International Law Conference 2018 (i-NLAC2018) "Modern Market Industry Trends and Implications to Fair Competition in Indonesia"

This research aimed to examine the implications of modern market to fair competition, particularly to the existence of traditional market and small businesses. In Indonesia, the modern markets play a limited for increasingly important role groceries retail markets. Traditional retailers still have a substantial role and the penetration of modern industry, concentration is high, and a small number of large players are present. As modern markets penetration increases, there is generally a process of transfer of market power from manufactures and producers to retailers. In 2013, the amount of modern retail industry in Indonesia reached massive progress within the last 5 years with more that 23.000 stores with total minimarket is 14.000 stores. In this sector, producers and manufacturers still have substantial market power in several product markets including bargaining power. This research shows recent cases that such bargaining power is eroding favour of modern market chains, changing the competitive dynamics of retail markets. Furthermore, the increasing size of modern market chain might present certain risks to competition. In addition, regulations on modern retail open new issues to traditional markets existence. One of the legal issues is the imbalance position between traditional market and modern minimarket leads to unfair competition for traditional groceries. The Regional Government entitled to product small business and traditional market to enforce the Law No. 5 Year 1999. In fact, some regional policies liberalize the market by giving more permits expansion for modern market.