition, when the Pay- TV segment was still newly appeared, the movies content and the sports content are in the same related market. MARS survey also stated that music contents and news content are also important for the customers. Therefore, it is very possible for them to enter related market which is defined as the market for buying the Pay-TV premium content; ---
40 See Written Statement of a Court Hearing Dionisius A. Narjoko form the Advanced Examining Team in May 2008, the explanation of question 4. 41 For Indonesian customer, movie channels is a little more important than sports channels
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34.2.2.7 Indovision admits that its presentation to the Commission on 11 February 2008 that the upstream market is related to this case, “the providing and/or channel for the Pay-TV operators”. 42 There is no reason for the Commission to reject the industry players’ general analysis; ------34.2.2.8 Although sports contents are considered as separated, BPL media rights is not a market with its own rights. According to MARS survey, BPL is just the third of “mostly watched programs” – after UEFA Champions League and Football Asia – and the sixth sports program, which by the respondents who like sports is stated to be watched regularly after UEFA Champions League, Sport News Score, Football Asia, SportCenter and Auto Racing Planet. Therefore, the other alternative soccer (UEFA Champions League and Football Asia) and the other major alternative sports program (Sport News Score, SportCenter and Auto Racing Planet) are in the same position in the mean of attraction for the customer like BPL. The fact that MARS research was done when BPL became exclusive in PTDV does not reduce the fact that the other sports program are higher in value for Indonesian Pay-TV customers. Therefore, BPL is just one of the parts from the valuable sports contents (see the definition of upstream market given by EU Commission). 43 There are many technical problems related to the survey method conducted by MARS
42 Indovision PowerPoint Presentation at 11 February 2008 "The Violation Assumption Report Summary of Law no. 5 Year 1999". 43 Contradictory to the statement in point 77 (part III) from Advanced Examination Report, PTDV does not “ dominate the sports package customer share ”. First, it is wrong to limit the sports packages only to ESPN and Star Sport. Second, Indovision is still the biggest affiliation from ESS for ESPN and Star Sport.
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which must be studied further; ------34.2.2.9 About AAMN, which is agreed it will be paid to ESS, it just proves the fact that AAMN considers this content valuable when negotiating it. AAMN price is probably decided by considering the content’s form, the amount of available seasons, AAMN judgment (probably right or wrong), or Indonesian market, AAMN’ hope (can be right or wrong) in the definition of investment advantage, etc. After that, the price paid by AAMN must be viewed from the price paid by ESS to FAPL. Therefore, the price paid by AAMN does not prove whether there is a content that can replace BPL – in the definition of the attraction availability for the customer. Indovision reports the subjective position that BPL is the important product which is not related to it; ------EU’s Experience in the Relationship with Upstream Market Definition ; ------34.2.2.10 Although it is not stated strictly in the LHPL, the Commission’s file is included in EU Commission’s decision in the FAPL case. Later, Indovision focuses on that decision in its presentation to the Commission on 1 February 2008; ------34.2.2.11 The valid court regulations and facts that are assumed by the EU Commission in its decision about media rights in soccer depends on the occurred fact so that it cannot be compared with Law No. 5/1999 and the facts related to this case. However, the points below must be remembered when it comes to the market definition: ------
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i. None of the three cases decided by EU Commission – UEFA Champions League decision, Bundesliga decision and FAPL decision (all of them are called by “EU’s decisions”) 44 – that regulates the questions asked in the recent case, it is about the on- selling term of soccer media rights. The questions asked in EU’s decisions are: in what issue do UEFA, Bundesliga, and FAPL can have the authority of the media rights selling for and by private clubs involved in the competition, which they organize, and later the profit earned from the exception according to Article 81 (3) from the Treaty of EU? 45 ------ii. EU’s decisions apply the same definition for related upstream market: “the market for obtaining TV broadcasting rights for soccer which is played regularly in a year” . In the UEFA Champions League decision, EU Commission stated that this definition including national league (first and second division), national cup, UEFA Champions League, and UEFA Cup – so that media’s rights over national leagues are not sold in their own name. FAPL decision strictly ensures that it is related to BPL and United Kingdom; ------CONCLUSION ; ------34.2.2.12 Based on MARS survey and CASBAA report and also Media Partners Report discussed in the Explanation,
44 Champions League Decision No. 2003/778/EC (2003); Bundesliga decision No. 2005/396/EC (2005); FAPL decision No. 2006/868/EC (2006). 45 Because they prevent private clubs to sell media rights about the matches where they are involved and because they prevent every competition among clubs.
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the Upstream Market is the premium content and includes at least movies and sports as stated in the Study and Clarification Team. 46 This opinion is also agreed by Indovision which is the dominant player in this industry 47 34.2.2.13 Considering the importance of movie content and customer’s interest on alternative sports content as proven by MARS survey, BPL is not the only one in its kind or a term that must be present in the customers’ interest power. The development rate experienced by PTDV’s competitors during July 2007 and Q1 2008 48 supports this conclusion; ------34.2.2.14 In all issues, the opinion of Advanced Examining Team about Upstream market is limited on BPL which is not supported by an evidence, economic theory, and EU experience; ------B. The Downstream Market The Findings in LHPL: ------34.2.2.15 LHPL considers that the related downstream market is Pay-TV in Indonesia, it therefore rejects ESS argumentation that downstream market consists of FTA and Pay-TV. 49 The Argumentation explained is that in the issue of cost, capacity, income and equipments, FTA television is very different from Pay- TV because both of them are mixed in a single market. LHPL adds that its analysis is supported by the fact that FTA channel is also included in Pay-TV
46 Study and Clarification Report, Part III point 48 47 Indovision PowerPoint Presentation at 11 February 2008 "Report Summary of Violation Assumption of Law No. 5 Year 1999". 48 Explanation, point 9-22. 49 Explanation, point 148-159
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package and for FTA viewers, it cannot be replaced by Pay-TV; ------ESS’ Opinion ; ------34.2.2.16 TPL’ analysis is failed to include the important fact that since Pay-TV was still a developing service in Indonesia, its expansion depends on Pay-TV operators’ ability to ensure the FTA viewers to subscribe on Pay-TV. It is meant by Professor Ordover as a cross-elasticity between FTA and Pay- TV in Indonesia. It does not depend on the assumption that Pay-TV can replace the FTA television. Whether FTA channels also included in Pay-TV package is also unrelated. The fact that all Pay-TV organizers that are developing recently states that a number of majority customers are from FTA, not from their competitors. Therefore, it supports Professor Ordover’s argumentation about cross- elasticity; 34.2.3 THERE ARE NO VIOLATION OF ARTICLE 16 ; ------34.2.3.1 In its explanation, LHPL concludes that BPL Control must be continued in a tender process and, excluding from that behavior does not affect monopolistic practice or unfair competition, there is a risk were ESS and Astro Group run a business relationship in the future related to the other contents that can cause the market distortion; -- 34.2.3.2 Based on those findings, it is incorrect according to the law to conclude that ESS and AAMN violate Article 16 because; ------• The anti-competition behavior that is accused is not regulated in Article 16, which only regulates
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about its agreement, that is different from the other terms like Article 19; ------• LHPL admits that the anti-competition behavior that is accused now does not cause and does not have any risk of causing monopolistic practice and unfair competition; ------34.2.4 MARKET’S BEHAVIOR IS NOT REGULATED BASED ON ARTICLE 16 ; - 34.2.4.1 Law No. 5/1999 differentiates between “the Restricted Agreement” (Part III) and “the Restricted Activity” (Part IV). Article 16 is extracted in Part III and it therefore just focuses on the issue of agreement. In line with it, the statement in Article 16 is crystal clear: Article 16 is valid only if a term in an agreement can cause monopolistic and/or unfair competition; ------34.2.4.2 The Advanced Examination Report states that “ The verification team considers that the agreement is not anti-competition” .50 Therefore, there is no violation of Article 16 in this case 51 ; ----- 34.2.4.3 Hence, LHPL records that a tender process should be done before the negotiation and the finishing of BPL Controlling. It raises questions about the behavior of the parties and not the agreement among them. It is impossible based on Article 16. TPL’s argumentation which states that “ the behavior before agreement/deal that encourages the agreement/deal cannot be separated from the existence of the agreement and must obey the terms of competition ”, violates both from the clear language rule from Article
50 The Advanced Examination Report, Part III point 119. 51 See also the Explanation, points 160-162.
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16 and the general rule from Law No. 5/1999. The construction and application of Article 16 by the Advanced Examining Team are contra legem; ------34.2.6 THERE IS NO MARKET MISTAKE; ------34.2.5.1 For the completeness, ESS does not agree with TPL’s opinion that every time a BPL broadcasting rights moved, it must be conducted through competition mechanism which is arranged previously; ------34.2.5.2 First, LHPL’s conclusion is based on the consideration that BPL is a very “essential” content. ESS is ready to accept that consideration with the “essential” term which is understood in the common mean “valuable” to attract the customer’s interest. In this case, MARS survey (see the previous) and CASBAA’s report and the reports for Media Partners (see Explanation), outline that BPL is just one of the valuable broadcasts. The substantial development experienced by all PTDV competitors since August 2007 proves that BPL is just a content that is valuable, but it is not the very important one for Pay-TV organizers for competing. 52 The expert witness who is appointed by the Commission – Dionisos Narjoko – outlines it through brief analysis that BPL is not considered as a very important broadcast. 53 In line with it, MARS report reveals that the unavailability of BPL is just on the third level from the “disadvantage” that is explained b Indovision service. The most unimportant thing according to the
52 Explanation, points 9-16 53 Written Statement of a Court Hearing Dionisius A. Narjoko by the Advanced Examining Team in May 2008, Answers to questions 12-13.
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view of FM and Telkomvision and even it is not mentioned as the disadvantage by the IM2 customers. Therefore, there is no reason for changing the regulation to move BPL broadcasting rights; ------34.2.5.3 Second, as figured in the Explanation 54 , FAPL tender process has ensured that every interested party receives a fair opportunity to obtain the rights for BPL Content. There is no reason economically to give the rights for the party which fails to obtain the rights from FAPL and they who choose not to join the FAPL tender process, the rights to interfere the use of those rights; ------34.2.5.4 Third, none of the EU’s decision – which just rule the requirement based on the cooperative selling of soccer media broadcasting rights by a number of organization (FAPL, UEFA, Bundesliga) for and in the name of accepted club – considering the selling of soccer media rights must be conducted through a tender which is defined. EU’s decision just arranges about the first selling, which is from the entity that organize the tournament/league to the first buyer from the media rights. In this case, the term of the first selling ensures the fair competition because Indonesian BPL rights 2007-2010 is given through an open tender, for the particular period and without the automatic renewing rights – the three important conditions for EU; ------34.2.5.5 Finally, the Advanced Examining Team establishment is potentially making a loss for Indonesian Pay-TV market. Forcing the weigh and limitation without base vis-à-vis the exploitation of media rights is just
54 Explanation, points 163-168.
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because that rights is assumed to be valuable by the Commission can encourage the rights holders to leave Indonesia and disable the industry; - 34.2.6 THERE IS NOT MONOPOLISTIC PRACTICE OR UNFAIR COMPETITION ; ------34.2.6.1 Article 16 is a term whose characteristic is rule of reason. 55 Therefore, it is impossible to violate Article 16 if there is not proved about the existence of terms of agreement which has caused or can cause monopolistic practice or unfair competition. The element that is the monopolistic practice is (i) economic power concentration which causes market control, (ii) unfair competition, and (iii) customer’s potential loss. 56 The unfair competition can be in form of (i) dishonest competition, (ii) illegal competition, and (iii) prohibited competition 57 ; ------34.2.6.2 ESS has figures it on the Explanation 58 that BPL controlling has not caused and will not cause during the rest of its two years period, monopolistic practice or unfair competition in Upstream Market or Downstream Market (including the markets which have been explained in LHPL). LHPL does not contain ESS and AAMN mistakes assumption or BPL Controlling has caused or can cause monopolistic practice or unfair competition. Even LHPL contains some opposing statements. Therefore it is impossible that there is a violation of Article 16 in this case; ------34.2.6.3 Concerning Upstream market (it is even wrongly limited only until BPL media rights), LHPL concludes
55 Explanation, points 163-168. 56 Explanation, points 178-179. 57 Explanation, point 224. 58 Explanation, points 169-235.
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(the conclusion which is not agreed by ESS) that PTDV competitors suffer from a loss because BPL controlling because some of their customer move to PTDV. This accusation of loss does not refer to monopolistic practice of unfair competition. Churn cannot be avoided in Pay-TV industry. If BPL Controlling was done through a tender, the churn will still able to be occurred in the same amount. Generally, every time a valuable broadcast moves to the other hand, churn will be occurred. From competition point of view, the problem is not the immediate churn (which is unavoidable), but whether there is, in the middle/long period, a response of the competition provided by the organizer which has lost the valuable content. In this case, the fact that since August 2007, the competitors of PTDV have experienced the substantial development that show that the competition response is provided and implemented as it is recorded in LHPL 59 ; ------34.2.6.4 Concerning downstream market (even it is wrongly limited just until Pay-TV), LHPL – in line with the Explanation – records that it is healthy and competitive in all area, which are the customers (increasing), organizers’ amount (increasing), channels’ amount (increasing), subscription fee (decreasing), market’s barrier (low). 60 Therefore, LHPL concludes strictly that “ The Examination Team considers that the action done by the Reported Party does not cause bad effect in Pay-TV industry in short
59 The Advanced Examination Report, Part III, points 130: BPL exclusive broadcast “causes Astro’s competitors to conduct the strategy to response Astro’s step which finally attracts new customer”. 60 The Advanced Examination Report, Part III, points 127-158/see also the Explanation, points 6-27.
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period ”. 61 Away from the cause of market distortion, LHPL records that Astro Group’s behavior to control BPL is not only “ directly attract new customers, but also indirectly causes Astro’s competitors to conduct the strategy to response Astro’s action which finally attract new customers ”. 62 Consequently, LHPL admits that “ it can be concluded that in the phase before and after Astro obtains the exclusive Barclays premier league broadcast in Pay-TV, the number of customers is increasing and there is not any customer development barrier ”63 ; ------34.2.6.5 It is known that TPL finds that is none, either the absent of the tender before negotiation about BPL Controlling or the BPL Controlling itself, that causes the monopolistic practice or unfair competition; ------34.2.7 PAST FACT WHICH IS NOT RELATED AND THE CONCERN OF HYPOTHESIS ABOUT THE HAPPENING OF VIOLATING BEHAVIOR IN THE FUTURE RELATED TO BPL CONTROLLING CANNOT BE USED TO STATE THAT THERE IS A VIOLATION OF ARTICLE 16 LAW NO. 5/1999 ; ------34.2.7.1 One of the risk of market distortion identified in LHPL is not related to the absent of tender and BPL Controlling . The only reason given by LHPL to state that there is a violation of Article 16 by ESS and AAMN is what is called by “long-term” risk that n the future ESS and Astro will conduct the other business cooperation which is related to other content/channel and that relationship could violate the competition
61 The Advanced Examination Report, Part III, point 159. 62 The Advanced Examination Report, Part III, point 130. 63 The Advanced Examination Report, Part III, point 131.
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regulation. 64 In other word, TPL recommends the Commission Assembly to look for the violation of Article 16 based on the possible future action by ESS and Astro Group, which is based on the hypothesis about a possible issue that can happen in the future which is not related to this case ; ------34.2.7.2 The Advanced Examining Team’s concern is probably from the past fact examined in 2006. That fact (where ESS reserved all of his rights) is not related to this current case or case examination. Therefore, TPL’ conclusion which is based on that fact can be ultra vires ; 34.2.7.3 The Commission just has the authority to give the punishment for the real violation of Law No. 5/1999. To avoid the doubt, if one of the Articles from Law No. 5/1999 that regulates about the risk of market distortion in the future is a violation, there must be a fact that the risk is real and it is present when the Commission conduct the examination. If the Commission Assembly followed the recommendation from TPL, they would not only have been wrong in applying Article 16 but also misuse its authority (ultra vires ). Of course, no one can prevent the Commission in conducting new examination, by considering the new condition , if there will be an indication of real violation in the future. Deciding based on “hypothesis’ or “prediction” about behavior which probably happens in the future WITHOUT REAL EVIDENCE is a serious violation of due process of law, and clearly an action that exceeds the authority; ------
64 The Advanced Examination Report, Part III, point 164-166.
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34.2.8 ARTICLE 50 (B) IS VALID IN ALL CONDITIONS ; ------34.2.8.1 In the Explanation, ESS figures by focusing on the findings in Study and Clarification Report, that BPL Controlling is “ related to intellectual wealth rights ” and therefore it is not included in the scope of Law No. 5/1999 65 ; ------34.2.8.2 Therefore, LHPL states that Article 50 (b) is not valid to the finding of BPL Controlling because of the “exception of related agreement with the Intellectual Property Rights which is not excepted absolutely but relatively ”. 66 The construction of Article 50 (b) is contra legem because it opposes the grammatical definition of that article which regulates the exception an intellectual property rights absolutely and entirely. BPL’s agreement is clearly “related” to the Intellectual Property Rights so that it must be excepted from Law No. 5/1999; ------34.2.8.3 The fact that EU and USA – where their competition Law does not regulate about the absolute exception as stated in Article 50 (b) – does not give the rights to TPL or the Commission Assembly to conduct the estimation which deviates from the purpose of the Law creator about absolute exception as meant in Article 50 (b); ------34.2.9 IF IT IS ASSUMED THAT THERE IS A VIOLATION OF ARTICLE 16 (ALTHOUGH IT IS CLEARLY NOT), THERE IS NO SANCTION THAT CAN BE GIVEN TO ESS ; ------The BPL Controlling is practicable ; ------
65 Explanation, points 88-93. 66 The Advanced Examination Report, Part III, point 47.
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34.2.9.1 ESS records that LHPL admits that BPL controlling is certainly practicable 67 ; ------ESS cannot be punished to pay the fine or compensation ; ------34.2.9.2 ESS records that LHPL admits ESS as overseas party abroad, and therefore it cannot be punished to pay the fine or compensation 68 ; ------There is no loss and relationship between violation and loss assumption ; ------34.2.9.3 The reporting parties do not experience any loss because of PTDV exclusivity. They experience a strong development and strengthen their position since August 2007. There is no relationship between the violation assumption of Law No. 5/1999 and loss assumption suffered. To avoid the doubt, none of the reporting parties has the believable reason that they have the rights of BPL season 2007/2008. A false telephone conversation record without ESS permission does not prove its contrary and ESS reserved its rights for taking legal path in that case; ------34.2.9.4 As the addition of the reason that has been given by ESS in Explanation 69 to reject the claim of Telkomvision and IM2, it can be recorded that both companies reject to participate in the FAPL tender process. Therefore, they intentionally reject BPL season 2007-2010 and do not have any ground to claim for compensation; ------
67 Explanation, points 242-252. 68 Explanation, points 242-252. 69 Explanation, point 253.
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34.2.9.5 The assumption of Indovision is based on a report of PT Asian Appraisal Indonesia (“ Indonesian Examination Report ”). Indonesian Evaluator Report is wrong in many things such as: • Indonesian Examination Report assumes each customer who unsubscribe from Indovision during the Examination period is caused by the absent of BPL content. This assumption does not have any ground; -- • Indonesian Examination Report assumes that each customer who unsubscribe must subscribe for at least 10 years – this assumption does not have any ground, especially in the newly Pay-TV competition market; ---- • Indonesian Examination Report considers the former Indovision customers rejection to pay the cut off penalty. There is clearly no cause and effect relationship between customers rejection and the lost of BPL; ------• Indonesian Examination Report considers that all Indovision promotional fee during that period, so that Indovision would not spend any promotional fee if the still broadcasted BPL; ------• Indonesian Examination Report considers all purchasing of sports program by Indovision that is stated to compensate the loss. However, almost all of those broadcasts were part of Indovision’s offers before they lost BPL and almost all of them were bought before Indovision lost BPL; ------
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There is no punishment for the wrong hypothesis in the future ; ------34.2.9.6 As a principal thing, there is no punishment that can be given to the possible behavior in the future or based on the past fact that is not the part of the current event; ------34.2.10 CONCLUSION ; ------1. The term of Article 16 Law No. 5/1999 regulates about PROHIBITED AGREEMENT. This Article does not rule about any prohibited action or behavior. Therefore, as long as there is no evidence about TERM of ESS-AAMN Agreement that can cause monopolistic or unfair competition, the Commission Assembly cannot support the decision of LHPL which states that there is a violation of Article 16 by ESS and AAMN; ------2. ESS believes that BPL Controlling negotiation and BPL Controlling itself do not and will not violate Law No. 5/1999. Furthermore, none of the facts in the examination which proves that ESS causes the loss to one of the reporting parties; ------3. It would be a violation of due process of law if the Commission Assembly stated that there is a violation of Article 16 just based on “hypothetical fact” or “prediction” about future behavior without real evidence; ------4. According to Indonesian Terms of Law as reflected on the Jurisprudence of The Supreme Court of Indonesian Republic, compensation claim must be real, specified, and supported with sufficient evidence. The characteristic of Indovision compensation claim is speculative and not supported by sufficient evidence. Therefore, this compensation claim must
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be rejected by the Commission Assembly of the Commission; ------34.3. Based on the issues listed previously, with all respects ESS requests the Commission Assembly of Case No. 03/KPPU/L/2008 to state that ESS does not violate the terms of Article 16 Law No. 5/1999, or at least state that there is not enough evidence to state that there is a violation of Article 16 Law No. 5/1999; ------35. Considering that on 08 August 2008, the Commission Assembly has received the written Feedback/Argument from Reported Party II and Reported Party IV as follows (see evidence A163): ------BPL PERIOD 2007-2010; ------35.1. In the end of 2006, The Football Association Premier League Limited (“FAPL” ) organizes an open tender to obtain the broadcasting rights of Barclays’ Premiere League program for the season of competition 2007- 2010 (“ BPL ”). As delivered in the Violation Assumption Report (point 3) on 6 February 2008 that is published by the Commission (“ LDP ”), besides Astro Multimedia International (AAMN’s affiliation) and ESS, the tender to obtain BPL for Indonesia was also involved by some terrestrial TV or Pay- TV operators in Indonesia such as: MNC Group (RCTI) and PT MNC Sky Vision (Indovision), which is also the reporting party in the case aquo 70 ; ------35.2. Because the broadcasting rights of BPL program for Indonesian territory was won by ESS, AAMN, as the content supplier of PTDV, later negotiated it with ESS to obtain the exclusive rights of BPL program management for Indonesian territory, in order to be broadcasted by PTDV 71 ; ------35.3. As a result of that negotiation, ESS agrees to transfer the exclusive rights to organize the broadcasting of BPL program in Indonesian territory to
70 See also paragraph 16 LHPL. 71 See paragraph 17 LHPL.
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AAMN 72 , which later ordered ESS to supply BPL content to PTDV, through ESPN and Star Sports channel, to be broadcasted in Indonesia; ------35.4. The purchasing pattern scheme of 2007-2010 Barclays’ Premiere League Broadcasting Rights can be seen in the following picture; ------
Picture 1: The purchasing pattern scheme of 2007-2010 Barclays’ Premiere League Broadcasting Rights
Tender of BPL 2007–2010 Program in FAPL
ESS is the winner
ASTRO MNC ESS Indovis io Other Group/RC n s
AAMN conducted a negotiation with ESS
AAMN
BPL Program is supplied to PTDV
Indovison PT DV Indovis io Telkomvisio n n
Communication with ESS about the availability of BPL 2007-2010 program
72 See paragraph 18 LHPL.
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THE SUMMARY OF VIOLATION ASSUMPTION ; ------35.5 Based on the Commission establishment No. 41/PEN/KPPU/III/2008 about Advanced Examination of Case Number: 03/KPPU-L/2008, on 12 March 2008, the Commission decides as follow: ------a. Reported Party I (PTDV), II (AAAN), III (ESS) and IV (AAMN) are assumed to violate Article 16 Law Number 5 Year 1999 about the Prohibition of Monopolistic Practices and Unfair Competition (“ Law No. 5/1999 ”); ------b. Reported Party I (PTDV), II (AAAN), and IV (AAMN) are assumed to violate Article 19 letter (a) and (c) Law No. 5/1999; ------35.6 As the Law Authority of Reported Party IV (AAMN), we also highly appreciate the recommendation of the Advanced Examining Team so that the Commission Assembly states that there is no violation of Article 16 or Article 19 (a) and (c) by Reporting Party II (AAAN) in the case aquo 73 The conclusion related to Reported Party II (AAAN) is in line with the true fact and in line with the examination process of case aquo (LHPL, page 59): ------3. The Examining Team does not find any sufficient evidence to show the role of AAAN and PTDV related to the process of obtaining the BPL exclusive broadcasting rights in Indonesia; ------4. The Examining Team does not find any sufficient evidence to show the misuse of Astro Groups’ monopolistic power in Malaysia to block the PTDV competitors in obtaining the exclusive BPL broadcasting rights in Indonesia; ------5. The Examining Team does not find any sufficient evidence to show the misuse of Astro Groups’ monopolistic power in Malaysia to limit the
73 Paragraph 99 and 100 LHPL.
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circulation of exclusive BPL broadcasting rights in Indonesia; ------35.7 As the Law authority of Reported Party IV, we also highly appreciate the conclusion of the Advanced Examination Team that the behavior of Reported Party IV (AAMN) which supplies Barclays’ Premiere League (BPL) exclusively to the Reported Party I (PTDV) is not an anti- competition behavior 74 ; ------Paragraph 111: The supply of broadcasting rights to PTDV to AAMN causes the circulation of BPL broadcast in Indonesia becomes limited. Therefore, the Examining Team determines that that limitation is consistent with the analysis of previous Examining team that AAAN, AAMN, and PTDV is as an economic entity so that AAMN in this case is the end user that has the rights for exclusive content without the duty to distribute it further to the other Pay-TV operator . Paragraph 112: Therefore, the examining team does not find that there is an anti- competition behavior of the limitation of BPL broadcasting by AAMN. 35.8 As a consequent of that conclusion, the Advanced Examining Team recommends the Commission Assembly to 75 ; ------State that there is no violation of Article 19 letter a and c Law No. 5 Year 1999 which is conducted by PT Direct Vision, Astro All Asia Networks, PLC, and All Asia Multimedia Networks FZ-LLC . 35.9 However, as the Law Authority of the Reported Party !V (AAMN) we need to give feedback and clarification and also argumentation related to the assumption that Reported Party IV (AAMN) together with ESS violate Article 16 Law No. 5/1999, as stated in LHPL (page 59); ------1. AAMN and ESS without competitive process have made an agreement related to BPL exclusive broadcasting rights in Indonesia
74 LHPL, paragraph 111-112 75 LHPL, page 59, point 6 (e).
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which can cause monopolistic practice in Pay-TV market in Indonesia; ------2. The behavior of AAMN and ESS previously cause loss that is experienced by PTDV competitors in Pay-TV market in Indonesia in short period and it potentially encourage unfair competition in long period . ------35.10 The Summary of Violation Assumption as stated previously can be seen in table 1 below:
Table 1: Violation Assumption in the Case Number 03/KPPU-L/2008
The Recommendation from Advanced Examination Advanced Examining Team Violation Assumption T-1 T-2 T-3 T-4 T-1 T-2 T-3 T-4 PTDV AAAN ESS AAMN PTDV AAAN ESS AAMN
Article 16 √ √ √ √ √ √
Article 19 (a) √ √ √
Article 19 (c) √ √ √
THE PRE-AGREEMENT BEHAVIOR OF BROADCASTING RIGHTS TRANSFER BETWEEN ESS AND AAMN IS NOT ANTI-COMPETITION; ------35.11 First, the Commission assumed that the process of rights transferring to organize BPL program in Indonesia territory from ESS to AAMN without tender process, which is later supplied to PTDV, was done by misusing the Astro’s monopolistic position in Malaysia (MBNS). 76 It is figured by the Clarification in LDP (paragraph 56) as follows: ------The Team does not notice any strong economical motive which is the base of ESS action. The logic explanation of this behavior is the
76 Paragraph 88 LHPL, same as AAMN, MBNS is subsidiary from AAAN.
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present of monopolistic position by Astro Malaysia , as the only Pay- TV provider in Malaysia, which is used as the bargaining power of Astro Malaysia to close the opportunity of the other Pay-TV operators in Indonesia to obtain the exclusive BPL broadcasting rights from ESS, by purchasing BPL broadcasting rights in Indonesian territory in a unity with the exclusive BPL broadcasting rights in Malaysian territory; ------35.12 After examining the corresponding document among ESS with AAMN and MBNS, and also interviewing the Reported Parties either in the Preliminary Examination or Advanced Examination, the Advanced Examining Team concludes that the assumption is not proven (paragraph 99 & 100 LHPL): ----- Paragraph 99: …….. Nevertheless, considering the contract value of BPL in Indonesia in the previous season and the contract value of the whole channels in Malaysian territory, the Examining Team concludes that there is no abusive behavior conducted by Astro Group related to their monopolistic position in Malaysia to obtain the exclusive BPL broadcasting rights in Indonesian territory. Paragraph 100: …………., however, by comparing the BPL contract value in Indonesia in the previous season which is doubled, it removes the indication of abusive behavior conducted by Astro Group in AAAN. 35.13 Furthermore, the Commission’s early assumption that Astro Group, in this case AAAN uses the monopolistic position of MBNS in Malaysia to “press” ESS” is also objected by the Commission’s finding during the examination. From the examination process, the Commission finds “economical motive” that is the background of ESS decision in making the agreement for transferring the BPL program organizing rights for Indonesian territory (LHPL, paragraph 20); ------
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However, considering the experiences during running a business in Indonesia, ESS considers Pay-TV operator in Indonesia (in this case Indovision, Indosat Multimedia/IM2 and Telkomvision) do not have good performance in the developing commitment of Pay-TV business development so that ESS decided to do the negotiation of BPL broadcasting rights with AAMN. 35.14 We have to underline the Commission findings previously: ‘ ….. so that ESS decided to do the negotiation of BPL broadcasting rights with AAMN’. It shows that ESS decision to negotiate with AAMN is related to the transfer of organization rights of BPL program for Indonesian Territory is conducted freely based on economic consideration. There is no “force” which was conducted by Astro Group to ESS; ------35.15 Furthermore, that the Commission finding stated previously shows that, substantially, ‘based on the experience during running business in Indonesia’, ESS can be stated it has done the ‘beauty contest’ toward the Pay-TV operators in Indonesia before deciding to do the negotiation related to the transfer of BPL organizing rights for Indonesian territory with AAMN. 77 It is also supported by the expert witness who was presented by the Commission, Prof. Dr. Ine S. Ruky 78 (when answering the question asked by the Advanced Examining Team (Advanced BAP (Expert), question and question number 7); Questions: In the previous period, BPL broadcasting could be accessed by the customers of all Pay-TV in Indonesia, but after it is bought by Astro Malaysia, customers’ access is lost. ESS does not offer it first to the other Pay-TV operators. Answer: I think, Astro is much more aggressive so that it is natural for the Business Actor. Even, when it is focused on the Commission report that ESS had offered to the Pay-TV in Indonesia, which were Indovision, IM2, and Telkomvision, but because it considered the
77 Paragraph 20, LHPL. 78 The Great Teacher of Industrial Economy, Economy Faculty, University of Indonesia.
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performance of those Pay-TV ESS therefore thought that those TV operators did not have commitment so that it was natural if ESS chose the company or operator, which was profitable for ESS. 35.16 All explanations previously shows that ESS and AAMN’s behavior in negotiating is the natural behavior and not anti-competitive as concluded by the Advanced Examining Team; ------The Broadcasting Selling has been conducted by Competitive Mechanism; 35.17 Whether BPL is a premium content or not, and the availability of the rule about the selling of exclusive content, in fact the selling of BPL broadcasting rights has been conducted by giving the Business Actors the same opportunity to obtain BPL broadcasting rights. In this case, the same opportunity to obtain BPL happened when the tender in FAPL is conducted; -- 35.18 We are not agree with the construction arranged by the Advanced Examining Team which implies about ESS responsibility to resell the BPL broadcasting rights which it has obtained because ESS is not the end user of BPL broadcasting rights and it is just as an intermediary as a distributor (please see point 117 and 118, page 48 LHPL); ------35.19 In this case, do not see the relevance of ESS status as the distributor or as the end user of BPL broadcasting rights in deciding the responsibility to resell BPL more competitively, because ESS competitors in the tender in FAPL were the Pay-TV operators or terrestrial TV , they were ESS, MNC Group (RCTI), AAMN and Indovision. It is different when ESS competitors in the tender in FAPL were not those TV operators, so that they do not have the opportunity at all to compete in obtaining BPL broadcasting rights; ------35.20 It is true that ESS position in the aquo case is just as the distributor, but in our opinion, in order to analyze the fair competition in the ownership of BPL broadcasting rights, therefore it must be focused on the fact that the competing parties in FAPL are the same parties, which ask about the same competition one more time to obtain BPL broadcasting rights
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which has been won by ESS as one of the competitor in FAPL tender. By the loss on the BPL broadcasting rights in FAPL, the competing Business Actors, including Indovision and AAMN, basically have lost the opportunity to that obtain BPL broadcasting rights, so that they should not claim to be give another opportunity to obtain the BPL broadcasting rights; ------35.21 In the FAPL tender, the competing Business Actors must not in the definition that their party will have to do the tender again for BPL, which has won by them. Basically, whoever the winner of BPL tender in FAPL, therefore he has the rights to use is whatever he wants, it is to be broadcasted be himself, or transfer it to the other party; ------35.22 Therefore, it is clear that there is no prohibition for ESS to transfer the broadcasting rights to AAMN through direct negotiation between two of them. If the owner of the broadcasting rights in the FAPL level is, for example, Indovision, of course Indovision will broadcast it directly without being forced to do the tender once more about that BPL broadcasting rights. In our opinion, it is unfair when in the same level of competition, ESS has more responsibility compared by the other competitors; ------35.23 In needs to be added that it is a natural business behavior when a Business Actor expects a big profit from the content he bought when he wants to spend much money to buy it. It is also suitable for ESS, which has spent much money to win the tender in FAPL. Of course ESS expects the maximum profit by giving the broadcasting rights for the party which is the most profitable for ESS. In this case, based on the information from ESS party in the Preliminary Examination, it is appropriate if ESS choose to transfer the BPL broadcasting rights for the operator that has the good performance and reputation for paying; ------Basically, there has been a fair competition in transferring BPL’s broadcasting rights from ESS; ------
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35.24 Although, there is no term of law that force ESS to do the tender again to transfer the BPL broadcasting rights legally by the tender in FAPL, basically there has been a fair competition in transferring that BPL broadcasting rights. It is proven by the appearance of barriers or the efforts to block the other Business Actors to submit the offer for BPL broadcasting rights owned by ESS; ------35.25 As explained previously, basically, before choosing AAMN as the candidate for BPL broadcasting rights buyer, ESS has done the ‘beauty contest’ or screening process or internal selection process based on the track record of the other Pay-TV operators. After those selection processes were conducted, later ESS chose to sell the BPL broadcasting rights to AAMN considering AAMN’s seriousness. It is really the essential of business competition: the advantage of one Business Actor from the other competitors is from the quality of the company itself. Therefore, basically the transferring of BPL broadcasting rights has been conducted with the competitive mechanism as desired by the Commission; ------35.26 Moreover, from AAMN side, it is clear that AAMN never do the efforts to block the other Business Actor to submit their bids. Furthermore, as it has been proven by the Commission, AAMN did not use the monopolistic position of MBNS (subsidiary) in Malaysia or the other thing to support the offer, and all actions done by are the natural business activities; ------There is no Term of Law that Force ESS to Conduct the Tender Again about the BPL Broadcasting Rights which has been Won in the Tender in FAPL; ------35.27 That in the FAPL , the Commission considers that AAMN and ESS have violated Article 16 Law No. 5/1999 concerning that the transfer of BPL broadcasting rights is not conducted through competitive mechanism and open the same opportunity for the competitor Business Actor from AAMN; ---- 35.28 In fact, none of the term of Law (either in Indonesia or in Singapore which are the Law basis of ESS) which forces ESS to do the tender once again
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for BPL broadcasting rights that has been won in the tender in FAPL. None of the FAPL regulations or the Law of England that concerns about it: ------35.29 Related to this issue, first and the most important, is that there is no Law that regulates about the selling of exclusive content in Indonesia. It is also reflected in LHPL. In LHPL, the Advanced Examining Team recommends that the government sets a regulation that regulates about the transaction of television exclusive content. Based on that recommendation, it is clear that the Advanced Examining Team admits that there is no regulation that regulates about the transaction of television exclusive content, which means that the transfer of BPL broadcasting rights from ESS to AAMN does not violate any terms of Law; ------35.30 If the Commission still states that the competitive transfer is clear although there is no terms on Law that force it, therefore the responsibility to do the competitive transfer is not AAMN’s responsibility, because the proprietary rights (of the broadcasting rights) and the decision is absolutely according to ESS; ------There is no terms of Law that Restrict the Direct Negotiation of BPL Broadcasting Rights Purchasing 35.31 As explained previously, the BPL transfer process from ESS to AAMN by direct negotiation between both of them cannot be considered as violate the law, including competition law, considering that there is no terms of law that regulates about exclusive content selling. Besides, there is also no terms of law which restricts direct negotiation for direct purchasing of a goods/service (in this case the BPL broadcasting rights) which has been won before by the Business Actor seller in a tender based on the law which has been involved by the Business Actor competitors; ------35.32 Therefore, it is ESS absolute rights to decide to whom their party will transfer the BPL broadcasting rights, which has been won from FAPL. If finally ESS transfer the BPL broadcasting rights to Indovision by a direct negotiation between them, so the other Business Actors, including AAMN
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and PTDV, cannot claim the validity of the court process by the reason that they are not given the opportunity to buy. It is because the other Business Actors basically have been given the same opportunity to obtain the BPL broadcasting rights from FAPL tender, however, they cannot be the winner in that competition; --- 35.33 In addition, the direct negotiation is a natural action to do, and has been practiced widely in the broadcasting business, so that it is clearly not a violation of business etiquette. In fact, in this case, the other Business Actors also do direct negotiation with ESS, by applying the offer of BPL broadcasting rights purchasing, while ESS do not announce the selling of BPL openly; ------35.34 Besides it is unrestricted by the law and a natural thing in a business, it is proven that the court of BPL broadcasting rights transfer also does not have any relationship with the claim of monopolistic position of Astro in Malaysia. it is admitted by the Commission and LHPL, which can be cited as follows (points 99, page 46); “… The Examining Team concludes that there is no abusive behavior conducted by Astro Group related to its monopolistic position in Malaysia to obtain the BPL broadcasting rights in Indonesian territory.” THERE IS NO VIOLATION OF ARTICLE 16 LAW NUMBER 5/1999: ------35.35 To be stated that it violates Article 16 Law No. 5/1999, AAMN must fulfill all elements of Article 16, which are as follows: ------“… The Business Actor is not allowed to sign an agreement with another party abroad that contains a term which can cause monopolistic practice /unfair competition.”
35.36 Below will be explained each element of Article 16, with its application in the case of aquo ; ------The element of “Business Actor” and “The Other Overseas Party”; ------
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35.37 We do not agree and reject the decision of the Advanced Examining Team that AAAN, AAMN, and PTDV are single economic entity. Basically, AAMN has the Base of Law which is equal with ESS related with the parties in Indonesia (which are the Business Actors) that are basically the same, therefore if ESS is not assumed as a Business Actor, AAMN is also not a Business Actor; ------35.38 However, if the Advanced Examining Team assumes that AAMN is a Business Actor, that assumption must be build based on the right concept of law, and not based on doctrine single economic entity; ------35.39 In point 63 page 30, it is stated that; ------“The Examining Team concludes that AAAN, AAMN, and PTDV form a single economic entity, so that although AAAN and AAMN are not founded and located in Indonesia, but both of them run their business activity in the Law Territory of Indonesia by PRDV as the media.” 35.40 We consider that the Single Economic Entity cannot be applied to consider the relationship among AAAN, AAMN, and PTDV because both AAAN and AAMN are not the shareholders of PTDV directly or indirectly. The shareholders of PTDV are PT Ayunda Prima Mitra and Simple Concorde, which are not the part of Astro Group. Because they are not the shareholders, which is an indication of the present of control, AAMN or AAAN cannot be assumed as an economic unity with PTDV. Moreover, since the beginning, AAMN has not ever been appointed, directly or indirectly, as the shareholder of PTDV. Since the beginning, the role of AAMN is as the content supplier and set top boxes (decoder); ------35.41 As written in point 28 LHPL page 26, the Commission is also assumed that the Single Economic Entity Doctrine is the relation between the holding and subsidiary where the subsidiary does not have independency to set the direction of company’s policy as a economic entity unity. The relationship of mother and subsidiary can only happen
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when there is a ownership of share from the mother in a company (subsidiary). Therefore, it is clear the main element of and the most important to decide the present of an economic entity unity is the ownership of share in a company; ------35.42 Moreover, based on LHPL point 55 and 56 page 28 and after that it is examined further whether by the present of share ownership causes: ------1. The control of holding company to the board of directors of the subsidiary; ------2. The advantage that is experienced by holding company from the subsidiary ------3. The obedience of the subsidiary for the policy applied by the holding company; ------35.43 In this case, the Commission has realized that PTDV is not the subsidiary of AAAN and AAMN because there is not any ownership of share from AAAN of AAMN in PTDV; ------35.44 It has been explained to the Commission in the Advanced Examination that Astro Group by its subsidiary, which are ANBV and ANHBV, has a plan to conduct a joint venture with PT Direct Vision. However, until now, the joint venture plant has not been conducted so that until now, there is no ownership of AAAN and AAMN in PTDV; ------35.45 We also have explained the Commission that the content supplying, including BPL content for PT Direct Vision, has been conducted by AAMN in the context of joint venture plan in so that the joint venture can be agreed soon. Therefore, it is clear that there has not been any agreement about the joint venture ; ------35.46 Apart from the joint venture that is the background of the grant of the television broadcasting content (including BPL) by AAMN for PTDV, that
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transfer of content is not free of charge and does not need to be paid as stated in LHPL page 30 (in the figure) as cited below: ------“Until now, PTDV does not have the counter performance responsibility to Astro for the content supplied by AAMN” There is a possibility that the transaction value of the supply content will be converted to be owned by Astro Group in PTDV” 35.47 In fact, the content supply (including BPL) has caused counter performance as seen in the reconciliation statement and invoices sent by AAMN to PTDV apart from that the joint venture will be agreed later; ------35.48 The relationship between AAMN and PTDV is not merely an ordinary business because it is based on the plan to do the joint venture of the subsidiary of AAAN in PTDV. However, the special relationship of AAMN and PTDV does not automatically make PTDV becomes an entity unity with AAMN, AAAN, or vice versa. The fact that there is no direct or indirect ownership of share by AAAN or AAMN in PTDV, so that AAAN, or AAMN do not have the ability to control must be the consideration and cannot be put aside; ------35.49 We also want to clarify the statement cited from the Advanced Examining Team based on the Advanced Examination Report of AAMN that stated that PTDV has operated in Indonesia as if the joint venture has been done is the evidence that the joint venture has existed. It has been agreed that there are some things that are run first before joint venture is agreed for the sake of the agreement process of joint venture which is based on the agreements that have not been signed (one of them is the supply channel agreement), however, the fact that need to be underlined now is that there is no controllling from Astro in PTDV which is indicated by the supply share of the share directly or indirectly in PTDV. The placement of one director as the representative of Astro in PTDV cannot also be assumed narrowly as the present of control or the entity unity as meant in the econmic entity doctrine. It needs to be recorded that the two other
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directors are appointed by the Lippo Group; ------35.50 Based on the reasons previously, we very much oppose the Single Economic Entity Doctrine to define the relationship between AAMN, AAAN, and PTDV. the Commission states that: 1. Single Economic Doctrine Entity requires the relationship between holding company and subsidiary (point 55 LHPL page 28); 2. The business activity done which is done by the party which is located in Indonesian territory is not enough to be assumed to conduct activity in Indonesia (point 65 LHPL page 31); Considering the assumption from the Commission, the Commission should not consider AAMN and AAAN as the companies which have a single entity with PTDV; The Element of “the Agreement with Overseas Party”; ------35.51 We consider that the meaning of the phrase “agreement with the other overseas party” in Law No. 5/1999 is clearly pointed on the agreement between Business Actor and the other overseas party, and cannot be explained widely so that it covers the process of permission making. Related to this problem, the “agreement with the overseas party” as stated in Article 16 Law No. 5/1999 is the agreemet of BPL program transfer between AAMN and ESS (BPL agreement); ------35.52 The term ‘agreement’ must not defined as something that covers the actions of the parties before the agreement is created; ------35.53 In LHPL, the Commission has admitted that the BPL agreement does not have anti-competition characteristic. However, the Commission focuses on “the pre-agreement behaviors that later creates the agreement...,” Therefore, the problem of the Advanced Examining Team is ESS and AAMN activities before the agreemen made, not the BPL agreement; ------35.54 The interpretation made by the Commission is not correct because of the word ‘agreement’ as meant in Article 16 Law No.5/1999 basically has the
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clear definition and not blurred, so that it must be interpreted as the standard definition of “agreement” , which is a product containing the agreements from the parties which create it, the agreement that is the base of the rights and responsibility practice of the parties based on the agreement; ------35.55 It is in line with the “agreement” definition as in Article 1 Number 17 Law No. 5/99 which define “agreement” as “an action by one or more Business Actors to be tied to one or more the other busines players with any names, written or unwritten”; ------35.56 Furthermore, in the Explanation of Article 16 and Article 1 Number 17 Law No.5/1999, it is just stated as “clear enough”. Based on the valid regulation, the clear term is the words which are the part of Terms of Law are not blurred, so that there is no room for doing the interpretation for particular purpose; ------35.57 The “agreement” can be formed written or unwritten, as long as there is an agreement and the tie of the parties. However, in the case of aquo , it is clearly an agreement between ESS and AAMN is the things that are included in BPL agreement. In this case, ESS and AAMN are tied each other by doing the business transaction of BPL controlling program; ------35.58 Considering that the agreement meant in Article 16 Law No. 5/1999 has been fulfilled by the BPL agreement, so it is incorrect if “agreement” in the case of “aquo” is interpreted broadly to cover the process of making the agreement (pre-agreement). Related to it, the phrase used by the Commission is “pre-agreement bahavior” is automatically shown that the problem is the “behavior” and not the agreement, while the meaning of “agreement” in Article 16 Law No. 5/1999 is clearly that the “agreement” itself and not the action done by the parties before the agreement; ------35.59 Broad interpretation from the principles of interpretation about terms of Law must not be done. It can break the law certainty. Besides, it does not have clear limitation about how far is the action of AAMN and ESS can be
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categorized as the “process” of making the agreement; ------The Element that “Includes the Term that can Cause the Monopolistic Practice and/or Unfair Competition”; ------35.60 The phrase “includes the term that can cause…” as meant in Article 16 Law No. 5/1999 is basically simple and clear for its mean and purpose, which is the prohibition of agreement making containing clauses articles that can cause monopolistic practice and/or unfair competition. Hence, Article 16 is focused on the problem whether, in the agreement, there is a term/article that can cause monopolistic practice and unfair competition; ------35.61 This element should be explained in simple way and proved just by the agreed problems in the agreement without any further analysis about the process of making the agreement; ------35.62 In the BPL agreement, there is no term that can cause monopolistic practice and unfair competition at all. We have stated about this thing for many times in the examination process in every levels in the Commission, and have been admitted by the Advanced Examining Team in LHPL, as follows: ------… The examining team considers that agreement is not the behavior with anti-competition characteristic, but the Examining Team considers the pre-agreement behaviors, that later create the agreement itself, cannot be separated from the existence of the current agreement must obey the valid competition legal principles. 35.63 Based on that issues, it is clear that the element of “the agreement containing the term that can cause monopolistic practice and unfair competition” is not fulfilled; ------
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The Element that “can Cause Monopolistic Practice and/or Unfair Competition”; ------35.64. Later, it needs the letter of agreement containing the prohibited clauses. Besides, Article 16 Law No. 5/1999 also needs the occurrence of effects that are caused by those clauses; ------35.65 However, the Commission in LHPL also has admitted that there is no effect that is caused by the BPL Agreement , as follows (point 159, page 57); ----- “Based on the development of the number of customers, Business Actors, products, subscription fees, and the low level of switching barriers, the Examining Team considers that the action done by reported party does not give any bad effect in Pay-TV industry in short period.” 35.66 If it happens (which must be proven by valid way, not by assumption or survey, the customer transfer from the other Pay-TV operator to PTDV because of BPL agreement. Therefore, it is not the effect of unfair competition, but it is merely an essential of that competition. About the absent of negative effect in Pay-TV industry as the effect of BPL agreement will be explained below; ------35.67 Based on the explanation previously, it is clear that not all of the elements of Article 16 are fulfilled in the case of aquo , especially the elements of “agreement containing the term that can cause monopolistic practice and unfair competition” and the elements of “effect” of the agreement; ------35.68 Even if the Commission still assumes that BPL agreement has caused unfair competition. However, the element of “the agreement containing the term…” is still not fulfilled. Later, considering that Article 16 must be fulfilled in cumulative way, so the element of “agreement” that is not fulfilled causes AAMN cannot be stated to have violated Article 16 Law No. 5/1999. Besides, AAMN status as the Business Actor also cannot be
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constructed by the Advanced Examining Team; ------
DEFINITION OF RELEVANT MARKET IS NOT APPROPRIATE; ------
Figure 2: Market Pay-TV Industry
Upstream Market
Content Suppliers
Company A Company B Others
Pay TV Operators dan Free to Air TVs
A B C D E Others
Advertising Pay -TV Subscribers Agencies
Downstream Market
35.69. Before discussing in details whether there is negative impacts at the relevant market, then the Commission needs to clearly and objectively specify the definition of the relevant market, by considering the alternative substitution of the related product in the market, either at the upstream market and downstream market . After that, the Commission can
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determine properly whether the agreement between ESS and AAMN in relation to the BPL in the territory of the Republic of Indonesia has caused the negative impact at the relevant market; ------35.70. In this opportunity, we reaffirm that the determining of the relevant market, particularly the market of the product for the upstream market, as specified by the Commission in the Preliminary Examination Result Report which was then clarified in the Advanced Examination Result Report is not appropriate. We stick our standing as illustrated in more details in the Response and Defense and Clarification of the Reported Party II II (AAAN) and Reported Party IV (AAMN), dated 27th May 2008 (pages 13 to 18) that the determining of the relevant market as done by the Commission in the Preliminary Examination Result Report and Advanced Examination Result Report, particularly at the upstream market, is not appropriate. Such market is too narrow; ------35.71. The followings are the different definition of the relevant market as specified by the Commission in the LDP and Preliminary Examination Result Report / Advanced Preliminary Examination Result Report; ------
Table 2: Definitions of Relevant Market according to the Commission
Preliminary Examination Relevant LDP Result Report / Advanced Market Examination Result Report
market for the acquisition of market for the acquisition of broadcasting right in relation to exclusive right on BPL content the films and sports by the pay- Upstream in the period of 2007-2010 to be TV operators for the Market broadcasted throughout the broadcasting throughout the territory of the Republic of territory of the Republic of Indonesia (*) Indonesia
Pay-TV market throughout the Market of pay-tv throughout the Downstream territory of the Republic of territory of the Republic of Market Indonesia Indonesia
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(*) It is not clear whether the Advanced Examining Team has changed the definition of the product market of the upstream market in the Advanced Examination Result Report compared to Preliminary Examination Result Report. In paragraph 19 of the Preliminary Examination Result Report, the Team states: ----
Preliminary Examination Result Report has stated that the market for the purchasing of the BPL right is a market which is separated from the market for the acquisition of other contents .
However, the Preliminary Examination Result Report (in part C-1-d) precisely defines the upstream product market as ”the acquisition market of the exclusive broadcasting right of BPL in the period of 2007-2010 throughout the territory of the Republic of Indonesia” ------
35.72. In this opportunity, we would like to reaffirm that the definition of the upstream product market as specified by the Commission in the Preliminary Examination Result Report and Advanced Examination Result Report is not appropriate due to the fact that : such product market is not only very narrow as it deals with the BPL exclusive broadcasting right, but also it is limited by the certain period of time, i.e. the BPL program for the period of 2007-2010 . Such market determination assumes that there is no substitutability of the BPL in the upstream market , meanwhile all facts arising during the aquo case examination process do not support such preposition as stated by the Expert Witness Winfred Knibbeler (an European competition law expert); ------35.73. Winfred Knibbeler, has been repeatedly quoted by the Commission (Advanced Examination Result Report, Part III on Analysis, paragraf 14, 22, 28 and 29), when asked of his opinions on the determination of relevant market in this case based on the practices in the Europe (question no. 26), he answers as follows; ------….. The establishment of an upstream market for broadcasting rights limited to the BPL rights as purchased from ESS significantly deviates from established EU decision practice . Under EU competition law, it is unprecedented to establish separate markets for rights related to specific foreign football leagues. Market
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information regarding Indonesia does not appear to justify such a departure from established EU decision practice.
……
As described above, on the basis of this methodology based on substitutability of media rights – in relation to the ability to attract viewers and/or subscribers – EU competition authorities have consistently established a relevant product market “for the acquisition of TV broadcasting rights for football events that are played regularly throughout the year”, thereby not differentiating between foreign football leagues .
The product definition applied by the KPPU – which is based on a differentiation between the BPL and other foreign leagues – as a result significantly differs from established EU practice .
Such a differentiation would only seem justified from an EU competition law perspective if the BPL rights could not be regarded as substitutes for the media rights relating to other domestic and foreign football leagues – including for example the German Bundesliga, the Spanish Liga and the Italian Serie A – in terms of the ability to attract viewers and/or subscribers. 79
AGB Nielsen data, to which is also referred in the reports of the KPPU, suggest that such a differentiation between the BPL rights and media rights relating to domestic and other foreign football leagues – implying that the BPL content is unique in terms of attracting viewers and/or subscribers – would not be justified . 80
......
These market figures suggest that the upstream market for the acquisition of media rights related to football events of which the BPL media rights form part would include the rights related to the
79 In a bid to avoid a misinterpretation on the opinion of Winfred (as quoted in the Advanced Examination Result Report, page 22, paragraph 22), it is better the Commission quotes completely the opinion of Winfred in this paragraph and the following paragraphs. 80 Presentation to the Commission on the BPL, Report of AGB Nielsen, 6 November 2007.
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Indonesian Liga Djarum as well as the German Bundesliga, the Italian Serie A and the Spanish Liga. Even if it would be justified to establish a separate market for the acquisition of media rights related to foreign football events – as opposed to domestic events – there would appear no reason for confining such a market to the BPL rights. 81
35.74. The Winfred Knibbeler’s opinion is in line with the testimony given by the Indonesian Broadcasting Commission (KPI) 82 in responding to the question number 6 when being examined at the Commission on 8 th July 2008; ------No, if we see that the BPL is a hobby which has a substitution. It is slightly different if the World Cup which is the only event which cannot be substituted. 35.75. The same opinion is also expressed by Helen Katherina, the Assistant Director of PT AGB Nielsen Media Reaserch, a witness presented by the Commission in the Session held on 3 rd July 2008 in responding to the question number 22: ------
Question :
(Based on the presentation data) 83 , Which league is more popular among the football leagues throughout the world.
Answer :
81 In order to avoid a misinterpretation on the opinion of the Expert Witness, Winfred Knibbeler (as quoted in the Advanced Examination Result Report, page 22, paragraph 22), it is better the Commission quotes completely the opinion of Winfred in this paragraph and the following paragraphs, due to the fact that in this case Winfred Knibbeler even wishes to state that ”the Competition Law in the European Union sees the BPL market as a separate market if the ...BPL rights could not be regarded as substitutes for the media rights relating to other domestic and foreign football leagues ... in terms of the ability to attract viewers and/or subscriber¡ ”. However, it is in the fact that (read the following paragraph) “AGB Nielsen data … suggest that such a differentiation AGB Nielsen data, to which is also referred in the reports of the KPPU, suggest that such a differentiation between the BPL rights and media rights relating to domestic and other foreign football leagues – implying that the BPL content is unique in terms of attracting viewers and/or subscribers – would not be justified.” 82 The Indonesian Broadcasting Commission (KPI) is represented by Yazirwan Uyun (Broadcasting Content Coordinator of the KPI) and Don Bosco Selamun (Permit Coordinator of KPI), Examination Official Report (BAP) , dated 8th July 2008. 83 The AGB Nielsen’s data is the quantitative data, instead of the survey data whose the accuracy of its methodology is not seldom doubted, the results are therefore may be deviated from the fact.
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The BPL is more popular but not so significant if compared to the Italian League if seen from the show per match. If seen from average, the BPK is not more popular .
35.76. The opinions of the Expert Witness, regulator and witnesses indicate that there is a substitution for the BPL program. Therefore, determining the upstream product market as the procurement market of the BPL program to be broadcasted in Indonesia is not at all appropriate; ------35.77. As we have stated in the Response and Defense as well as Clarification of the Reported Party II (AAAN) and the Reported Party IV (AAMN), dated 27th May 2008 (paragraph 31), as referred by the Commission in the Advanced Examination Result Report (paragraph 20, pages 21-22), the most appropriate way to define the upstream product market is by consider whether alternative substutitons is available for the BPL program from the point of view of other business actors in order to attract subscribers; ------Based on the above explanations, in my opinion, the most appropriate way to define the ‘relevant market‘ is to consider whether alternative substitution is available in the ’upstream market’ to other business actors (instead of the television watchers/subscribers) in the ’relevant market’ in order to maintain their competitive ability in attracting subscribers when such business actors fail to acquire the BPL broadcasting rights. In other words: is there alternative substitution for the BPL program, as one of the television program, which they can acquire to attract subscribers, when these business actors fail to acquire the BPL broadcasting rights.
35.78. This opinion is in line with that expressed by Helen Katherina, the Assistant Director of PT AGB Nielsen Media Research, a witness presented by the Commission in the session held on 3th July 2008 in responding to the question number 23; ------
Question :
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From the advertisers side of the Free to Air TV, what is the substitution for the BPL from the point of view of the advertiser in publishing their advertisements?
Answer :
From the advertiser side, they are not too worried about the absence of the BPL on the Free to Air TV. There are many shows which can substitute . They are more concerned about the quantity of the watchers of a show .
35.79. Concern of the business actors , either the broadcaster or the advertisers is the ability of a program in attracting more subscribers or watchers. And there are various programs which have the ability to attract new subscribers for the pay-TV. It is acknowledged by Handhi S Kentjono, the Director of PT MNC Skyvision (Indovision) as quoted by the Investor Daily, edition 17th September 2007, of which we have informed the Commission by our letter concerning Additional Information on the Indovision’s Statement (the Reported Party I), dated 8th July 2008; ------
….. Therefore, his side took initiative to substitute the EPL program with other programs which are not less attractive . These programs among others like Italian League (Seri A), Germany League (Bundesliga), Japanese League, European Cup Qualification, and Olympics Qualification. “Seriously, we replace one program with five programs in a time which are not of the same class ”, he said.
35.80. All explanations above indicate that there are quite many substitutions for the BPL program. Therefore, it is not appropriate that the Advanced Examination Team determines the upstream product market as the BPL market (only) to be broadcasted in the territory of the Republic of Indonesia. The determination of the product market in such narrow way is only appropriate if the BPL is the essential content as per the concept and definition of the essential content which we explained in the Response and Defense as well as Clarification of the Reported Party II (AAAN) and Reported Party IV (AAMN), dated 27 th May 2008; ------
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35.81. The Advanced Examination Team endeavors to prove whether the BPL is an essential content by way of collecting opinions from some pay-TVs in Indonesia—which means the competitors of PTDV—and the consumers (through MARS survey) whether, in their opinion, the BPL is an essential content. We are in the opinion that this method is not appropriate due to the fact that when they answer to the question, they obviously understand the term ‘essential’ in the plain context as the lexical meaning of such term, instead of in the context of the concept and definition of the ’essential content/essential facility’ as known in the competition law as we have explained in the Response and Defense and Clarification of the Reported Party II (AAAN) and the Reported Party IV (AAMN), dated 27 th May 2008. In other words, the same word/term ( essential content ) has different meaning in the competition law from the understanding of the consumers and pay-TV operators; ------35.82. Therefore, in order to identify whether the pay-TV operators, a content, in this case the BPL— is essential or not, the appropriate way is not by asking their ideas whether such content is essential or not, but by considering the factual conditions in the market. In this case, all facts and data which arise during the examination process of the aquo case indicate that when the BPL content is broadcasted exclusively by PT DV, the number of subscribers of all other pay-TV operators even grow well, among other due to the other pay-TVs offers other exclusive contents which are not less attractive than the BPL, which constitute the substitute product for the BPL. Even, at one side, Indovision as the Reporting Party in the aquo case claims that the BPL is an essential content, so there is no substitution for the content; at other side, Indovision also confirms this fact through the statement of the Director of PT MNC Skyvision (Indovision), Handhi S Kentjono, as quoted by Investor Daily, edition 17 th September 2007; ------
….. ….. Therefore, his side took initiative to substitute the EPL program with other programs which are not less attractive . These programs among others like Italian League (Seri A), Germany League (Bundesliga), Japanese League, European Cup
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Qualification, and Olympics Qualification. “Seriously, we replace one program with five programs in a time which are not of the same class ”, he said.
It is expected that the contradictions of the Reporting Parties can also become a consideration by the Commission Assembly in deciding the aquo case ; ------
35.83. Specifically for the aquo case, other reason that to see the factual condition in the market is the most appropriate way to determine whether a product is an essential content (in the competition law definition) rather than asking questions to the pay-TV operators. It is because the operators are the parties who have the vested interests in the aquo case in which they are also the Reporting Parties in the aquo case. Therefore, to ground the assessment of the essential content (in the competition law definition) to their opinions only which are based on the subjective ideas and assessments are not appropriate; ------35.84. Sedangkan mengenai survey terhadap konsumen yang diselenggarakan MARS, dengan menjawab bahwa BPL adalah konten penting (dalam pemahamannya terhadap kata ’penting’ sebagai orang awam) seorang responden tidak dengan sendirinya pasti akan menjawab ’tidak penting’ bila ditanyakan apakah konten olahraga/sepakbola lain (misalnya Liga Serie-A Italia, Bundesliga, dan Liga Spanyol) adalah konten penting atau tidak. Sangat mungkin ia akan menjawab lebih dari satu atau semua konten tersebut adalah konten penting (dalam pemahamannya terhadap kata ’penting’ sebagai orang awam). Dengan kata lain, ketika seorang responden menjawab bahwa BPL adalah konten penting, hal tersebut sama sekali tidak serta merta dengan sendirinya berarti bahwa ia akan menjawab bahwa konten olahraga/sepakbola lain adalah konten tidak penting bila ditanyakan; ------35.85. Selanjutnya, pada kesempatan ini kami merasa perlu untuk mengklarifikasi metode KPPU dalam menentukan pasar produk di upstream market . Pada paragraf 23 halaman 22 LHPL, Tim Pemeriksa Lanjutan menyatakan; ------
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Sesuai dengan pengertian pasar produk, maka Tim Pemeriksa mengupayakan untuk menilai substitutability dari hak siar program acara lain terhadap hak siar BPL baik dari sisi supply (operator TV berbayar) dan sisi demand (konsumen TV berbayar) 35.86. Menurut hemat kami KPPU keliru dalam melakukan analisis terhadap pasar produk di pasar upstream. Dalam melakukan analisa di pasar upstream, tentunya KPPU harus melakukannya terhadap pihak-pihak yang terlibat di pasar tersebut, dan konsumen TV berbayar bukanlah pelaku dalam pasar upstream . Konsumen TV berbayar adalah pelaku di pasar downstream . Pendapat ini sejalan dengan keterangan Saksi Ahli Winfred Knibeller berikut ini (jawaban atas pertanyaan nomor 24); ------Question: In European competition regime, who are considered the upstream- market players? Answer : On the upstream market for the acquisition of broadcast rights related to football events, the suppliers are the owners of the rights concerned – i.e. the football associations or other bodies representing the football clubs. The purchasers on the upstream market are the pay TV and free-to-air operators .
35.87. Dari uraian di atas menjadi jelas bahwa para pelaku dalam pasar produk di pasar upstream adalah sebagai berikut; ------
• Sisi supply (misalnya produk tayangan olahraga) : supplier content, seperti misalnya FAPL, Organisasi Sepak bola Liga Jerman, Liga Italia, FIA (F-1), NBA, dsb; ------
• Sisi demand : adalah broadcaster yang terdiri dari antara lain, para operator TV berbayar maupun para operator TV terestrial; ------
Dari pelaku-pelaku yang terlibat dalam pasar ini, terlihat bahwa pasar ini sangat kompetitif, baik dari sisi supply maupun demand. Supply content sangat beragam dan calon pembeli pun sangat banyak . Di Indonesia, total jumlah operator TV berbayar maupun operator TV terestrial sudah melebihi angka 20 (dua puluh); ------
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35.88. Bahkan kalaupun pasar produk pada upstream market didefinisikan sesempit pasar penjualan hak siar program BPL untuk wilayah Indonesia (sebagaimana ditetapkan oleh KPPU dalam LPHL), pasar ini tetaplah cukup kompetitif. Dari segi supply, walaupun penyuplainya tunggal, yaitu FAPL, hak siar tersebut akan di-tender setiap tiga tahun sekali. Untuk periode 2004-2007, hak siar BPL dimenangkan oleh TV-7. Sedangkan hak siar BPL periode 2007-2010 dimenangkan oleh ESS. Hak siar untuk periode 2010-2013 akan kembali ditenderkan pada tahun 2009, dan tender tersebut terbuka bagi semua broadcasters di Indonesia untuk berpartisipasi; ------35.89. Sebagaimana dikutip oleh KPPU (paragraf 28, halaman 23 LHPL), adalah benar bahwa Saksi Ahli Winfred Nibeller menyatakan bahwa; ------
It is generally accepted that the relevant upstream product market is based upon “the susbtitutability of media rights from the perspective of TV broadcaseters in relation to the ability to attract viewers and/or subscribers ”.
35.90. Pendapat Winfred yang menekankan pada “perpective of TV Broadcaster” sebagaimana diacu oleh KPPU (paragraf 28 dan 29, halaman 23 LHPL) tidak dimaksudkan sebagai pendapat yang bersifat subjektif. Diperlukan suatu analisis yang mendalam dan objektif dalam menentukan apakah suatu konten memiliki substitusi atau tidak (halaman 12);` ------
Substitutability of media rights can therefore be determined by analyzing the extent to which other content is suitable for the desired purpose of attracting viewers and/or subscribers. On the basis of considerations of and market investigations performed by the EU competition authorities, the relevant upstream product market has therefore consistently been defined as the market for “the acquisition of TV broadcasting rights for football events that are played regularly throughout every year.” This product market definition is applied in all leading cases in relation to the selling of football media rights.
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35.91. The Commission cannot come a conclusion in such a simple way that there is no substitution for the BPL program, solely because the reporting parties state that the BPL is an essential content (paragraph 29, page 23 of the Advanced Examination Result Report); ------The Winfred Knibbeler’s opinion emphasizes on the “perspective of TV broadcaster” which is in this case consistently indicated by either the Reporting parties or Astro Group in seeing the BPL as an essential content to attract subscribers.
This conclusion is very brief because: firstly , it is not grounded by the objective investigation and assessment; and secondly , if the reporting parties and Astro are in the opinion that the BPL content is an essential one to attract the subscribers, then the Commission cannot automatically come to a conclusion that there is no substitution for the BPL content; ------
35.92. The very subjective statements of the reporting parties in the aquo case which is aimed at influencing the Commission in order to punish the reported parties and obtain compensation in trillions, cannot be made as grounds by the Commission in determining that there is no substitution for the BPL program BPL (paragraph 23, page 22 of the Advanced Examination Result Report); ------Whereas, the Reporting Parties in this case are the pay-TV operators which state that the BPL program is an essential content for their business activities. The answer given by Grant Ferguson in response to the question given by the examining team as quoted by the Commission in the Advanced Examination Result Report (paragraphs 25 & 26) cannot also be used to draw a conclusion that there is no substitution for the BPL; ------Question: Is there any supporting evidences such as marketing research or consumer research which state that BPL program is an attractive content? Answer : AAMN acquires the BPL only to be forwarded to DV. Despite of the fact that there is such research, it shall be acknowledged throughout the world that the BPL program is a
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content having a high value, therefore this content can be assured to be attractive in Indonesia. Question: What contents ever acquired by AAMN with most expensive price? Answer BPL. Things that can be concluded from the answer given by Mister Grant Ferguson is that the EPL is a valuable and attractive content which has the capability to attract subscribers . There are many other contents of the same capabilities. And it is required comprehensive investigation before the Commission decides the definition of the upstream product market in this case; ------35.93. The testimonies of the Expert Witness Winfred Knibeller (page 13) on the determination of the relevant market in the Europe Eropa can be a reference by the Commission in determining the definition of the upstream product market ; ------Media rights for various foreign national leagues are consistently held to be in the same product market , in view of their comparable ability to attract viewers and/or subscribers while providing for a similar brand image:
“The consumer in the end is also interested in the football matches of the European UEFA Champions League, in football matches of the Belgian national league, in football matches of the Belgian national team and in foreign football leagues like those of Spain, England, Germany, France and the Netherlands, and the consumer can view these through other broadcasters .” 84
We are unaware of any EU precedent establishing a separate product market for the acquisition of football media rights relating to one specific foreign league only.
35.94. As described above, and as discussed in the Response, Defense and Clarification of the Reported Party II (AAAN) and the Reported Party IV
84 Court decision on appeal, Court of Appeal Brussels, case nr. 2005/MR/2, Telenet N.V. – Liga Beroepsvoetbal V.Z.W., 28 June 2006 (translated).
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(AAMN), dated 27 th May 2008 (paragraphs 30 & 31), in our opinion, in analyzing the upstream product market, the Commission shall conduct analysis from the supply and demand aspects of the business actors in the upstream market, not by analyzing the supply and demand to the business actors in the downstream market (see paragraph 23, page 22 of the Advanced Examination Result Report) . Therefore, the determination of the product market by asking the reporting parties (through MARS) to conduct a survey on the consumers perception on the BPL program is not an appropriate method in determining whether or not there is a substitution for the BPL program in the upstream market ; ------35.95. In this opportunity, we would like to convey that we reserve our rights to give response to the methodology and some aspects in relation to the survey conducted by Mars as above stated; ------35.96. All of our explanations as described above have made us to draw a conclusion that the determination of the upstream product market by he Commission (Preliminary Examination Result Report dan Advanced Examination Result Report) as the “market for the acquisition of the broadcasting exclusive right for the BPL in the period of 2007-2010 for the territory of the Republic of Indonesia cannot be defended; ------THERE IS NO NEGATIVE IMPACT TOWARD MARKET REGARDING BPL’S BROADCASTING RIGHTS OVERTAKE FROM ESS TO AAMN;------35.97 In the part F of Economic Analysis (LHPL’s paragraph 24),the Advanced Examination Team analyzed by dividing the impact of reported party action to pay-TV industrial for upstream and downstream market in Indonesia. For downstream market, the Commission divided it into two categories. They are short-term and long-term impact;------a. Impact on the upstream market 35.98 At paragraph 125-126 page 49 of Advanced Examination Result Report, when discussing the impact on the upstream market, the Advanced Examination Team stated below:------
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As mentioned at section IIID paragraph 77-78, due to the action conducted by AAMN and ESS, AAMN’s competitors experienced financial loss in Barclays Premier League broadcasting rights purchase for Indonesian Region. The financial loss was caused by the lost of audiences because the sport-package subscribers shifted to pay-TV since the Barclays Premier League was broadcasted exclusively on Astro. The lost of subscribers was a financial loss for pay-tv operators because the main income source from pay-TV operator came from the subscription fee paid by the subscribers. 35.99 We suggested, the commission’s reference, as the authority of competition law, needed to be applied on related market when evaluating whether there was a negative impact on related market or not. In the case of pay-TV industry, the impact analysis on the upstream market can not be separated from the impact on the downstream market. The key question here is whether the upstream market (content purchase) was competitive? As we described on our presentation in front of the Commission Assembly Session on August 7, 2008 (the presentation was attached), the upstream market, in this case, was naturally very competitive. Therefore, it was unreasonable for the Advanced Examination Team to state that there was a negative impact on the upstream market;------35.100 Furthermore, we advised the analysis on the upstream market can not be separated from the impact analysis on the downstream market, and the Advanced Examination Team itself has concluded that BPL agreement did not cause any negative impact on pay-TV market in Indonesia (downstream market). In our opinion, the competition authorities needed to “hold themselves” for not getting involved in any business among pay- TV operators if there is no evidence of negative impact on pay-TV industry in Indonesia;------35.101 It is accordance with the opinion of an expert witness presented by the commission, Prof. Dr. Ine S. Ruky 85 (when answering a question from the
85 Professor of Economic Industry, Faculty of Economy, University of Indonesia
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Advanced Examination Team (Advanced BAP(expert), question and answer no.26):------Question : Is there anything else needed to say in this examination? Answer : 3 When I see this case, it is wise for the commission for not becoming a referee regarding the conflict among the pay-TV operators . Contradictory, the commission is preferable to consider the pay-TV industry competition condition and exclusive rights market condition. There is a legal aspect in which there is a protected exclusive rights. 35.102. The expert witness’ statement, Prof. Dr. Ine S. Ruky mentioned above meant that the commission needed to restrain themselves for not being involved in the privately conflict among pay-TV operators. If the reported parties action did not interrupt the competition, but elevate the competition instead, the commission was suggested to not become a referee regarding the conflict among the pay-TV operator;------35.103. In the following parts, we will explain that the Advanced Examination Team has discovered and concluded that pay-TV market (downstream market) in Indonesia was competitive. The competition condition went on competitively. All operators have the increasing number of subscribers as a result of the competition caused by broadcasting BPL program exclusively by PTDV. The commission just exactly concluded that the pay-TV’s subscribers and future subscribers took benefit from the competition. That is why we appealed the commission for not being influenced by the arguments of the reporting parties who claimed that they experienced financial loss due to the BPL program broadcasting exclusively by PTDV;------35.104. Beside that, in this opportunity, we would also like to inform that we really doubt the accuracy and methodology of total financial loss calculation reported by the reporting parties. By no means of getting too many details on technical things, we think that the calculation presented by the reporting parties fundamentally have no basis at all.
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35.105. The financial loss calculation presented by the reporting parties was not conducted on the correct related market. The customer lost was no calculated by referring to the related market definition, which is pay-TV market, but calculated based on the number of sports program subscribers on pay-TV. Logically, by increasing number of pay-TV operators’ subscribers, the reporting parties gained profit in total. This fact can be seen on the reporting parties financial reports;------35.106. However, even if they factually experienced financial loss as a result of BPL exclusive broadcast, it was a natural phenomenon, in which a result of competition. By purchasing BPL program exclusively with expensive price, of course, it is intended so that BPL can draw new subscribers’ attention to PTDV. The new subscribers could be totally brand new subscribers or other pay-TV subscribers;------35.107. The change in pay-TV subscription is a natural thing in the pay-TV industry. Except this change occurs massively and causes other pay- TVs collapsed in which does not occur in aquo case. On one side, Indovision became the reporting party in the aquo case based on the financial loss as a result of subscribers leave that is claimed for BPL exclusive broadcast on PDTV. On the other side, the natural thing mentioned above was supported by Director with concurrent responsibility as the Corporate Secretary of Global Media Com, (parent firm of Indovision), Budi Rustanto’s statement 86 , which expect that live broadcast of Euro 2008 can attract new subscribers;------Probably pay-TV must have programs that can make people “run” . When Barclays Premier League was a trend, probably there were some people moved to Astro and register a new subscription there. Now, for soccer maniacs, especially with Euro 2008, I think they would move. It is an undoubtedly normal thing ,” he said.
86 GATRA, June 11, 2009. The 2 nd BAP of the Reported Party (AAAN), answer from the question no.5
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It seems that the reporting party’s contradiction can be a consideration for Commission Assembly to decide an aquo case;------35.108. Based on explanation mentioned above, supported with our arguments in other parts of this response, we think that the financial loss experienced by the reporting party, even if it exists, it was not due to any action that can be blamed to the reported party. Therefore, we plead to the Commission Assembly to state that compensation request from the reporting parties rejected because it has no reasonable basis. The detail of our response regarding compensation claim from the reporting party is presented on chapter VIII of the response. b. Impact on the Downstream Market 35.109. Shortly, we need to say that the Commission itself has confessed that there was no negative impact caused by anything related with the BPL program broadcasting rights from ESS to AAMN that later exclusively broadcasted by PTDV (paragrpah 159, page 57 Advanced Examination Result Report). All indicators the Commission used for analyzing whether there was any negative impact as a result of exclusive right shift from ESS to AAMN showed a result that precisely strengthen arguments which has been stated by many parties so far that pay-TV market in Indonesia was not negatively influenced by exclusive BPL broadcasting of PTDV. In fact, what happen was contradictory. Pay-TV in Indonesia has become more competitive, thanks to exclusive BPL broadcasting of PTDV;------The exclusively broadcasting of BPL in PTDV, in fact, increased the number of subscribers from all pay-TV operators in Indonesia. 35.110. By exclusively broadcasting BPL by PTDV, the Advanced Examination Team discovered that competition climate among pay-TV operators increased. It is marked with increasing number of subscribers from all pay-TV operators (paragraph 130-131, page 50-51 Advanced Examination Result Report);------Paragraph 130 : ASTRO’s participation and exclusive Barclays Premier League game strategy has influenced the number of subscribers in pay-
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TV industry in total. It shows that the strategy is not only directly inviting brand-new subscribers, but also indirectly causing ASTRO’s competitors to apply another strategy as a response of ASTRO’s action which will result in inviting new subscribers. Paragraph 131 : Thus, it can be concluded that in the previous phase before and after ASTRO got the Barclays Premier League show exclusively on pay-TV, the subscribers number keep increasing and there was no obstacle in subscribers’ increase. The Conclusion from The Advanced Examination Team proved that the reported parties’ Action, including AAMN and ESS, was a precisely pro-competition, not an anti-competition behavior as it has been alleged recently; ------The Low Entry Barrier Level Indicates a Very Competitive Climate Market. 35.111. Beside that, the Advanced Examination Team also confessed that pay-TV condition in Indonesia is very competitive. It is marked with the low entry barrier level for businessmen who want to be pay-TV operators in Indonesia. (paragraph (134, page 52, Advanced Examination Result Report);------35.112. Based on the Broadcasting Directorate of Communication and Information Department (paragraph 133, page 52 Advanced Examination Result Report);------a. There are 14 (fourteen) broadcasting institutions that have legal permission from the General Directorate of Post and Telecommunication, Department of Information,... b. There are 5 (five) satellite-subscription broadcasting that have the principle permission, which is... c. There were 28 (twenty eight) companies which are still proposing permit, including satellite, mobile and digital terrestrial TV. However, the approval process has been delayed to wait government policies regarding the migration issue from analog terrestrial technology to the terrestrial digital ones.
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35.113. The development data of the number of entrepreneurs who join to become pay-TV operators proved that pay-TV market in Indonesia will be very competitive in a short-term and long-term . The free entry and free exit condition caused the high possibility of emerging new entrepreneurs. It will really support the competition climate in the pay-TV market;------The Consumers Will Get Benefit from the Competitions among Pay-TV Operators 35.114. As it mentioned by the Advanced Examination Team in Advanced Examination Result Report, many existed conditions in pay-TV industry will give benefit to the pay-TV consumers. Even it was not significant, the Advanced Examination Team discovered that there is an increasing number of channels in pay-TV in Indonesia (paragraph 137, page 52). The addition of channel numbers was followed with channel variation addition that subscribers or future subscribers could choose (paragraph 14, page 52);------35.115. The channel addition and variation was not followed with increasing subscription price structure. What happen was contradictory. There was tendency of decreasing early registration and monthly subscription fee (paragraph 154, page 56). The decreasing subscription fee of course will really give benefit for consumers and future consumers of pay-TV;--- 35.116. Besides that, the Advanced Examination Team also discovered that switching barrier in pay-TV industry in Indonesia was low. It clearly enough will give consumers benefit that will make them easily change their subscription from one pay-TV operator to another pay-TV operator. With a competitive market as mentioned above, this condition will clearly give benefit consumers (subscribers) and future consumers (future subscribers) of pay-TV in Indonesia;------35.117. All data and facts found by the Advanced Examination Team during the investigation of this case will lead the Commission to a conclusion that action that has been conducted by the reported parties did not
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give any bad impact on pay-TV industry in a short term ;------35.118. What happen was contradictory. As it has been mentioned above, the reported parties action regarding with exclusive BPL program broadcasting from PTDV gave positive impact for pay-TV industry . The exclusively program broadcasting will in fact increase the competition among pay-TV operators and in the end, the consumers will get benefit from the competition. As a result of the competition, the pay-TV programs were more varied and the subscription cost was also decreased;------35.119. Based on findings and conclusions from the Advanced Examination Team in Advanced Examination Result Report (paragraph 166, page 58), we could conclude that basically the Advanced Examination Team did not find any anti-competition behaviors conducted by ESS and AAMN in the aquo case. However, both ESS and AAMN needed to be declared as breaking competition law with consideration of long- term impact on competition among pay-TV operators;------“Even there was no finding of anti-competition impact in a short term , the Advanced Examination Team decided that they have enough basis to judge that the same behavior or action will be repeated in the future if the Commission Assembly did not state that the current action conducted by ESS and ASTRO group as an action violating the competition law.” (paragraph 166, page 58 Advanced Examination Result Report);------35.120. The Advanced Examination Team basically suggested the Commission Assembly to punish AAMN and ESS now with a mistake that probably will never happen in the future. On the other words, the Advanced Examination Team would like to say that now you are not guilty, but considering our concern that you will do the same mistake in the future, we have to punish you now. This is a violation against the main basic law principles ;------35.121. If it is still forced, it will cause the emerging of law uncertainty. And as being concerned by the Advanced Examination Team for long-term
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impact on competition, the law uncertainty also has a long-term impact on foreign investment flow, as it related with distrust toward law enforcement in Indonesia;-- 35.122. That action, if it was conducted by the Commission Assembly in the aquo case, in fact will be anti-competition. According to the Advanced Examination Team, every transaction between ESS and ASTRO group in the future will always be able to be punished by the Commission even though it has no prove of being anti-competition;------35.123. In this case, even we appreciate the Advanced Examination Team’s concerns on aquo case’s long term impact toward competition, we needed to confirm that the Commission’s concerns had no basis based on the reasons we are going to explain below;------35.124. We saw that the Commission’s analysis for the long-term impact was only based on assumption. By looking the fact of the existence the Commission’s case no.07/KPPU-L/2006 related with ESS action which supplied exclusively 6 big channels to PTDV, it is concerned that the both sides will do the same business strategy in the future (please Advanced Examination Result Report, page, the 160 th – 164 th items). We needed to confirm once more that the concern of this long- term impact was unreasonable and had no basis;------35.125. First of all, the relation of ESS with AAMN and AAAN were not an affiliation and the connection among them was exactly the same like what ESS had with any other TV operators, where ESS supplied certain channels and contents it had to the pay-TV operators. The relation among ESS and the TV operators, including AAMN and AAAN, was merely an ordinary business relationship that tied in with an expectation to gain profit for both sides;------35.126. We believe that the Honored Commission Assembly will agree with us that even a simple logic can conclude that there was no financial profit for ESS just by building an exclusive relation with some certain pay-
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TV operators. It is considered that the pay-TV market in Indonesia was really dynamic with a possibility of new comers and foreign investment which are ready for joining the business, so that it can not be confirmed that a certain pay-TV could have a stabile monopolistic position over pay-TV market in Indonesia;------35.127. Therefore, a competition among pay-TV operators basically gave benefit and, of course, it is intended by the ESS because ESS would gain maximum profit due to the pay-TV operators’ competition to acquire content supplies from ESS. That is why it is an incorrect assumption that in a long term ESS would continue the same business strategy with AAMN;------35.128. The Advanced Examination Team’s conclusion that basically ESS and Malaysian Astro was doing the same business strategy like the one in 2006 by having the BPL agreement was having no basis at all. The BPL content sales from ESS to AAMN was basically equal with other content sales, including premium contents, like the one conducted with ESS and other pay-TV operators. Besides that, there was no law regulating about exclusive content sales so it was natural if ESS and AAMN arranged the BPL agreement because they believed they did not violate any regulations or law;------35.129. Furthermore, the most important part was the bad impact on competition was not supposed to be constructed based on nothing other than an assumption , but it need supporting evidences that the long-term impact will happen. It is a fundamental principle of a law-based country. The assumption-based allegation is precisely a violation against human rights, and once more, it is ruining the law enforcement. On behalf of that, we implore for the Honored Commission Assembly’s discretion to response this issue with sustaining the assurance of law enforcement in Indonesia;------THE OBLIGATION OF COMPENSATION HAD NO BASIS AND WAS UNREASONABLE
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35.130. Due to the failure to comply with elements stipulated in Article 16, there was clearly no basis to set up a compensation;------35.131. In the item 6c of Advanced Examination Result Report’s conclusion and recommendation to the Commission Assembly, the Advanced Examination Team has recommended to the Commission Assembly to punish All Asia Multimedia Networks FZ-LLC to pay fine to the country and count and set up a compensation to the reporting parties;------35.132. The Advanced Examination Team recommendation above has been based on item 1 and 2 in the conclusion and recommendation of the Advanced Examination Report which declared AAMN and ESS has made an agreement of an exclusive BPL broadcasting rights in Indonesia without having a competitive process could cause the monopolistic practice on pay-TV market in Indonesia. The ESS and AAMN action above caused a financial loss experienced by the PTDV competitors in the pay-TV market in Indonesia for a short term and potentially emerged unfair competition in a long term;------35.133. The Advanced Examination Result Report’s conclusion and recommendation regarding the mentioned above were incorrect, because;------A. The financial loss reported by the reporting parties was not a concrete loss, but it is only based on nothing other than an assumption;------35.134. Conclusion and Recommendation regarding the financial loss experienced by the reporting parties, in this case, was considered by the Advanced Examination Team based on the consideration stated on paragraph 77 and 78 of the Advanced Examination Report;------35.135. Stated on paragraph 77: “ The subjective perspective from Indovision stated that Barclays Premier League being important for pay-TV industry was supported by the facts that Indovision’s subscribers market has gone since Barclays Premier League
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broadcasted. It was showed that the Indovision’s subscribers market decreased drastically from 53% in June 2007 to 39% in December 2007”;------35.136. At paragraph 78, it is mentioned;------“Therefore, exclusively broadcasting Barclays Premier League in a certain pay-TV was an important thing for the operators for it caused the shift of sport package subscribers to pay-TV. The loss of subscribers was a financial loss for pay-TV operators for the main income source was from the subscription fee paid by the subscribers.” 35.137. As we have explained previously, to measure a negative impact, the competition law authorities should measure it in a related market by referring to the subscribers’ number in the related market. In the aquo case, it is certain that the amount of financial loss needed to be counted based on the number of pay-TV subscriber instead of the number of sport program subscribers. Fact and data showed that during BPL program being broadcasted exclusively by PTDV, the number of subscribers from all reporting parties increased. Therefore, it is very unreasonable if the reporting parties claimed that they have financial loss, particularly in amount of trillions of rupiah;------35.138. In paragraph 33 and 34 section Facts of Advanced Examination Result Report, it was mentioned that there were 15 (fifteen) entrepreneurs having the license of pay-TV in Indonesia and 98% subscribers of pay-TV was dominated by 4 main business operators, which are Indovision, ASTRO, First Media, and Telkomvision;------35.139. Therefore, it was impossible, with a necessary change to be done, to conclude that the decrease of Indovision’s subscribers market was a definite result of the subscription shift to ASTRO because it was a calculation merely based on assumption with opinion sample polling from a part of subscribers. In the beginning of paragraph 77, it was mentioned that Indovision’s financial loss was a “subjective
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perspective” that certainly must be supported with concrete evidences;------35.140. According to the Law in a court (jurisprudence), it has been declared firmly that compensation that could be granted is a concrete financial compensation, not just from an assumption. This is one of defined jurisprudence in the Supreme Court of Republic of Indonesia no. 117K/Sip/1971, date June 2, 1971, in which its decision mainly declared;------Compensation claim, that can not be explained perfectly and was not supported with convincing authentication regarding the amount of compensation that must be received by the litigant parties, can not be granted by the court. 35.141. Based on the valid law of civil procedure, it is decided that only reality-based facts that have authentication value. According to M. Yahya Harahap (former Supreme Judge of Supreme Court) in his law of civil procedure book about Claim, Trial, Confiscation, Authentication, And Court Decision, Sinar Grafika Publisher, Jakarta, 2004, page 501 confirmed that evidence submitted contains concrete and relevant fact or prima facie , which prove a state or condition which directly related to the examined case (footnote: Supreme Court no.71K/Pdt./1984, date May 11, 1985 ju. PT Denpasar no.98/1983, June 27, 1983 jo. PN Klungkung no.47/1982 on December 29,1982;------35.142. Indovision’s subjective perspective about the shifted subscribers’ market to ASTRO was nothing other than an “abstract fact” which in authentication law, it is categorized as an absurd material. Therefore, it did not deem as evidence to prove the truth. The presented prove in the court must be able to prove concrete fact that directly related to the essential case material being disputed. On the other hand, the evidence which only contains abstract fact was invaluable for evidence to prove the truth of law state or condition. (Look at : M. Yahya Harahap, Op.Cit, page 502);------
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35.143. After carefully examined the Financial Loss Estimation Evidence presented by PT. MNC Skyvision and Loss Estimation submitted by Indosat M2, it was proved that those calculations from the evidences above was nothing other than “estimation” or “prediction” which did not meet preliminary requirement that the loss evidence must be concrete or prima facie as mentioned above;------B. There Was Inconsistency When Determining Loss on the Upstream and Downstream Market so It Does Not Have Enough Reason to Punish the Astro Group;------35.144. In the economic analysis about the impact of the reported parties action toward pay-TV industry in Indonesia for the upstream and downstream market in the short and long term period, there was opinion inconsistency in the Advanced Examination Team where the Examining Team gave opinion that AAMN action to buy Barclays Premier League broadcasting rights in Indonesian region was overviewed causing financial loss to the competitors in the upstream market, particularly in the field of purchasing the Barclays Premier League broadcasting rights. On the other hand, in the downstream market (pay-TV industry) showed the positive impact with the join of ASTRO as the business player, which are the increase of pay-TV subscribers, the increase of business player, the addition of channel’s variation that subscribers could choose, the more competitive subscription price, and the low level of switching barrier. It is the purpose and goal of the fair business competition as intended by the Law;------35.145. However, the opinion from the Advanced Examination Team referring to the long-term negative impact based on the assumption that the same behavior will be repeated in the future was a very premature proposition for a reason to punish ESS and AAMN because the long-term loss has not happened yet, even it could be prevented if the government released a regulation about exclusive television content transaction,------
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35.146. Moreover, the Advanced Examination Team only recommended punishing AAMN itself without ESS because ESS was not a business player in Indonesian, whereas on the other side, the Examining team admitted that ESS and AAMN behavior was a behavior violating the competition law. It is rationally conflicting because if the violation did really happen, the violation itself never exist if there was no agreement between ESS and AAMN;------35.147. Based on the mentioned things above, the conclusion and recommendation from the Examining Team deciding to punish AAMN to pay fine to the State and also to count and determine a compensation to the reporting parties have no basis at all, therefore it must be rejected;------RESERVATION OF RIGHTS TO FURTHER RESPOND 35.148. Before closing these Response, Pleading and Clarification, we declared that we reserve our rights to further respond in other forum all circumstances expressed in LDP, Preliminary Examination Result Report, and Advanced Examination Result Report, including, but unlimited, the following matters: ------a. In Advanced Examination Result Report, Advanced Examining Team among underlining on result of survey conducted by MARS against pay-TV in Indonesia in association with aquo case. We declared that we reserve our rights to further respond in other forum matters related to the survey implementation and result validity, Including, but unlimited on, the methodology, question asked and method of question asked, etc. We discussed the matter not too much in these Response, Pleading and Clarification because in our opinion that, even without questioning any result validity and survey implementation, all responses and pleadings and clarifications are expressed by us—either in oral or written—either by Witness and Expert Witness—either in oral or written—as long as the process of aquo case examination has been adequate proven obviously that no violation of Article 16 and Article 19 point (a) and (c) of Law Number 5 Year 1999 by AAMN or AAAN occurs. ------
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“... ”No exclusive broadcasting rights opposed to law of competition . But behavior to obtain the exclusive broadcasting rights and exploitation of exclusive broadcasting rights can be of anti- competition in nature when acquisition or exploitation of the rights conducted in uncompetitive or to obstruct competition so that consumer inflicting impact can be resulted in ” (Advanced Examination Result Report, par. p. 46 . 46)
But most of the discussion of loss in Advanced Examination Result Report and as a basis for judging AAMN was guilty of violating Article 16 of Law Number 5 Year 1999 as a basis for the recommendation of sentence imposition to AAMN on violation of Article 16 Law Number 5 Year 1999 is the loss of Reporting Parties (other Pay-TV operators) who are PTDV's competitors, and not Pay-TV’s consumer. We reserved our right for further response in other forum concerning this issue; ------in addition, if any loss the consumer suffered as a result of 2007-2010 BPL content exclusivity on PTDV, quod non , the loss is a result of exclusivity itself—that is consistently acknowledged by the Clarification Team and the Examining Team as not contrary with law of competition— not as a result of behavior to obtain the exclusive broadcasting rights; because if only AAMN alone wins the BPL exclusive broadcasting rights at FAPL, then AAMN will also provide the exclusive broadcasting only to PTDV so that impact for the consumer, if any—quod non , will also not different at all and will exactly equal to aquo case that currently occurs. Accordingly, we also reserved our right to further respond in other forum concerning this issue; ------
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We reserved our right to further respond in other forum concerning loss validity the Reported Parties claimed that they suffer as a result of BPL content exclusivity on PTDV and validity of the loss counting method. Furthermore, referring to the matter we also reserved our right to further respond in other forum concerning fine sentence and compensation recommended to impose against AAMN because we consider as groundless and unreasonable. We should not discuss too much the matter in these Response, Pleading and Clarification because in our opinion that as long as the process of aquo case examination has been adequate proven and clear that no violation of Article 16 Law Number 5 Year 1999 by AAMN occurs so that actually sentence imposition of AAMN is improper.
35.149. CONCLUSION; ------
1. As finding result of Advanced Examining Team in Advanced Examination Result Report, Astro Group (AAAN and AAMN) was not proven and never used the position as Pay-TV operator in Malaysia to suppress ESS related to the transfer agreement of BPL program broadcasting rights for the Indonesian territory. ------
2. Therefore, Advanced Examining Team recommended that no AAAN and AAMN violate Article 19 (a) and (c) was right and accordance with real fact. ------
3. Advanced Examining Team recommended that no AAAN violates Article 16 is right because AAAN never involved in the transfer agreement of BPL broadcasting rights between ESS and AAMN; ------
4. Alleged violation to Article 16 was not proven; ------
5. BPL program that is exclusively broadcasted by PTDV has no negative impact towards Pay-TV’s industry in Indonesia. Even Pay-TV’s industry in Indonesia continues to undergo rapid growth; ----
6. Hence, AAAN and AAMN request the Commission in order to cease examination on this case; ------
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36. Considering that in term of Decision arrangement, the Commission Assembly observed any latest progress in association with exclusive broadcasting rights transfer of Barclay Premiere League for 2008-2009 season; ------37. Considering that the Commission Assembly judged necessary to hear information of Reported parties concerning issue as intended in Concerning Case Position at point 36 of this Decision; ------38. Considering that the Commission Assembly called for Reported parties to come in Second Session on 22 August 2008 for getting information related to the latest progress of BPL Exclusive Broadcasting Rights in 2007-2010 season ( see the evidence B48); ------39. Considering that the Commission Assembly called for AAAN and Witness from Lippo party (Mr. Reynold P. Ong) to attend in Third Session on 25 August 2008 and the Commission Assembly obtained information related to existence and PTDV business activities ( see the evidence B48); ------40. Considering that hereafter the Commission Assembly judged to have had evidence and adequate judgment to make Decision; ------
CONCERNING LAW
Based on Laporan Hasil Pemeriksaan Lanjutan ( Advanced Examination Result Report ) (hereinafter referred to as “Advanced Examination Result Report”) Opinion or Pleading of Reported parties, letter, document and other items of evidence, the Commission Assembly judged and concluded any violation or not by the Reported parties. In making judgment, the Commission Assembly describes in several parts namely first, concerning alleged violation; second, identity of Reported parties; third, formal aspect; fourth, material aspect; fifth, the Commission Assembly conclusion; sixth, compensation; seventh the Commission Assembly consideration prior to make Decision; eighth, the Commission Assembly recommendation; ninth, concerning decision dictum, and closing; ------1. Concerning Alleged Violation (see the Evidence A151); ------1.1 Considering that alleged violation in this case is violation to Article 16 Law Number 5 Year 1999 conducted by Astro All Asia Networks, Plc, All Asia Multimedia Networks, FZ-LLC and PT Direct Vision with ESPN STAR Sports as well as alleged violation to Article 19 point (a) and point (c) Law Number 5
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Year 1999 conducted by Astro All Asia Networks, Plc, All Asia Multimedia Networks, FZ-LLC and PT Direct Vision in association with Exclusive Broadcasting Rights of Barclays Premier League in 2007-2010 season; ------1.2 Considering that based on Advanced Examination Result Report, especially in association with alleged violation against Law Number 5 Year 1999, the Examining Team recommended to the Commission Assembly in order to: ------a. Declared that violation to Article 16 Law Number 5 Year 1999 conducted by All Asia Multimedia Networks, FZ-LLC dan ESPN STAR Sports are found;------b. Declared that violation to Article 16 Law Number 5 Year 1999 conducted by PT Direct Vision and Astro All Asia Networks, Plc are not found; ------c. Declared that there is no violation to Article 19 point (a) and point (c) Law Number 5 Year 1999 conducted by PT Direct Vision, Astro All Asia Networks, Plc, and All Asia Multimedia Networks FZ-LLC; ------1.3 Considering that based on the Examining Team recommendation in clause 1.2 point b and point c, the Commission Assembly then in this decision no longer judges the violation to Article 16 Law Number 5 Year 1999 occurs or not that conducted by PT Direct Vision and Astro All Asia Networks, Plc and violation to Article 19 point (a) and point (c) Law Number 5 Year 1999 conducted by PT Direct Vision, Astro All Asia Networks, Plc, and All Asia Multimedia Networks FZ-LLC; ------1.4 Considering that hereafter the Commission Assembly only judged to have occurred or not violation against Article 16 Law Number 5 Year 1999 that conducted by All Asia Multimedia Networks FZ-LLC and ESPN STAR Sports based on Advanced Examination Result and opinion or pleading from Reported parties and all letters and/or documents or other items of evidence included therein. ------2. Concerning Reported Parties Identity: ------Considering that Reported parties’ identity in this case is as follows: ------2.1 PT Direct Vision (hereinafter referred to as “PTDV” ) is a corporation in the form Limited Company established according to law and regulation of Republic of Indonesia, with the Statute in which latest amendment was made based on Deed Number 119 by Notary Sutjipto, S.H., which its share owned by PT Ayunda Prima Mitra at 49% and Silver Concord Holdings Limited at
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51% where PT Ayunda Prima Mitra owned by PT Broadband Multimedia, Ltd (currently PT First Media, Ltd), which is one of Lippo Group subsidiaries, currently having domicile at Gedung Citra Graha Lantai 9, Jalan Jenderal Gatot Subroto Kavling 35-36 Jakarta 12950, Indonesia, engaging business activities in Pay-TV management based on Letter of Director General of Post and Telecommunication Number 14 February 2005 concerning service management permit of pay-tv multimedia, and engaging business activities since 28 February 2006 within the Indonesian territory using "ASTRO" trademark ( see the Evidence B5, B38, C9); ------2.2 Astro All Asia Networks, Plc (hereinafter referred to as “ AAAN ”) is a corporation in the form of Limited Company, registered in England and Wales and engaging business activities in Malaysia based on The Company Act of 1985, Memorandum and Article of Association of Astro All Asia Networks, Plc dated 22 July 2003, where its share owned by Grup Usaha Tegas at 42%, Khazanah 20%, Malaysian government trust at 10%, and public at 28%, currently having domicile at All Asia Broadcast Centre, Technology Park Malaysia, Lebuhraya Puchong Sungai Besi, 57000 Kuala Lumpur, Malaysia, is a holding company that having various subsidiaries that engaging business activities in pay-tv, radio broadcasting, production and distribution of TV’s content, and a number of other media business (see the Evidence B8, B34, C119-C121); 2.3 ESPN STAR Sports (hereinafter referred to as “ESS” ) is a joint venture corporation in the form of general partnership between ESPN and STAR Sports, established in United State of America based on Delaware State law, having a branch office registered in Singapore, based on Certificate of Registration of Foreign Company (Form 83 The Companies Act, Cap. 50, Section 371), Company Number: F 05357E that registered in Singapore dated 25 June 1997 signed up by Miss Tan Shook Yng ((Acting Deputy Registrar of Companies and Businesses Singapore), which its share owned by ESPN at 50% and STARTV by 50%, where in majority ESPN owned by Disney Corporation and STARTV in majority owned by News Corp, currently having domicile at 151 Lorong Chuan, #03-01 New Tech Park, Singapore 556741, engaging business activities in development of sport program production, distribution and sale of channel and broadcasting rights in Asia
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territory and Indian subcontinent, including therein to the pay-tv company in Indonesia (see the Evidence B9, B36, C150); ------2.4 All Asia Multimedia Networks, FZ-LLC (hereinafter referred to as “AAMN” ) is a corporation in the form of Limited Company, which founded on April 2006 in Dubai, United Arab Emirates, which its share owned 100% by AAAN, currently having domicile at Dubai World Center Lantai 6, Dubai, United Arab Emirates, and having Branch office at All Asia Broadcast Centre, Technology Park Malaysia, Lebuhraya Puchong Sungai Besi, 57000 Kuala Lumpur, Malaysia, engaging primary business activities in obtaining content, making Indonesian and Malaysian television channel be supplied to pay-TV operator under operation of Astro either at PTDV in Indonesia, MBNS in Malaysia or Kristal Astro di Brunei Darussalam, and engaging secondary business activities such as decoder procurement supplied to PTDV in Indonesia ( see the Evidence B21, B35); 3. Concerning Formal Aspect; ------Considering that before judging and concluding case subject (material aspect), the Commission Assembly judges beforehand formal aspect responded by Reported party, i.e. concerning Exemption of Article 50 point (b) Law Number 5 Year 1999 Commission Jurisdiction towards Reported parties; ------3.1 Concerning Exemption of Article 50 point (b) Law Number 5 Year 1999; ------3.1.1 Whereas, based on the Examining Team analysis in Advanced Examination Result Report as described by point 21.2 of this Decision Concerning Case Position, exclusive broadcasting rights is not contrary with law of competition. Yet, behavior to obtain the exclusive broadcasting rights and exploitation of exclusive broadcasting rights can be of anti-competition in nature, when acquisition or exploitation of the rights conducted in uncompetitive or to obstruct competition, so that consumer inflicting impact can be resulted in;. 3.1.2 Whereas, the Examining Team also observed universal practice applied in other countries that have been implementing first law of competition. In European Union, existence of Intellectual Property Rights ( IPR ) is acknowledged by law of competition, but exploitation over the rights must be subjected to law of competition. ------
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3.1.3 Whereas, law of competition applied towards exploitation of IPR in European Union is known as exhaustion of right doctrine that identical with first sale doctrine known in Law of Anti-Trust in the United State of America. Both doctrines indicate that behavior or agreement related to IPR is not exempted against law of competition applied. ------3.1.4 Considering that the Examining Team concluded about exemption on agreement related to the IPR is not absolute but relatively exempted due to misuse on acquisition or exploitation to the IPR that potential damages competition and may result in consumer inflicting impact; ------3.1.5 Considering that act or agreement regulated it excluding in article of exemption as intended in Article 50 point (b) Law Number 5 Year 1999, hence, the Commission Assembly has rights and power to examine alleged violation related to the matter; ------3.1.6 Whereas, no PTDV, AAAN or AAMN provided opinion or pleading related to this matter; ------3.1.7 Whereas in its opinion and pleading, ESS had opinion that construction of Article 50 (b) according to Advanced Examination Result Report stating exemption upon agreement related to the IPR is not absolutely exempted, but relatively exempted is contra legem because it contraries to grammatical meaning of that Article that regulates concerning exemption of any absolute and comprehensive IPR. BPL agreement is clearly “linked” to the IPR, so that it ought to be exempted from Law Number: 5/1999 ( see the Evidence A164); ------3.1.8 Whereas, in its opinion and pleading, ESS expressed the fact that European Union and USA—where their law of competition didn’t regulate about absolute exemption as mentioned in Article 60 (b)— provided no rights to the TPL or the Commission Assembly for making irrelevant interpretation from intention of Legislator concerning absolute exemption intended by Article 50 (b) ( see the Evidence A164); ------
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3.1.9 Considering that in association with analysis about Exemption of Article 50 point (b) Law Number 5 Year 1999, the Commission Assembly has the following opinion: ------3.1.9.1 Whereas, interpretation of the Examining Team concerning relatively exemption against Article 50 point (b) was already truly made by considering Expert’s opinion and law of competition applied in other countries; ------3.1.9.2 Whereas, BPL Broadcasting Rights was actually IPR, but the acquisition and exploitation must follow the principles of fair business competition; ------3.1.9.3 Whereas , as an authority of competition, the Commission Assembly had the power to handle case with misuse indication over acquisition or exploitation on the IPR that damages competition and may result in consumer inflicting impact; ------3.1.9.4 Whereas, based on the above-mentioned matters, the Commission Assembly judged this case is not exempted according to Article 50 point (b) Law Number 5 Year 1999; ----- 3.2 Jurisdiction of the Commission against Reported parties; ------3.2.1 Whereas, in Advanced Examination Result Report, the Examining Team concluded that the Commission has jurisdiction against Reported parties, namely AAAN, AAMN, and PTDV based on analysis of Single Economic Entity doctrine where AAAN, AAMN, and PTDV form a single economic entity, so that in spite of AAAN and AAMN are not founded or having domicile in Indonesia, yet both of them engaging business activities in the Indonesian territory through PTDV umbrella ( see the Evidence A151); ------3.2.2 Whereas, in Advanced Examination Result Report, the Examining Team deemed that no ESS engaging business activities in the Indonesian territory, so that no qualification of business actor is fulfilled as intended in Article 1 paragraph 5 Law Number 5 Year 1999. In this case, ESS acted for other party in overseas ( see the Evidence A151); ------
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3.2.3 Whereas, in its opinion, PTDV confirmed that PTDV is a company that acts in accordance with the Company Statute of PTDV where the management in the company is responsible for shareholder. Thus, PTDV is not a vehicle from AAAN or AAMN as well as is not part of single economic entity as described in Advanced Examination Report of Case Number: 03/KPPU-L/2008 because currently Astro is not Shareholder of PTDV (see the Evidence A162); ------3.2.4 Whereas, in its opinion and pleading, AAAN and AAMN stated that no Single Economic Entity can be applied judging relationship between AAAN, AAMN, and PRDV because there is no direct of indirect share ownership either from AAAN or AAMN at PTDV, so that no relationship of holding and subsidiary company is found where the subsidiary has no independence to define course of the company’s policy as a single economic entity ( see the Evidence A163)' ------3.2.5 Whereas, in its opinion and pleading, AAAN and AAMN stated that relationship between AAMN and PTDV is actually not only usual sale and purchase because is relied on the plan to make joint venture of AAN subsidiary at PTDV, yet no special relationship owned between AAMN and PTDV automatically makes PTDV into a single economic entity with AAMN, AAN or vice versa. The fact that no ownership of share found direct or indirect by AAAN or AAMN at PTDV, so that AAAN or AAMN has no ability to control, must be any consideration and may not be overlooked ( see the Evidence A163); ------3.2.6 Whereas, in its opinion and pleading, AAAN and AAMN declared that placement of one director as the representative of ASTRO at PTDV can not also be concluded narrowly due to any control or single entity as meant in single economic entity doctrine. It is necessary to note that other two directors are appointed by Lippo Group ( see the Evidence A163); ------3.2.7 Whereas, in its opinion and pleading, ESS received the status decided by Advanced Examination Result Report where ESS is not a business actor as provision in Article 1 paragraph (5), but is foreign party as provision in Article 16 ( see the Evidence A164); ------
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3.2.8 Whereas, in its opinion and pleading, ESS stated by assumption that Advanced Examination Result Report is already exact in considering that provision of Law Number 5/1999 that refers to “business actor group” provides room for application of Single Economic Entity doctrine (“ SEE ”), no reference in Article 16 concerning this matter is found. Article 16 only regulates about business actor and not group of business actor. Hence, there is no room to apply SEE doctrine in association with Article 16 ( see the Evidence A164); ------3.2.9 Whereas, in its opinion and pleading, ESS declared that it understands from Advanced Examination Result Report that PTDV is a subsidiary that its share is fully owned by Lippo Group. 87 Therefore, ASTRO Group and PTDV could not be any SEE, in viewing that PTDV is owned 100% by Lippo Group and because of it is fully controlled by Lippo Group and not by Astro Group ( see the Evidence A164); ------3.2.10 Considering that in association with analysis about jurisdiction of the Commission upon Reported parties, the Commission Assembly has the following opinion: ------3.2.10.1 Whereas, Single Economic Entity doctrine could be applied in this case where AAAN, AAMN, and PTDV form a single economic entity based on considerations as specifically described in Concerning Case Position in point 21.3 of this Decision; ------3.2.10.2 Whereas, although there is explicitly relationship of holding and subsidiary company between Group Astro and PTDV through share ownership, yet Group Astro has indicated domination and real control towards PTDV as specifically described in Concerning Case Position in point 21.3.11 of this Decision; ------3.2.10.3 Whereas, the Commission Assembly judged that ESS’s opinion and pleading in point 3.2.9 above is irrelevant because ESS is not the competent party to give the statement;
87 Laporan Pemeriksaan Lanjutan, Bagian II butir 37.
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3.2.10.4 Whereas, based on the above-mentioned matters, the Commission Assembly judged that the Commission has jurisdiction against PTDV as Indonesian business actor, and against AAAN and AAMN as business actor that have really engaged within the Indonesian territory through PTDV; ------4. Concerning Material Aspect; ------Considering that in judging the violation has occurred or not, the Commission Assembly conducted analysis of element proof in Article 16 Law Number 5 Year 1999. Before conducting analysis of element proof in the Article 16, the Commission Assembly performed first relevant market analysis in this case in order to determine on which market act of anti-competition conducted by Reported party to bring about impact; ------4.1 Relevant Market Analysis; ------4.1.1 Whereas, based on entire description of product and geographic market in Advanced Examination Result Report as described in Concerning Case Position point 21.1 of this Decision, then relevant market in this case is ( see the Evidence A151); ------a. Purchase market of BPL broadcasting rights for the Indonesian territory is without geographic boundary ( upstream market ); ------b. Pay-TV’s market is throughout the Indonesian territory (downstream market ); ------4.1.2 Whereas, PTDV provides no opinion in association with relevant market; ------4.1.3 Whereas in its pleading as described in Concerning Case Position from point 35.69 – 35.96 of this Decision, AAAN and AAMN declares that determination of relevant market, particularly product market for upstream market decided by the Commission in Advanced Examination Result Report, which then is clarified in Advanced Examination Result Report is inexact; The product market is very tight because only involves exclusive broadcasting rights of BPL program, but it is still also limited by term, i.e. BPL program in the period of 2007-2010. Determination of such market supposes that no BPL substitution is found in upstream market. AAAN and AAMN concluded that actors within product market in upstream market from supply side
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(for instance, sport display product) are supplier content , such as FAPL, Germany League Sport Organization, Italy League, FIA (F-1), NBA, etc; and from demand side is broadcaster comprising such as pay-TV operators or terestrial TV operators ( see the Evidence A163); ----- 4.1.4 Whereas in its pleading as clarified in Concerning Case Position at point 34.22 of this Decision, ESS considered that definition of Upstream Market in Advanced Examination Result Report is too tight definition. Relevant Upstream market in this matter at least should cover chief sport content (i.e. primary football game but also Formula 1, main gol tournament, main tennis tournament, etc) and possibly also including general primary content (i.e. primary sport program, primary film, etc). In addition, according to ESS, Downstream market is not only pay-TV in Indonesia, yet including Free to Air (FTA ) and pay-TV ( see the Evidence A164); ------4.1.5 Considering that in association with analysis about relevant market, the Commission had the following: ------4.1.5.1 Whereas, chief determinant in defining any market definition laid on consumer view that in this case is represented through survey that specifically made for the purpose. Whereas, opinion and practice of the competition institute outside Indonesian territory was not merely able to describe consumer perception occurs in the Indonesian territory; ------4.1.5.2 Whereas, definition of relevant market ( upstream ) was not only BPL Broadcasting Rights yet also including broadcasting rights of other content premium as opinion or pleading from AAMN and ESS ( see the Evidence A163, A164); ------4.1.5.3 Whereas, definition of relevant market ( downstream ) was performed using economic approach, considering experts opinion and practice of the competition institute in European Union, and survey results analysis of subscribing TV’s customer. ------4.1.5.4 Whereas, based on product market analysis for downstream market, the Examining Team had considered aspect of use, characteristic, and price between TV’s free to air and pay-TV
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and to conclude between TV’s free to air and pay-TV did nod substitute each other, so the downstream market for pay-TV' s product is separated from TV’s free to air ; ------4.1.5.5 Whereas, based on the consideration of technology and regulation in conducting geographical market analysis, the Commission Assembly concluded that upstream market for purchase of content premium broadcasting rights is not geographically restricted, while downstream market of pay- TV was not regularly limited simply in the Indonesian territory; ------4.1.5.6 Whereas, based on the above mentioned considerations, the Commission Assembly judged that determination of upstream relevant market is broadcasting rights of content premium without geographical restriction and downstream relevant market is Pay-TV throughout the Indonesian territory; ------4.2 Analysis of Element Proof in Article 16 Law Number 5 Year 1999; ------4.2.1 Whereas, provision in Article 16 Law Number 5 Year 1999 sounds as follows: “Business actor is prohibited making agreement with other party in overseas containing provision that may result in monopolistic practices and/or unfair business competition occur ”; ------4.2.2 Whereas, in Advanced Examination Result Report, the Examining Team declared that violation of Article 16 Law Number 5 Year 1999 perpetrated by AAMN and ESS are found ( see the Evidence A151); ------4.2.3 Whereas, the Commission Assembly judged that elements of Article 16 Law Number 5 Year 1999 that must be satisfied in stating any violation or not is: ------4.2.3.1 Element of Business Actor; ------4.2.3.2 Element of overseas party in overseas------4.2.3.3 Element of Agreement; ------4.2.3.4 Element that may result in monopolistic practices and/or unfair business competition occurred; ------4.2.4 Whereas, analysis of element fulfillment against each element in Article 16 Law Number 5 Year 1999 above was as follows: ------
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4.2.5 Element of Business Actor; ------4.2.5.1 Whereas, business actor as declared in Article 1 point 5 Law Number 5 Year 1999 was “ each individual person or company, either in the form of corporation or not, which established and having domicile or engaging the activity within the Republic of Indonesian’s territory, either individually or collectively, carrying out various activities of business in economic ” ------4.2.5.2 Whereas, in this case, business actor meant AAMN as described in Part of Concerning Law at point 2.4 of this Decision; ------4.2.5.3 Whereas, analysis of business actor element fulfillment as described in Part of Concerning Case Position at point 21.3. 17.4 of this Decision was as follows: ------a. Element of “ each individual person or company ”; ------Whereas, AAMN was a corporation so the this element was fulfilled; ------b. Element of “ either in the form of corporation or not ”; ------Whereas, AAMN is a corporation in the form of Limited Company, so this element was fulfilled; ------c. Element of “ established and having domicile or engaging the activity within the Republic of Indonesian’s territory ”; ------Whereas, AAMN was established and having domicile in Dubai, United Arab Emirates, engaging the activity within the Indonesian's territory based on Single Economic Entity Doctrine ; ------d. Element of “ either individual or collective through an agreement ”; ------Whereas, AAMN engaged its business activity individually; ------e. Element of “ carrying out various business activities in economic ”; ------Whereas, AAMN carried out various business activities in economic such as to obtain content , make Indonesian and Malaysian television channel supplied to pay-TV
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operator and procurement of decoder supplied to PTDV in Indonesia; ------f. Thus, AAMN is proven to satisfy element of business actor based on Law Number Year 1999; ------4.2.5.4 Whereas, thus, element of business actor is fulfilled ; ------4.2.6 Element of overseas party in overseas ------4.2.6.1 Whereas, in this case other party in overseas meant ESS as other party who made an agreement with AAMN; ------4.2.6.2 Whereas, ESS was a company formed in the principle of general partnership between ESPN and STAR Sports, established in United State of America based on Delaware State law, having a branch office registered in Singapore. Therefore, ESS is not business actor as described in Article 1 point 5 Law Number 5 Year 1999 but other party exists in overseas; ------4.2.6.3 Whereas, thus, element of other Party in overseas is fulfilled ; ------4.2.7 Element of Agreement; ------4.2.7.1 Whereas, agreement as stated in Article 1 point 7 Law Number 5 Year 1999 was “ an act, one or more business actors, for binding self against one or more other business actors in any name, either written or unwritten ”; ------4.2.7.2 Whereas, ESS and AAMN had made an agreement concerning right to manage BPL broadcasting and right to assign TV operator in Indonesia that may show exclusively BPL broadcasting. Principle points of the agreement had been included into Heads of Agreement between ESS and AAMN and to have been implemented since 2007, in spite of no complete agreement was finalized. Referring to clarification of agreement as described in Article 1 point 7 Law Number 5 Year 1999 above, the agreement could be in written or unwritten. Considering unwritten agreement concerning management and right to appoint between ESS and AAMN had and still been valid, the Commission
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Assembly then judged bahwa between ESS and AAMN had been formed any agreement as intended in Article 1 point 7 Law Number 5 Year 1999 concerning right of BPL broadcasting management and right to appoint TV operator in Indonesia that may show the BPL broadcasting; ------4.2.7.3 Whereas, in point 5 the Heads of Agreement was stated: “The Sole and exclusive right for AAMN to control the placement of the BPL Content on pay television platforms in the Territory and to direct ESS by giving ESS 30 days’ prior written notification to deliver ... ”
4.2.7.4 Whereas, based on clause of the above-mentioned Heads of Agreement . the Commission Assembly had opinion that AAMN obtained exclusive rights to appoint television operator in Indonesia to broadcast BPL in 2007-2010 season, either through direct award without tendering or through competitive process; ------4.2.7.5 Whereas, rights to the management and appointment was an exclusive agreement owned by AAMN so that ESS was unable to supply BPL broadcasting to TV operator in Indonesia without any approval from AAMN. The agreement may result in the occurrence of monopolistic practices and unfair business competition, when conditions as will be analyzed in further element at point 4.2.8 is fulfilled; ------4.2.7.6 Whereas, thus, element of other Party in overseas is fulfilled; ---- 4.2.8 Element that may result in monopolistic practices and/or unfair business competition occurs; ------4.2.8.1 Whereas, the Commission Assembly judged an agreement between AAMn and ESS containing exclusive provision concerning right of BPL broadcasting management and appointment of TV operator in Indonesia to show the BPL broadcasting may result in the occurrence of monopolistic practices and/or unfair business competition, when condition below was cumulatively fulfilled, i.e.: ------
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(1) BPL broadcasting was significant content for downstream relevant market; ------(2) The process of BPL broadcasting exclusive rights AAMN obtained to have been conducted by uncompetitive manner; ------(3) Anti-competitive impact was found on upstream and/or downstream relevant market; ------4.2.8.2 Furthermore, the Commission Assembly will describe analysis towards the following above-mentioned circumstance: ------Concerning BPL broadcasting for downstream relevant market was significant or not ; ------4.2.8.3 Whereas, based on the Examining Team analysis in Advanced Examination Result Report as described in Part of Concerning Case Position at point 21.4 of this Decision, viewed from supply side and from demand side, it could be concluded that England League was significant content for Pay-TV industry in Indonesia ( see the Evidence A151); ------4.2.8.4 Whereas, analysis from supply side was based on the perspective of Pay-TV operator that indicated the England League show is significant show for business actor in Pay-TV market in Indonesia. In addition, based on customer segment data on sport package containing ESPN channel was shown that England League content became driver or content that causes the customer moved operator; ------4.2.8.5 Whereas, analysis from demand side looked from consumer view point sourced from Paid-TV customer survey ; ------4.2.8.6 Whereas, in its opinion, PTDV said Advanced Examination Result Report Commission confirmed that BPL content is not essential content where on November and December 2007 a change of sport package customer segment containing ESPN channel is only 1% ( one percent ) indicated declining trend and percentage quantity that equals to Indovision, IM2, and First Media. This fact is supported by evidence of PTDV
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customer data delivered to the Advanced Examining Team on 11 July 2008 that indicated the occurrence of customer declining at sport package on December 2007 – April 2008 (see the Evidence A162); ------4.2.8.7 Whereas, in its opinion and pleading, ESS stated that based on MARS survey and CASBAA Report and Media Partners Report described that BPL is only one of various worth broadcastings. Substantial growth that was undergone by all PTDV competitors since August 2007 proved that BPL is only a worth content but not very important thing for Pay-TV organizer to compete ( see the Evidence A163); ------4.2.8.8 Whereas, in its opinion and pleading, AAAM and AAMN said way the Advance Examining Team in proving whether BPL is essential content by gathering opinion of Pay-TV operators in Indonesia—that meaning PTDV competitors—and consumers (through MARS survey) is inaccurate because the word of ‘important’ in ordinary context differed with conceptual context and definition of ‘ essential content/essential facility ’ as known in law of competition ( see the Evidence A164); ------4.2.8.9 Whereas, in its opinion and pleading, AAAN and AAMN subsequently said to see whether for Pay-TV operators of any content—in this matter BPL—is essential or not, the right way is not by asking whether in their opinion the content is important, but by seeing their fact of circumstance in the market. In this matter, all facts and data put to the front during the process of aquo case examination indicated that when BPL content is exclusively broadcasted by PTDV, total consumer of other all Pay-TVs even grows richer because inter-alia, on other Pay-TVs there is exclusive contents that no attraction lose from BPL so it is substitution product for BPL ( see the Evidence A164); ------4.2.8.10 Considering that in association with analysis about relevant market, the Commission had the following: ------
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4.2.8.10.1 Whereas, in determining important or not content of England League in relevant market of Pay-TV, the Examining Team had considered data either from supply side or demand side shown in supporting graphic and table illustration either derived from CASBAA Report, Pay-TV customer data from ESS or survey conducted by MARS (see the Evidence C114, C191-C195, C247); ------4.2.8.10.2 Whereas, PTDV had wrong interpreted Advanced Examination Result Report where it never stated that BPL content is essential one; ------4.2.8.10.3 Whereas, responding opinion from PTDV, the Commission Assembly judged that a change of package customer segment containing show of England League only achieved 1% ( one percent ) on December compared with November 2007 even indicates that when PTDV has England League still able to increase customer segment compared with its chief competitor (Indovision and First Media) that continues to undergo customer segment declining as seen in Part of Concerning Case Position (Table 9) of this Decision. Besides, a rise of customer segment every month in cumulative per June – December 2007 from 16% (sixteen percent ) into 36 ( thirty six percent ) indicates that in the present of England League show, PTDV succeeds strengthening its position in the market that increases more than 2 ( two ) fold in the period of 6 (six) months (see the Evidence A151); ------4.2.8.10.4 Whereas, in order to indicate any certain content causing the customer moved, the
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Commission Assembly observed early months where the show begins to be exclusively broadcasted on certain operator and compared with pattern of customer segment rise in previous months. It is necessary done in order to know customer segment rise that results in the present of certain exclusive show, or caused by other business strategy; ------4.2.8.10.5 Whereas, based on the above-mentioned method, the Commission Assembly found the fact at the time of first 3 (three) months the England League show begins to be broadcasted by PTDV (August – October 2007), a rise of its customer segment increases rapidly i.e. 6% (six percent), 8% (eight percent) and 3% (three percent) or, in cumulative, PTDV achieved customer segment by 17% (seventeen percent) within 3 (three) months. 4.2.8.10.6 In fact, at previous period PTDV just undergoes increase with accumulation 16% (sixteen percent) in the period of 12 (twelve) months, i.e. since June 2006 – June 2007 (see the Evidence A151); ------4.2.8.10.7 Whereas, in relation with declining of total customer by 7,000 (ten thousand) customers at Q1 2008 (2008 first four months) compared with Q4 2007 (2007 fourth four months) PTDV goes through, the Commission Assembly judged that it aborts no fact when England League is exclusively shown by PTDV resulted in PTDV achieved enhancement of significant customer segment; ------4.2.8.10.8 Whereas, the Commission Assembly had opinion that in judging the important or not any
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show in Pay-TV industry is by considering the show impact against significant customer migration from one operator to another. This related to Pay-TV industrial character whose chief income is dominated by payment for certain period (monthly/quarterly/annually) from the consumer. The customer migration data are worthwhile to confirm whether subjective perspective of business actors and consumer perspective fitted to anything happened in relevant market. Based on description at point 4.2.8.10.3 – point 4.2.8.10.5 above, the Commission Assembly judged that customer migration occurs as a result of exclusive BPL show at PTDV as well as those data confirmed that BPL show is important as subjectively perceived by business actor and indicated Pay- TV consumer response towards BPL show; ------4.2.8.10.9 Whereas, in responding opinion and pleading from ESS stated that England League show is only one of worthwhile shows from a number of other show, aborted no fact that England League show is worthwhile show as well as aborted no fact that the content is important. ------4.2.8.10.10 Whereas, in responding opinion and pleading from AAAN and AAMN, the Commission Assembly judged subjective opinion of business actor and consumer opinion indicated by result of fact-supported survey that total sport package consumer containing England League show moves so adequate evidence finds that England League is important for Pay-TV industry as stated in Advanced Examination Result Report. In addition, AAAN, AAMN and ESS provided no
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supporting evidence to indicate exclusive content into an attraction for migrating customer from other operator; ------4.2.8.10.11 Whereas, the Commission Assembly also found the price fact of BPL broadcasting rights in 2007-2010 season is very expensive be compared with other content that AAMN ever buys and the price also increased around 4 (four) fold be compared with price of 2004-2007 EPL broadcasting rights (see the Evidence B9); ----- 4.2.8.11 Whereas, base on the above-mentioned matters, the Commission Assembly judged that BPL broadcasting is important content for downstream relevant market; ------Concerning acquisition process of BPL broadcasting exclusive rights; ------4.2.8.12 Whereas, according to the Examining Team, purchase of BPL broadcasting rights from ESS to AAMN passed through no competitive process as migration process from FAPL to ESS, where migration of BPL broadcasting rights that is important content for pat-TV industry, must ensure all business actors in the market to get equal chance and access without discrimination ( see the Evidence A151); ------4.2.8.13 Whereas, the Examining Team found no PTDV involvement in the negotiation process of BPL exclusive broadcasting rights with ESS or any other strategy initiated by PTDV. In this case PTDV is a vehicle for Astro Group in realizing the business and strategy in Indonesia. Thus, the Examining Team found no anti-competition behavior undertaken by PTDV in this case (see the Evidence A151); 4.2.8.14 Whereas, in its opinion, PTDV supported the Commission finding stated that no PTDV involved in the process related to acquisition of exclusive show rights on Barclays Premier League (”BPL”) in Indonesia, where PTDV is only a carrier
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4.2.8.15 Whereas in its opinion and pleading, ESS said Advanced Examination Result Report noted that any process of tender should be conducted prior to negotiation and completion of BPL arrangement. This questioned behavior of parties and not agreement among them. This is disallowed based on Article 16. TPL argumentation said that “behavior prior to consensus/agreement that pushed consensus/agreement could not be separated from existence of agreement and should obey competition values of provision” violates either from clear language norm from Article 16 and general order from Law Number 5 Year 1999. Construction and application of Article 16 by the Advanced Examining Team is contra legem (see the Evidence A163); ------4.2.8.16 Whereas, in its oral opinion and pleading, ESS declared to have discussed issue of BPL broadcasting rights in 2007- 2010 season with Indovision (see the Evidence B9, B36); ------4.2.8.17 Whereas, in its opinion and pleading, AAAN and AAMN stated pre-agreement behavior of BPL broadcasting rights transfer between ESS and AAMN is not anti-competition and BPL broadcasting rights sale has been conducted by competitive mechanism (see the Evidence A164); ------4.2.8.18 Considering that in association with analysis about acquisition process of BPL Broadcasting exclusive rights, the Commission Assembly has the following opinion: ------4.2.8.38.1 Whereas, the Commission Assembly found no evidences that reinforce the statement that ESS has provided a chance to Indovision in negotiating BPL broadcasting rights in 2007-2010 season; ------4.2.8.38.2 Whereas, the Commission Assembly judged that BPL broadcasting rights transfer from ESS to AAMN conducted through direct negotiation without providing equal opportunity towards other operators that has clearly stated their interest to the broadcasting rights, is discriminative behavior; ----
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4.2.8.19 Whereas, based on description as mentioned above, the Commission Assembly judged acquisition process of BPL broadcasting exclusive rights by AAMN conducted by competitive manner; ------Concerning anti-competitive impact on downstream and/or upstream relevant market; ------Concerning Impact at Downstream Market namely in Pay-TV Industry ------4.2.8.20 Whereas, based on the Examining Team analysis in Advanced Examination Result Report, in order to measure whether action done by the Reported party has influence against competition, the Examining Team considered Pay – TV market condition in short and long term timeframe. Short term impact is measured based on progress condition of customer quantity, the number of business actor, progress of total product offered, a change of pricing structure (subscribing cost), and switching barrier level ( see the Evidence A151); ------4.2.8.21 Whereas, in the phase before and after ASTRO obtains exclusive England League show on Pay-TV, the number of customer continues to increase and no barrier of customer growth is found; ------4.2.8.22 Whereas, the progress in the number of potential business actor who enters into the market, may become an indication that entry barrier for business actor is not relative high; ------4.2.8.23 Whereas, based on development of products, services that are found in pay-TV industry in Indonesia has increase of variation that may be selected by the customer or prospect; ------4.2.8.24 Whereas, based on subscribing initial cost data and customer monthly cost it can be concluded that Pay-TV industry has a tendency to decrease in price. From side of subscribing initial fee there was a tendency to go down on Pay-TV with satellite system as a result of direct price competition strategy. While on cable pay-TV, subscribing
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initial cost went down as a result of restructuring change of service/product offered; ------4.2.8.25 Whereas, based on size of subscribing initial cost that must be paid by the consumer in each operator and cost to unsubscribe, it can be summed up that switching barrier on Pay-TV industry is low. ------4.2.8.26 Whereas, based on the progress in the number of customer, progress in the number of business actor, product development, subscribing price development and lower switching barrier , the Examining Team judged the act conducted by the Reported party provides no negative impact in Pay-TV industry in the short term; ------4.2.8.27 Whereas, there is no PTDV’s opinion related to this; ------4.2.8.28 Whereas, in its pleading, ESS stated that chum rate (customer loss) was proper in pay-TV industry, so it can not be made as the basis of the loss ( see the Evidence A164); ------4.2.8.29 Whereas, in its opinion and pleading, AAAN and AAMN stated that there is no basis of loss for a competitor when no loss found in downstream market and no business actor is dead or driven out by the action (see the Evidence A164); ------4.2.8.30 Considering that in association with Impact in Downstream Market, i.e. in Pay-TV Industry, the Commission Assembly has the following opinion: ------4.2.8.38.1 Whereas, ASTRO entered into the market actually results in any migration of customer, but entirely the number of pay-TV customer increases; ------4.2.8.38.2 Whereas, appropriate when entrance of the new entrant will result in market segment owned by incumbent goes down; ------4.2.8.38.3 Whereas, the Commission Assembly judged that no short term negative impact is found in downstream market. ------
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4.2.8.38.4 Whereas, in judging the acquisition process of broadcasting exclusive rights, the Commission Assembly also considers about Level of Competition in the Long Term as follows: ------4.2.8.38.5 Whereas, by considering Case Number 07/KPPU-L/2006 previously conducted by Astro and Group ESS and behavior of both in this case, it seen any tendency either Astro and ESS to perform equal business strategy repeatedly in achieving pay-TV customer in Indonesia; ------4.2.8.38.6 Whereas, the Examining Team judged that ESS has potential to exploit its market strength in the domination of important channel in the development of future pay-TV industry. The Examining Team judged that this potency during the time is always collaborated with Astro in order to enhance its market segment in Indonesia ( see the Evidence A151); ------4.2.8.38.7 Whereas, even though in the short term no anti- competition impact is seen, the Examining Team judged to have adequate basis in judging that equal behavior will be repeated again in the future if the Commission Assembly says no current behavior conducted by ESS and Group Astro as behavior that transgresses law of competition ( see the Evidence A151); ------4.2.8.38.8 Whereas, accordingly, in order to prevent repetition of the matter in the future, the Examining Team judged that the Commission Assembly must state behavior of ESS and Group ASTRO in this case, as behavior that transgresses law of competition by considering long term impact that will occur in pay-TV market ( see the Evidence A151); ------
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4.2.8.38.9 Whereas, no opinion of PTDV was found in association with this; ------4.2.8.38.10 Whereas, in its pleading, ESS stated previous fact and future concern can not be made as reason to penalize ( see the Evidence A163); ------4.2.8.38.11 Whereas in its opinion and pleading, AAAN and AAMN declared that no concrete evidence upon long term impact is found ( see the Evidence A164); ------4.2.8.38.12 Whereas towards this matter, the Commission Assembly had opinion that in competition science of law is allowed providing an authority to the Commission Assembly in making prediction against competition impact that may occur in the long range upon any certain behavior; ------4.2.8.38.13 Whereas, in the period of the Commission Assembly Session, the following new fact is obtained: ------a. Whereas, since 16 August 2008, transition of BPL broadcasting in 2008-2009 season occurred from PTDV to AORA TV (PT Karyamegah Adijaya) in commercial reason and deliberation ( see the Evidence B48); ------b. Whereas, the Commission Assembly judged transition of BPL broadcasting in the form of the BPL exclusive rights exploitation is conducted through uncompetitive process; ------c. Whereas, the Commission Assembly judged an agreement between ESS and AAMN concerning authority transferring of designating operator that will broadcast BPL in 2007-2010 season has potential to bring
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about abuse of dominant position and results in lessening competition ; ------d. Whereas, based on letters were signed by Grant Fergusson dated 18 August 2008 the Commission Assembly obtained, in addition to BPL transition, Group Astro in this matter AAAN, AAMN and MBNS has given reminder to Group Lippo, which in this case PT First Media, Tbk, PT Ayunda Prima Mitra and PT Direct Vision concerning a plan of terminating facilities provision inter-alia ( see the Evidence A194-A199):------i. Transponder capacity dari MBNS; ------ii. Information Technology Services from MBNS; ------iii. Broadcasting Services from MBNS; ------iv. Channel Supply from AAMN; ------v. Satellite Reception Equipment Lease from AAMN; ------vi. Trademark License Agreement ; ------4.2.8.38.14 Whereas, based on the fact, the Commission Assembly judged the plan of terminating facilities provision is evidence that AAMN intends to leave PTDV; ------4.2.8.38.15 Whereas, based on the fact, the Commission Assembly had opinion, transition of BPL broadcasting rights and a plan of termination in point 4.2.8.30.13 above conducted by AAMN is contrary with statement of AAMN in examination process aiming to have some shares and to grow up PTDV; ------4.2.8.38.16 Whereas, the Commission Assembly judged that there is not good faith underlying behaviors of Group Astro until now influencing in the
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development of subscribing TV industry in Indonesia; ------4.2.8.38.17 Whereas, the Commission Assembly judged the behavior may inflict PTDV’s customer particularly due to result in unclearness of PTDV broadcasting survival and to bring about sunk cost as a result of re-unusable equipment; ------4.2.8.38.18 Whereas, based on the whole description, the Commission Assembly judged anti-competition impact in downstream market is found; ------Concerning Impact in Upstream Market i.e. Loss of Competitor in the Market of Broadcasting Rights Purchase on Premium Contents; ------4.2.8.31 Whereas, based on analysis of the Examining Team in Advanced Examination Result Report, action performed by AAMN and ESS has resulted in loss suffered by AAMN competitor in the purchase of England League broadcasting rights within the Indonesian territory ( see the Evidence A151); ------4.2.8.32 Whereas, according to the Examining Team, the loss emerges as a result of customer loss since the England League is exclusively shown at ASTRO because migration of sport package customer in Pay-TV. Customer disappearance is loss for pay-TV operator, in relation to chief income source of pay-TV operator obtained from contribution the customer pays ( see the Evidence A151); ------4.2.8.33 Whereas, on the basis of customer loss on the Pay-TV operators, the Reporter parties in this case that is PTDV i.e. Indovision, IM2 and Telkomvision claimed to suffer loss as a result of broadcasting of England League at ASTRO is shown. Therefore, those three Reporter parties in their report proposed application of indemnity; ------4.2.8.34 Whereas, no opinion of PTDV is found in association with this; ------
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4.2.8.35 Whereas, in its opinion and pleading, ESS stated that in principle no loss the Reporter party suffers because the number of Reporter party customer increases meaning that the Reporter party owns positive gain. In addition, ESS also stated that Telkomvision and IM2 are improper to claim indemnity in association that they never involved in the process of BPL broadcasting rights tender in 2007-2010 season. Besides, ESS stated that assumptions used by Indonesian Appraisal to estimate Indovision loss value as a result of BPL exclusively broadcasted by PTDV has no strong basis ( see the Evidence A163); ------4.2.8.36 Whereas, in its opinion and pleading, AAAn and AAMn in principle stated that when any loss the Reporter party suffers, it is an event where no Reporter party can be blamed ( see the Evidence A164); ------4.2.8.37 Considering, that in association with Impact in Upstream Market, i.e. Competitor Loss in Market of Broadcasting Rights Purchase on Premium Content , the Commission Assembly had opinion that in fact, impact on downstream relevant market is shown, then the Commission Assembly is no longer necessary to consider impact on upstream relevant market; ------4.2.8.38 Whereas, based on the whole descriptions of circumstance that must be cumulatively fulfilled to prove whether an agreement between AAMN and ESS containing exclusive provision about rights of BPL broadcasting management and appointment of TV operator in Indonesia to show the BPL broadcasting may result in monopolistic practices and/or unfair business competition occur, the Commission Assembly judged: ------4.2.8.38.1 BPL broadcasting is important content for downstream relevant market; ------
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4.2.8.38.2 Whereas, acquisition of the BPL broadcasting exclusive rights is conducted by uncompetitive manner; ------4.2.8.38.3 Anti-competition impact in downstream relevant market is found. ------4.2.8.39 Whereas, thus, element may result in the occurrence of monopolistic practices and/or unfair business competition is fulfilled ; ------5. Concerning Conclusion of the Commission Assembly ------Considering that based on judgment and description above, the Commission Assembly came to the following conclusion: ------5.1 According to Advanced Examination Result Report recommendation, there is no violation in Article 16 Law Number 5 Year 1999 conducted by PT Direct Vision and Astro All Asia Networks, Plc; ------5.2 According to Advanced Examination Result Report recommendation, there is no violation in Article 19 point (a) and point (c) Law Number 5 Year 1999 conducted by PT Direct Vision and Astro All Asia Networks, Plc, and All Asia Multimedia Networks FZ-LLC; ------5.3 Based on analysis of elements proof in Article 16 Law Number 5 Year 1999 above, the Commission Assembly judged that are evidences of any violation to Article Law Number 5 Year 1999 conducted by All Asia Multimedia Networks FZ-LLC and ESPN STAR Sports; ------6. Concerning Indemnity; ------6.1 Whereas, based on provision of Article 36 point j Law Number 5 Year 1999, the Commission has an authority to decide and stipulate any loss or not in other business actor party or society; ------6.2 Whereas, in deciding any loss of competitor or not, the inflicted party must be able to indicate the financial statement together with evidences of any loss; ------6.3 Whereas, in this case, the Commission Assembly received no financial statement that indicates any loss and find no evidence about any loss, so that the Commission Assembly decided no any indemnity; ------7. Concerning the Commission Assembly Consideration Before Making Decision; ------
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Considering that before deciding, the Commission Assembly considered the following matters: ------7.1 Whereas, the Commission Assembly necessary deemed to apply the principle of fair business competition in effort of obtaining and exploiting premium content broadcasting rights that will be broadcasted by TV operator in Indonesia; ------7.2 Whereas, the Commission Assembly judged that in order to omit monopolistic practices and/or unfair business competition in this case, it can be done through cancellation of agreement or revision of agreement between ESS and AAMN related to management and placement of England League broadcasting rights in 2007-2010 season so that management and placement of BPL broadcasting rights in 2007-2010 season is carried out through the competitive process among TV operator in Indonesia; ------7.3 Whereas, the Commission Assembly, based on Article 47 paragraph (2) point g Law Number 5 Year 1999 has an authority to impose fine against AAMN, however, in viewing that pay-TV industry in Indonesia is still in phase of initial growth so that the Commission Assembly imposes no fine in this case;------7.4 Whereas, the Commission Assembly necessary deemed to secure rights from pay-TV customer in Indonesia especially PTDV customer to remain enjoying the broadcasting that AAMN together with Astro Group must perform as a single economic entity; ------8. Concerning Recommendation of the Commission Assembly; ------8.1 Whereas, as the Commission task intended in Article 35 point e Law Number 5 Year 1999, the Commission Assembly recommended to the Commission to provide advice and judgment to the Government and other related party; ------8.1.1 Make general provision concerning important content standard and qualification ( premium content ) in the broadcasting; ------8.1.2 Make regulation that obligates transition of important content (premium content ) through competitive and transparent process be broadcasted by TV operator within the Indonesian territory; ------8.1.3 Make regulation towards contents that may not be exclusively broadcasted by Pay-TV operators; ------9. Concerning Decision Dictum; ------
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Considering that based on fact, analysis and conclusion above, and in viewing of Article 43 paragraph (3) Law Number 5 Year 1999, the Commission Assembly: ------
HAVING DECIDED
1. Declared that the Reported party III: ESPN STAR Sports and the Reported party IV: All Asia Multimedia Networks, FZ-LLC were legally proven and carry conviction to violate Article 16 Law Number 5 Year 1999; ------2. Declared that the Reported party I: PT Direct Vision and the Reported party II: All Asia Multimedia Networks, Plc, was proven to violate Article 16 Law Number 5 Year 1999 ------3. Declared that the Reported party I: PT Direct Vision, the Reported party II: Astro All Asia Networks, Plc, and the Reported party IV: All Asia Multimedia Networks, FZ-LLC were not proven to violate Article 19 point a and c Law Number 5 Year 1999; ------4. Declared annulment of agreement between the Reported party III: ESPN STAR Sports and the Reported party IV: All Asia Multimedia Networks, FZ-LLC related to the control and placement of broadcasting rights for Barclays Premiere League in 2007-2010 season or the Reported party IV: All Asia Multimedia Networks, FZ-LLC improved an agreement with the Reported party III: ESPN STAR Sports related to the control and placement of broadcasting rights for Barclays Premiere League in 2007-2010 season for being conducted through the competitive process among TV operators in Indonesia; ------5. Ordered the Reported IV: All Asia Multimedia Networks, FZ-LLC kept and secured pay-TV consumer interest in Indonesia with remains to keep survival of business relationship with PT Direct Vision and terminates no all services to the consumer until any legal settlement concerning owner status of PT Direct Vision; ------
Such this decision made through deliberation in the Commission Assembly Session on the day, Thursday , 28 August 2008 and read before the session stated open for the public on the day, Friday, 29 August 2008 by the Commission consists of Dr. A.M. Tri Anggraini, S.H., M.H. as Chairman of Assembly, Ir Mohammad Iqbal dan Dr. Ir.
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Benny Pasaribu, M.Ec. each as Member of Assembly, assisted by M. Hadi Susanto, S.H. and Ananda Fajar, S.H. each as Registrar.
Chairman of Assembly,
signed by Dr. A.M. Tri Anggraini, S.H., M.H.
Chairman of Assembly, Member of Assembly,
signed by signed by Ir. Mohammad Iqbal Dr. Ir. Benny Pasaribu, M.Ec.
Registrar,
signed by signed by M. Hadi Susanto, S.H. Ananda Fajar, S.H.
For legal Copy SECRETARIAT OF BUSINESS COMPETITION SUPERVISORY COMMISSION Ad Interim Chairman, Director of Law Enforcement,
Ismed Fadillah, SH, M.Si
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