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Jakarta. The Business Competition Supervisory Commission on Thursday said it had rejected Unilever Indonesia’s proposed acquisition of Sara Lee Body Care Indonesia during an initial assessment after determining that it would lead to market domination in two product categories.

Zaki Badroen, spokesman for the commission, known as the KPPU, told the Jakarta Globe that in its initial study, the commission determined that the proposed merger would result in Unilever Indonesia having a market share of greater than 50 percent in men’s hair cream and deodorant, exceeding the limit set by the commission.

However, Zaki said this did not mean the KPPU would necessarily reject the merger, because a more thorough study will be conducted before the final verdict.

“Even if the Unilever and Sara Lee merger did not pass the preliminary review process, there is still no certainty about whether we will fully prohibit the merger. The extended review will be concluded in October, and we have yet to reach a decision, so anything could still happen,” he said.

Franky Jamin, corporate secretary for Unilever Indonesia, denied that the merged company would capture more than 50 percent of the market for men’s hair cream and deodorant, and said he was confident the merger would be approved during the second assessment.

He said the combined share would be “much less” than 50 percent, but he did not know precisely how much.

If the KPPU rejects the acquisition again, Unilever can only appeal the decision in court.

A regulation that took effect in July requires large companies to notify the KPPU about proposed mergers and acquisitions before their completion, or face billions of rupiah (hundreds of thousands of dollars) in fines.

In September 2009, Unilever’s parent company said it would acquire Sara Lee’s personal care brands in a $1.9 billion deal. Unilever Indonesia notified the KPPU in May.

The new regulation follows a pair of high-profile cases in which the KPPU charged companies with violating monopoly laws.

One involved Singapore’s sovereign wealth fund, Temasek Holdings, which the KPPU accused of fixing prices by using indirect stakes it held in Telekomunikasi Selular (Telkomsel) and Indosat, two of the country’s leading mobile-phone service providers.

In May, the Supreme Court ruled that Temasek had indeed breached monopoly laws.

Another notable case is the ongoing dispute between the KPPU and a local subsidiary of French-based retail giant Carrefour.

The commission alleged that Carrefour Indonesia, through its acquisition of retailer Alfa Retailindo, dominated the wholesale supplier market and forced unfair trading terms upon its vendors.

It ordered Carrefour to sell its stake in the company and fined it Rp 25 billion. However, the South Jakarta District Court ruled in favor of Carrefour in February.

The Indonesia Employers Association (Apindo) has said it expects the KPPU to operate professionally and not create a new layer of bureaucracy that may discourage investment.