PRESS RELEASE                   4 August、2003

PT GARUDA INDONESIA VIOLATES LAW NO. 5 YEAR 1999 ON

THE PROHIBITION TO CONDUCT MONOPOLY AND UNFAIR

COMPETITION PRACTICES

PT Garuda Indonesia has violated Law No 5 Year 1999. The

Commission headed by Moh. Iqbal with members, Tadjudin

Noersaid and Faisal H. Basri, decided that PT Garuda Indonesia

has violated Articles 14, Article 15 sub-article (2) and Article

26 letter b of the Law No.5 Year 1999. In other areas however

the Commission also stated that PT Garuda Indonesia is not

proven guilty of violating Article 17 and Article 19 letters

a, b, and d of Law No 5 Year 1999.

For this violation, the Commission orders PT Garuda

Indonesia to cancel the dual access agreement given exclusively

to PT Abacus Indonesia, as well as ordering PT Garuda Indonesia

to revise the terms and conditions in appointing authorized

domestic ticket agents by eliminating the Abacus connection

requirement. The Commission also fines PT Garuda Indonesia in

the amount of Rp. 1.000.000.000,- (One billion Rupiahs). This

fine has to be paid by the PT Garuda Indonesia within 30 (thirty)

days after receiving copy of this verdict by PT Garuda

Indonesia.

This case first appeared when the Business Competition

Supervisory Commission (KPPU) received a complaint report from

an unnamed company on actions by PT Garuda Indonesia, which

is considered to be dictating, influencing agents not to invest

individually, as well as forcing agents to rent computers from

PT Abacus Indonesia.

After probing to PT Garuda Indonesia and the reporting

company and summoning 17 witnesses in its examination, the

Commission had found facts, which led to the conclusions:

1. PT Garuda Indonesia on 28 August 2000 has made an agreement

with PT Abacus Indonesia that for the distribution of PT

Garuda’s passenger tickets in Indonesia is only through the

dual access using the PT Abacus Indonesia terminal. The

reason for providing dual access exclusively to PT Abacus

 as the Abacus system provider in Indonesia is due to the lower

cost in the international transactions when using the Abacus

System. Whilst the objective of applying dual access with

only using the Abacus system is aimed to enable PT Garuda

Indonesia to gain access and control over the travel agents

in Indonesia which use the Abacus system in making

reservations and bookings of international flights. These

in all will benefit PT Garuda Indonesia in reducing the

transaction cost PT Garuda’s international flights.

2. PT Garuda Indonesia has also conditioned the travel

agents seeking to be Garuda’s authorized domestic agents,

to first prepare the Abacus system before obtaining the ARGA

connection system. The ARGA System is a system used for

reservations and bookings of Garuda’s domestic flight

tickets, whereas the Abacus system is used to reserve and

book Garuda’s international flight tickets.

3. PT Garuda Indonesia holds 95% shares in PT Abacus Indonesia.

PT Garuda Indonesia has also appointed two of its directors,

 Emirsyah Satar and Wiradharma Bagus Oka as commissioners of

PT Abacus. This has created conflicts of interest due to the

relevancy in the activities of PT Garuda Indonesia and PT

Abacus Indonesia.

4. This dual access policy has also caused difficulties to

other CRS providers in introducing and marketing their

systems to travel agents. This is due to the fact that most

of the travel agents have already selected CRS which has

easier access in reserving and booking Garuda’s domestic

tickets.

5. The requirements of the Abacus connection system have caused

authorized travel agents of Garuda, to bear the additional

installation costs and cost of renting the Abacus

instruments. However, the Abacus System can not be used for

reserving and booking domestic flights. For reserving and

booking domestic flights, PT Garuda Indonesia uses the Arga

System.