Garlic Cartel Emerges Due to Regulations  

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  • The skyrocketing prices of garlic in the past month have raised ever more questions. People are asking whether the garlic phenomenon is due to a natural market mechanism, such as a shortage of stock, or is a conspiracy of some individuals.

    The Competition Supervisory Commission (KPPU) has stepped in to assist in the case. The anti-monopoly watchdog is knee deep in the investigation, following intricate leads that have revealed dirty business practices. Conspiracy allegations have been narrowed down to a cartel – a group of individuals that have conspired to deliberately distort the market.

    KPPU Deputy Commissioner Saidah Sakwan says that those involved in the garlic cartel include business and government officials. Several government regulations seemingly permit market dominance by a handful of producers. As a result, prices can be shuffled in a way that benefits only those who conspire with the cartel.

    Saidah Sakwan met with Tempo reporter Pingit Aria and photographer Aditia Noviansyah to share his team’s findings. He says the KPPU have taken important steps to eliminate the garlic cartel.

    What are the KPPU’s findings on the indications of the garlic trade cartel?

    We have found that there’s a flaw in the garlic marketing lately. There is a possibility that this is due to the market mechanism, like supply and demand. However, after looking closely, there’s actually a supply of garlic that was detained in the Tanjung Perak Container Terminal in Surabaya. The owners did not immediately complete the paperwork, such as the Horticultural Product Import Recommendation (RIPH) and the Import Agreement Letter (SPI) issued by the Trade Ministry. It’s possible that they have deliberately halted the supply commodities to let prices soar.


    What are the Indications?

    We have examined the time patterns of the containers’ arrival along with the regulation and administration that have been set. Since October 2012, importers are obligated to obtain horticultural RIPH and SPI, according to regulations of the Agriculture and Trade Ministries. However, the importers did not immediately complete the permits for their containers, which arrived from January 8 through to March 16, 2013. From there on, we suspect that they’ve deliberately halted them in the port by delaying the permits, letting the prices soar to an absurd level. Moreover, those 394 containers are owned by 11 importers, and one company owns at least 60 containers. Because of the similar actions, which are delaying the permits, there is a possibility that the goods were intentionally held at the port.


    What finding would suggest that the importers delayed the permits on purpose, recalling that the Agriculture and Trade Ministries stated the issuance of the garlic import permit was already too late?

    That was revealed in our investigation. According to our sources, the permit process was delayed intentionally. There was actually enough time to process the paperwork, however they just didn’t make use of it.


    What is the result of this illegal practice?

    Obviously, prices have soared absurdly. Take an example, the price (of garlic) in Jember and Banyuwangi, East Jawa, hit above Rp 80,000 a kilogram, whereas the normal price is Rp 15,000.  If it hadn’t been manipulated, the price would not have reached that high.


    What indications are there that point to flaws with the regulators?

    We point out a regulation that obligates importers to acquire their own facilities as a requirement of an import permit, such as chilled storage. Whereas companies can just hire them. Due to this requirement, automatically only bigger companies can have the privilege as an importer. This regulation automatically reduces the number of players, particularly eliminating smaller companies. When related to this, it can be said that the garlic cartel emerged because of the regulation. We recommend this regulation be re-examined and improved.


    What kinds of sanctions will the KPPU Impose on the importers or the government?

    To the government, as a regulator, we can only recommend that the regulation be changed. As for the importers and the companies that are proven to be involved in the cartel can imposed with sanctions according to Law no. 5of 1999 about the prohibition of monopoly and unfair competition. Besides that, we also coordinate with the Corruption Eradication Commission (KPK) to follow up on any finding of corruption and bribery between businesses and regulators.