Jakarta (ANTARA) - Business competition lawyer from the University of Indonesia’s Faculty of Law, Muhammad Yahdi Salampessy, opined that the formation of GoTo will not lead to monopoly in the market. Salampessy, heading the research division under the university law school’s Agency for Business Policy and Competition (LKPU), listed several reasons for no monopoly resulting from the recently announced establishment of GoTo.
He firstly drew attention to the different markets targeted by the two companies.
“Based on Indonesia's business competition law, both Gojek and Tokopedia are two companies that do not compete in the same market, and their products are not interchangeable,” he noted while referring to Law Number 5 of 1999.
The markets of Gojek and Tokopedia are different, as Gojek’s focus is chiefly on mobility and on-demand services, while Tokopedia operates as an e-commerce marketplace, Salampessy expounded.
“By operating in two different markets, the risks of a monopoly or monopolistic practices as a result of the union are very slim,” he emphasized.
Meanwhile, Duta Wacana Christian University (UKDW) business expert Murti Lestari remarked that GoTo will not create a barrier to entry for new players.
Lestari, concurrently a member of the Institute of Social Economic Digital (ISED), a think tank focusing on Indonesia's digital economy, stated that market concentration or economies of scale were two possible outcomes of a business union between companies.
She noted that market concentration could be causal to welfare loss, as it strengthens the existing oligopoly structure that would negatively impact the public.
“In theory, market concentration usually occurs in business combinations between companies in an oligopoly market structure as this raises their market power and the possibility of an eventual monopoly,” Lestari stated.
However, a business combination could create economies of scale that result in welfare gain for the public and improved company performance through efficiency. She noted that on a large scale, the combined entities could have a higher opportunity to invest in technological developments to boost their competitiveness.
“This would surely proffer significant benefits to both users and the public,” Lestari stated.
Two indicators can help determine whether a business union will create market concentration or economies of scale. The first is to look at the industry’s market share, while the second is to observe the barrier to entry to specify the industry structure. These indicators can be used to project the impacts of the recent merger of Gojek and Tokopedia to form GoTo.
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On account of the fact that the Indonesian digital industry is still at its early growth stage, information on market share is still very limited. Hence, Lestari has suggested looking at the barrier to entry.
“There are relatively minimal barriers for new players in our digital industry,” she noted.
“Anyone, with the skill, mental capacity, and time, has the opportunity to develop a digital startup business or online business,” she pointed out.
The minimal barrier to entry is mirrored in how dynamic the "dominant" position is among Indonesia's tech players.
For instance, electronic payment in 2015 was dominated by Mandiri Online and BCA Online, but the situation changed in 2020 when GoPay was named as the leading digital wallet service in Indonesia by Sharing Vision, while other market studies by Ipsos cited ShopeePay as the leading player in October 2020.
This shift in market dominance in a relatively short period of time and minimal barrier to entry are clear indications of a contestable market -- an industry with a high level of competition despite having a high market concentration ratio.
“In this kind of industry structure, a business combination will maintain the contestable market condition and could potentially create higher economies of scale rather than market concentration,” Lestari stated.
Since five of the country’s biggest digital companies only account for 2.1 percent of the nominal GDP, Indonesia’s digital industry is still growing. Hence, she concluded that a business combination in the industry is a logical step to achieve economies of scale.
“Business combination could create welfare gains for consumers and efficiencies for companies; opening wider opportunities for micro, small and medium enterprises (MSMEs) to access the market, compete fairly, and foster innovation,” she stated.
Lestari highlighted that the combination -- similar to that of GoTo -- could result in stronger competitiveness at the global scale, so Indonesian digital companies can go global and make Indonesia proud at the international level.
“Thus, the government needs to look at combinations in our digital industry in a comprehensive way and also consider the positive impacts it creates for the public,” Lestari noted.
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