Large firms must not control entire industry: KPPU
Charoen Pokphand's subsidiary is among twelve companies being investigated for alleged monopoly in Indonesia's poultry industry
JAKARTA - Poultry companies should focus on one major business activity, or risk dominating the entire poultry industry - from upstream to downstream - and slipping into cartel-like activities, a member of an antimonopoly body has said.
Poultry companies should focus on one major business activity, or risk dominating the entire poultry industry - from upstream to downstream - and slipping into cartel-like activities, a member of an antimonopoly body has said.
Business Competition Supervisory Commission (KPPU) commissioner Munrokhim said his office was investigating alleged cartel practices in the poultry industry.
One possible way to avoid such practices is to allow poultry companies only to focus on one major business activity, he said.
“I think [the firms] need to sell their stocks to other investors so they don’t hold controlling stakes,” Munrokhim said on Monday.
Publicly listed poultry giants Charoen Pokphand and Japfa Comfeed, which dominates the country’s day-old-chicks (DOC) and poultry feed markets, operate various poultry businesses engaged in both upstream and downstream operations.
Munrokhim made the statement in response to alleged cartel practices reportedly behind a free fall in the price of live birds. The government and chicken breeders disagree, with the government believing that oversupply is behind the price slump.
Agriculture Ministry director general of livestock Muladno said on Monday that the slump in the price of live birds was mainly due to excessive supply and that his ministry had taken appropriate measures to stabilize the price.
“The quickest way to prop up prices is through mass chicken culling by both small and big farmers,” he said.
It is estimated that parent stocks hit 30 million chickens, outstripping national demand by 50 percent.
The price of live birds from farms is now around Rp 9,000 (68 US cents) per kilogram, not enough even to cover the standard production cost of Rp 18,000 per kg. Earlier in February, the selling price was around Rp 30,000 per kg.
According to Muladno, the ministry and various poultry associations previously agreed to cull 6 million parent birds to boost the price of live birds in the market. In an initial stage, chicken breeders culled 2 million chickens in October last year and around 1 million in December.
However, the measure has been halted since, the KPPU alleging that only 12 poultry giants took part in the culling to gain individual benefit amid the price slump.
The 12 accused companies are PT Japfa Comfeed Indonesia, PT Malindo Feedmil Indonesia, PT Charoen Pokphand Jaya Farm Indonesia, PT Satwa Borneo, PT Wonokoyo Jaya Corp, PT CJ-PIA, PT Taat Indah Bersinar, PT Cibadak Indah Sari Farm, CV Missouri, PT Ekspravet Nasuba, PT Reza Perkasa and PT Hybro Indonesia.
The KPPU announced its finding last week and it is set to hear responses from the accused this week.
Independent Poultry Breeders Association chairman Kadma Wijaya said, meanwhile, that there was an indication that semi-integrated poultry companies had dumped birds on the market, leading to the plunge in prices. “They sell their parent stocks at a lower price, as they have greater parent stocks do small breeders,” he said.
Japfa marketing director Budiarto Soebijanto insisted that no cartel existed, denying that the 12 companies had cooperated to create an oversupply or manipulate prices. His company, he added, had complied with the Agriculture Ministry’s instruction to carry out a mass cull to reduce stocks and help small farmers obtain higher prices.
