Analysis: Shopee and Google investigated for monopoly allegations – Academia

The Indonesian antitrust agency, the Business Competition Supervisory Commission (KPPU), has accused e-commerce company Shopee and tech giant Google of monopolistic practices. Shopee, accused of monopolizing its courier services, has closed the case by agreeing to make changes to its services. Google, on the other hand, accused of monopolizing through its Google Play Billing (GPB) system, has only just entered the trial phase.

The Shopee case began after agency investigators uncovered discriminatory practices by the e-commerce company in selecting courier companies on its digital platform. The platform was reportedly configured to automatically activate and prioritize PT Nusantara Express Kilat (SPX) for consumer package deliveries, prompting the KPPU to find such practices violated anti-competitive laws.

According to KPPU investigator Maduseno, Shopee previously offered consumers a variety of courier service options with different shipping costs. However, after the implementation of the algorithm change and standardization of delivery services on March 15, 2021, the option to choose couriers and shipping costs was removed. This move subsequently resulted in the loss of consumers and the introduction of a single price, which also eliminated price promotions. In addition, it was discovered that Shopee’s executive director Handika Wiguna Jahja simultaneously serves as a director of SPX – evidence that the KPPU says points to Shopee’s alleged monopolistic practices, as such a dual role could “affect related economic entities and potentially affect business competition.” The e-commerce company’s actions raised KPPU’s suspicions of violating Article 19D and Article 25, paragraph 1A of Law No. 5/1999 on the Prohibition of Monopolistic Practices and Unfair Competition. The case was held in several hearings and ended with the KPPU accepting Shopee’s proposal to change its user interface.

Then, on July 2, Shopee signed an integrity pact with the KPPU to ensure that its commitment to behavioral changes in alleged monopolistic practices would be maintained. Monitored by the agency, the pact includes commitments to refrain from engaging in anti-competitive behavior, cease activities with a dominant market position and voluntarily provide evidence of behavioral changes to the monitoring team.

Meanwhile, the Google case began in late 2022, with the KPPU accusing the tech giant of engaging in monopolistic practices by requiring companies distributing their apps through the Google Play Store to use GPB, a method of purchasing digital products and services in apps distributed through the store. Google reportedly threatened to remove apps from the Google Play Store if the relevant companies did not comply with the use of GPB, which further burdened app developers as the tech giant also imposed a service fee of 15 to 30 percent of the price of the digital content being sold. Before Google mandated the use of GPB, app developers could use other payment methods with fees of less than 5 percent.

As a result, the KPPU assessed that as a result of this policy and the fact that Google Play Store is the largest app distribution platform in Indonesia, the tech giant has created market barriers for payment service providers, limited payment options for consumers, and caused a decline in revenue for Indonesian developers while increasing revenue for itself.

Google’s actions have led to accusations of violating Law No. 5/1999, similar to the Shopee case. The first court hearing with the KPPU was recently held on June 28, and the second is scheduled for July 16.

What did we hear?

Several sources say that both Shopee Indonesia and Shopee Express knew about the KPPU investigation long before the integrity pact was signed.

The source of the problem is Shopee’s algorithm, which prioritizes Shopee Express for delivery services. As a result, customers who transact on Shopee are always directed to use Shopee Express to deliver their purchases. This is different from other e-commerce platforms that offer different courier and shipping options.

The algorithm that prioritizes a specific courier service has also been implemented in the seller’s panel, which further limits his options for shipping goods.

This monopolistic practice favoring affiliated companies frustrates freight forwarders, especially Asperindo members. The growth of digital trade, especially after the pandemic, has not automatically benefited them, and instead the digital logistics sector is dominated by freight forwarders affiliated with online marketplaces and aggregators.

Unfair competition in digital logistics affects not only Shopee but also Lazada, which is suspected of prioritizing related courier services as part of an ongoing investigation by the KPPU.

Fierce competition in digital logistics, along with the rapid growth of e-commerce, has led to predatory pricing in the parcel delivery industry. Logistics companies affiliated with e-commerce platforms are setting significantly lower prices, and several logistics companies are calling on the KPPU to expand its investigation beyond Shopee and Lazada to other markets.

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This content is provided by Tenggara Strategics in partnership with Jakarta Post to serve the latest comprehensive and reliable analysis on the Indonesian political and business landscape. Access the latest issue of Tenggara Backgrounder to read the articles listed below:

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