CARREFOUR INDONESIA: GROWTH VIA ALFA ACQUISITION
To increase market share and strengthen its position as a market leader in modern retailing, PT Carrefour Indonesia acquired a 75% (Rp 647 billion/US$87 million) stake in PT Alfa Retailindo from PT Sigmantara Alfindo and Prime Horizon in January 2008. The acquisition gave the company the right to operate all 29 supermarkets of the AlfaMidi chain, a public company with a market capitalization of about US$ 108 million, had more than 11,000 employees. Following the acquisition, Carrefour renamed the Alfa supermarket outlets to Carrefour and Carrefour Express and generated Rp 9.2 trillion in revenues: Rp 7.2 trillion from Carrefour and Rp 2 trillion from Alfa.
The Indonesia Retailers’ Association (APRINDO-Asosiasi Peritel Indonesia) predicted that Carrefour will dominate the national retail market in Indonesia. About a year after, the Business Competition Supervisory Commission (KPPU-Komisi Pengawas Persaingan Usaha) conducted an initial investigation process of Carrefour’s business expansion and in November 2009, KPPU declared that PT Carrefour Indonesia was proven legally and convincingly to have violated Article 17 Paragraph 1 and Article 25 Paragraph 1(a) of Law No. 5/1999 on the prohibition of monopolistic and unfair business competition. KPPU ordered Carrefour to release all the stakes of PT Alfa Retailindo Tbk to parties not affiliated with PT Carrefour Indonesia no later than one year after this decision and to pay a fine of Rp 25 billion.
To challenge this verdict, PT Carrefour Indonesia filed a civil case at the South Jakarta District Court, which decided to cancel all KPPU decisions related to PT Carrefour Indonesia in February 2010. The company was free from the divestment order and fines.
One of the main reasons used by PT Carrefour Indonesia to win in the Court was the definition of retail market and the results of market data researches.
This case provides students an opportunity to discuss and analyze their understanding about economic information in decision-making, market structure systems, and monopolistic issues, as well as to discuss corporate growth strategies. This enables students to be aware of contemporary issues in business restructuring and corporate actions, particularly recent corporate mergers and acquisitions in Indonesia.
The class session would be lively if the instructor uses the debate and open forum format. Role-play would be another method that could be used to discover the assumptions and perspectives of each actor (i.e., KKPU, Carrefour, Alfa and government, competitors, etc).