80409_281603_g7_monopoly And Oligopoly Cases Print.docx

Monopoly and Oligopoly Cases

Group 7

Gusti Ayu Komang Anggraeni

(1707511118)

Sabila Aulia Aziziah

(1707511120)

Economic Development Economy and Business Faculty Udayana University 2019

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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.

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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

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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:

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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.

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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.

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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.

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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.

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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/26558ID-praktik-monopoli-taksi-di-bandara-internasional-ngurah-rai-bali-menurutundang-u.pdf

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