Monopoly and Oligopoly Cases
Group 7
Gusti Ayu Komang Anggraeni (1707511118)
Sabila Aulia Aziziah (1707511120)
Economic Development
Economy and Business Faculty
Udayana University
2019
0
INTRODUCTION
Economics is one field that always exists and accompanies human life. In the
market of economics various types of markets are known, both of which are often
seen in practice in everyday reality as well as those that are only known in absolute
terms in theory.
The types of markets that are generally practiced are monopolies and
oligopolies. today, many of us do not know about monopoly and oligopoly markets.
both from its understanding, characteristic, even to the impact caused by the three
markets. Actually, these market activities, whether monopoly or oligopoly, can be
found in various countries that adhere to the system. Of course the activities of the
system chosen by the state itself also affect the economy of a country.
In this paper we will discuss about cases of monopoly and oligopoly in real
life. Hoped that this paper can provide a real depiction of the practices of monopoly
and oligopoly in real life.
1
SUBTOPICS
The market is a meeting place for sellers and buyers. In another sense, it is also
explained that the market is a meeting place for supply and demand for goods /
services. There are several types of markets and two of them are monopoly and
oligopoly.
MONOPOLY
A monopoly market is a form of market where there is only one firm, and this firm
produces goods that do not have replacement goods which are very close.
Monopoly is considered a less efficient market system because of the low level of
competition. Characteristics of a monopoly market:
1. Manufacturer as 'price maker'
2. Market demand is a form of company request
3. Marginal Revenue is lower than its averaging
4. MR has a negative scope
The causes of the monopoly market:
1. Mastery of strategic raw materials = Absolute advantage
2. Presence of patent rights = Competitive Advantage
3. Limited market
4. Provision of monopoly rights by the government
There are two factors that can cause a monopoly market to arise.
1. Economic of Scale
In various economic activities the level of technology has a large impact on
producers. efficient production can only be done if the amount of production
is very large and covers almost all the required production in the market.
When the company reaches a condition where production costs reach a
minimum, this means the amount of production is almost equal to the
amount of demand available on the market. This situation means that a
2
company can enjoys the most economical scale. Thus as a result of the
economies of scale the company can reduce the price of its goods if the
production is higher. So that new companies are not able to compete with
companies that first developed.
2. Legal barrier to entry
The government regulates the activities of companies that will realize
monopoly power. The rules are:
1. Regulation of patents and copyrights
Patent rights are the exclusive rights of an inventor to use / allow other
people to use their findings. Patent and patent law aims to protect
inventors from competitors who will use their inventions without
sharing the costs and effort incurred. At the same time, the patent rights
made the inventor in a monopoly position throughout the age of the
patent (20 years since registered).
2. Licence
The government can limit the entry of new industries in the industry
through licenses. The reason usually given to support such a monopoly
is to have a company in the industry preferable to open competition
We will take an example from case of monopoly taxi at Bali's Ngurah Rai
International Airport. As we know that the airport is a place that becomes a facility
and infrastructure to facilitate the influx of trasportations of passenger and goods
from arrival until leaving the airport. Airport taxis in operation are given the
freedom to transport passengers to and from the airport. When delivering
passengers, even though each airport taxi fleet has been equipped with an
argometer, in practice, the argometer is not used / not enabled (turned off). Usually,
the tariffs have been arranged by airport taxi cooperatives, where the tarrifs depends
on the location of the trip. This tariff determination tends to be detrimental to
passengers because the tarrif is far above the tariff if the argometer is used.
Passengers also feel disadvantaged because the high tariffs are not offset by a decent
fleet. Because there is no other options in using taxi services at the airport,
inevitably new arrivals must use existing services. With the existence of these
3
monopoly rights, consumers are forced to use airport taxis as transportation even
though they have to pay more.
The result that is very detrimental to economic or business activities is there
is no of business competition that allows companies not to raise prices at will above
the reasonable price level, because there are no alternative products to choose from
consumers. With the existence of law number 5 of 1999 concerning Prohibition of
Monopolistic Practices and Unfair Business Competition, is able to provide legal
certainty and equal protection to every business actor in business, by preventing
monopolistic practices and / or others unfair business competition.
OLIGOPOLY
An oligopoly market is a form of imperfect competition market where the supply
of one type of goods is controlled by several companies. Generally the number of
companies is more than two but less than ten. Each company establishes its own
policy and every action of a company such as holding a price change will be
responded by other companies, because every company in the market believes that
the wisdom of a company will affect the sales and profits of other companies.
The characteristics of an oligopoly market:
1. There are many buyers on the market
2. There are only a few sellers in the market
3. Products sold can be identical, but can also be different from the quality
standards that have been determined
4. There are obstacles to entering the market for new competitors
5. There is interdependence between companies (producers)
6. The use of advertising is very intensive
The types of oligopoly market :
1. Pure oligopoly market
4
This is an oligopoly practice where goods traded are identical goods, for
example oligopoly practices in bottled mineral water products.
2. Differentiated oligopoly market
This market is a form of oligopoly practice in which goods traded can be
distinguished, for example the motorcycle market in Indonesia which is
dominated by several well-known brands.
The oligopoly model is divided into two, namely:
1. Collusive oligopoly, is an oligopoly market where companies that are in the
market conduct collusion through agreements to divide markets and set
prices or other agreements.
2. Non-collusive oligopoly, is an oligopoly market where companies that are
in the market do not do collusion.
The advantages of the oligopoly market:
1. There is efficiency in carrying out production activities
2. Competition between companies will provide benefits to consumers in
terms of price and quality of goods.
The weakness of the oligopoly market:
1. Large investments and capital are needed to enter the market.
2. Old players can register their products so that they have patents that prevent
other companies from producing similar items.
3. Companies that have loyal customers will make it difficult for other
companies to compete with them
4. There are long-term obstacles such as granting franchise rights by the
government so that other companies cannot enter the market
5. There is the possibility of collusion between companies in the market which
can form a monopoly or cartel that is detrimental to society.
To avoid the adverse effects may be caused by the oligopoly market, the
government can make policy as follows:
5
1. Providing convenience rules for new companies to enter the market and
contribute to creating competition.
2. Enacting laws against cooperation between producers, namely by the
enactment of anti-monopoly law number 5 year 1999
We will take an example of the case of trading term and Carrefour's dominance
in the modern retail market in Indonesia. The Carrefour Supermarket is a retail
group founded in Annecy, France. In October 1998, Carrefour opened its first unit
in Indonesia, precisely in Cempaka Putih, Central Jakarta.
On January 22, 2008 PT. Carrefour Indonesia acquired the shares of PT. Alfa
Retailindo, Tbk. (ALFA) as many as 351 million shares or 75% of the 468 million
shares of PT. Alfa Retailindo, Tbk (ALFA). The total value of this transaction is
Rp. 674 billion with a price per share of around Rp 1,920. With this transaction, the
position of PT. Carrefour Indonesia is the leading player in the retail market
competition in Indonesia.
The economic impact after the acquisition of Alfa by Carrefour:
The dominance of market share which leads to monopolistic practices
Based on the evidence obtained during the inspection process, Carrefour's
market share is known to increase to 57.99% (2008) after Alfa's previous
acquisition of 46.30% (2007) in the upstream market so that it legally fulfills
the "master market" qualifications. and "dominant position".
The table below is the market share of upstream hypermarkets and
supermarkets in Indonesia in 2005-2008
Meanwhile, related to the Alfa acquisition case, Carrefour's actions are thought
to lead to monopolistic practices. In fact, there are allegations that Carrefour
6
will continue the process of similar acquisitions to other retailers that have
collapsed. About this acquisition of Alfa that must be anticipated, because the
acquisition will increasingly focus the market, meaning that there will be very
dominant and eventually lead to monopoly. The potential of Carrefour to carry
out monopolistic practices is very high.
Zoning arrangements that harm traditional traders
Traditional merchant income has declined by 50% or more, due to the more
intense development of modern retailers. From the usual Rp. 700,000.00 to
Rp 1 million per day, now only Rp. 300,000.00 - 400,000.00 or even less.
Not to mention the presence of a large Carrefour retailer whose construction
always takes place adjacent to traditional markets. So far, the location of
modern retailers such as minimarkets, supermarkets, and hypermarkets is
often close to traditional markets.
In clause 10 of the DKI Jakarta Regional Regulation No. 2 of 2002 it is
stated that the distance of the private market place of business or facility
whose floor area ranges from 2,000-4,000 square meters and must stand
with a radius of 2-2.5 kilometers from the environmental or traditional
market. In addition, the modern market must be located on the side of the
collector / arterial road. Carrefour allegedly violated a number of rules,
including the construction of outlets near traditional markets, in residential
settlements and outlet zoning.
Term trading that is detrimental to suppliers
KPPU found indications of monopoly deviation with an increase of 120
percent higher costs for suppliers after the acquisition of PT Carrefour
Indonesia against PT Alfa Retailindo Tbk. Before the acquisition in 2007,
the trading term without listing fees charged to suppliers reached 13%. After
the acquisition, these costs rose to 33%.
PT Carrefour provides a 6% promotional discount. From the total derivative
trading terms, even before the acquisition the promotional discount was only
3.5%. One of the products allegedly affected by changes in trading terms is
cosmetic products.
7
The discounted price of cosmetics after the 2008 acquisition given by
Carrefour was 8.75%, even though before the acquisition only 2.5%. A
supplier enters goods with a normal price of Rp. 20,000 per unit sold to
Carrefour for Rp. 17,500 per unit. Furthermore, to consumers Carrefour
sells for Rp. 12,500 per unit. The calculation is based on the net sales
provided by the company.
Then, what does Carrefour get from this trading term? Based on KPPU data,
in 2004 Carrefour obtained Rp. 40.2 billion in cash, which is equivalent to
17.46% of operating income. In short, even if there is no one who wants to
buy, Rp. 40.2 billion is already in the hands.
These problems then make suppliers complain about Carrefour to the KPPU
in relation to practices that are very burdensome to suppliers. In addition to
listing fee practices, suppliers also reported a number of cuts in the price of
products charged to them (fixed rebate, assortment fee) and a minus margin
mechanism.
As a result, Carrefour was declared to have violated Law No. 5/1999
concerning Prohibition of Monopolistic Practices and Unfair Business
Competition, and proven to have violated Article 19 letters a and b. In
addition, Carrefour has proven to use dominant power to establish trade
conditions with the aim of preventing consumers from acquiring competing
goods and or services in terms of price and quality. This is true,
Carrefourterer Article 25 paragraph 1 letter a.
PT Carrefour Indonesia is considered detrimental to goods suppliers
because of the high costs that must be borne by suppliers in traditional
markets, especially post-acquisition of PT Alfa Retailindo by Carrefour.
8
CONCLUSION
1. High airport taxi fares coupled with facilities received by customers that do
not match the rates they pay make many customers complain about this
facility. With the existence of law number 5 of 1999 concerning Prohibition
of Monopolistic Practices and Unfair Business Competition, is able to
provide legal certainty and equal protection to every business actor in
business, by preventing monopolistic practices and / or others unfair
business competition. So the hope of creating a conducive business, where
every business actor can compete fairly and healthily can be realized.
2. While it was related to the Alfa acquisition case with carrefour, the
Carrefour action was allegedly leading to monopolistic practices. In fact,
there are allegations that Carrefour will continue the process of similar
acquisitions to other retailers that have collapsed. This means that there will
be very dominant and eventually lead to monopoly. The potential of
Carrefour to carry out monopolistic practices is very high.
The dominant Carrefour position in the retail company industry is used to
establish trading terms both directly and indirectly, with the aim of
preventing or preventing suppliers from setting lower prices to competitors
and violating Law No. 5 of 1999 article 25 paragraph 1a.
9
REFERENCES
Marina, Anna dan Didin Fatihudin. (2008). Pasar Oligopoli di Indonesia: Kasus
Trading Term dan Dominansi Carrefour pada Pasar Ritel Modern di Indonesia.
BALANCE Economics, Bussiness, Management and Accounting Journal, Vol.
V No. 9. Retrieved from http://journal.um-surabaya.ac.id/ index.php/balance/
article/download/695/514.
Nasution, Yenni Samri Juliati. (2012). Mekanisme Pasar dalam Perspektif Ekonomi
Islam. Media Syari’ah : Wahana Kajian Hukum Islam dan Pranata Sosial, Vol.
14, No. 1. Retrieved from http://jurnal.ar-raniry.ac.id/index.php/medsyar/
article/viewFile/1725/1262.
Saputro, Dani and Nityadin Pradinantia. (2014). Praktik Monopoli Taksi di Bandara
Internasional Ngurah Rai Bali Menurut Undang-undang Nomor 5 Tahun 1999
Tentang Larangan Monopoli dan Persaingan Usaha Tidak Sehat. Privat Law
Journal. Retrieved from https://media.neliti.com/media/publications/26558-
ID-praktik-monopoli-taksi-di-bandara-internasional-ngurah-rai-bali-menurut-
undang-u.pdf
10
