The Indonesia Competition Commission (locally known as KPPU) recently granted conditional approval for a strategic business cooperation agreement between PT Garuda Indonesia (Persero) Tbk., (Garuda) and Japan Airlines (JAL), signed on 3 October 2024 (Agreement). The Agreement’s approval, issued on 26 February 2025 (Approval), marks a significant milestone, as it is the first instance in KPPU’s history of approving a joint business agreement. Past approvals issued by KPPU have been limited to merger & acquisition notifications.

The KPPU’s Approval sends a strong signal to the business community and sets an important precedent, offering greater legal certainty for businesses seeking to enter into similar strategic collaborations in the future. Although Indonesia does not yet have a specific regulatory framework governing the submission of joint business agreements for KPPU approval, this bold move demonstrates the breadth of KPPU’s discretion in interpreting and implementing the Competition Law.¹

The Approval followed Garuda's request after JAL secured antitrust immunity² from the Japan Fair Trade Commission (JFTC) for the Agreement. Even though KPPU will continue to monitor the implementation of the Agreement and its compliance with the Competition Law, such approval facility provides greater certainty and comfort to the business community that their agreements are Competition Law compliant. We set out an overview of the Agreement, KPPU’s approval conditions, and the implications of the Approval on future business cooperation agreements.

Overview of the Agreement

The Agreement covers a wide array of matters ranging from:

• enhancement of flight availability and scheduling;
• expansion of route network and connectivity; and
• integration and improvement of frequent flyer program.

To support its competition assessment, KPPU solicited input from various key stakeholders, including the Ministry of Transportation, the Indonesia National Air Carriers Association (INACA), and the Indonesian Association of Tour & Travel Agencies (ASITA). KPPU also conducted a market analysis of the Jakarta-Japan route and concluded that Garuda and JAL do not hold a dominant market position, which is currently held by All Nipon Airways (ANA).

Based on the stakeholders’ feedback and market share data, KPPU concluded that the Agreement would likely deliver benefits to both parties and their customers. Accordingly, KPPU found no grounds to consider the Agreement as contravening the Competition Law and regulations.

Conditional approval

Although KPPU approved the Agreement, at the same time it also imposed certain binding obligations on the parties to ensure compliance with the Competition Law, including the obligation to:

1. maintain pre-Agreement flight capacity & frequency, to ensure the retention of all flights that were available before the Agreement’s effectiveness;
2. improve the service quality for both Garuda’s and JAL’s passengers;
3. removing any exclusivity provisions that would prevent either Garuda or JAL from cooperating with other airlines; and
4. submit regular implementation reports, including flight schedules, revenue, gross profits and any policy changes relevant to the Agreement.

Failure to comply with these conditions may result in KPPU conducting investigations and/or imposing penalties. KPPU retains the authority to request data from the parties and to initiate its own investigations, should it suspect any breach of its imposed obligations or detect adverse market impact due to the Agreement.

Implications of the Approval on future agreements

The Approval marks a significant milestone in the development of the Indonesia’s Competition Law regime and enhances legal certainty for businesses entering strategic business cooperation agreements that may have anti-competitive implications. Although there is currently no formal regulatory framework for obtaining advance approval for such agreements, KPPU’s willingness to engage on a voluntary basis reflects a progressive and pragmatic approach. This case also underscores KPPU’s ability to influence the commercial structure and operational terms of joint business agreements in an effort to ensure their Competition Law compliance.

Key takeaways and recommendations

KPPU’s Approval sets an important precedent for businesses seeking clarity on the competition risks associated with strategic business cooperation agreements and strategic alliances. While the current process remains informal and discretionary, this development highlights the value of proactively engaging with KPPU where significant joint business agreements and strategic business cooperation agreements are involved.

To provide greater procedural certainty, we recommend that KPPU consider issuing formal guidelines that would govern the assessment and approval of such strategic business cooperation agreements. For companies intending to enter into strategic business cooperation agreements, this case serves as a positive practical reference point.

We will continue to monitor any future developments in KPPU’s involvement in approving strategic business cooperation agreements. We are also available to assist clients who may be considering or negotiating cross-border or domestic strategic business cooperation agreements that may trigger Competition Law concerns.