Advancing Fair Competition Principles in Indonesia AI Economy Through Regulatory Sandbox Governance
Agata Kurniati (*), Ningrum Natasya Sirait, Mahmul Siregar

Universitas Sumatera Utara

Abstract

The advancement of artificial intelligence (AI) has redefined Indonesia^s economic landscape, particularly in digital economy sector. These changes introduce not only new opportunities for efficiency and innovation but also emerging risks of algorithmic dominance and unequal market power. As AI-driven business models increasingly rely on control over data, computing infrastructure, and large-scale machine-learning capabilities, competitive advantages become disproportionately concentrated among a small group of dominant digital firms. In response, this research aims to analyze how AI-driven business models undermine fair competition principles in Indonesia and to assess the adequacy of existing legal instruments especially competition law, in addressing emerging forms of AI-enabled anti-competitive conduct. The study finds that Indonesia^s regulatory framework remains insufficient, as current laws do not effectively govern algorithmic pricing, facilitate oversight of tacit collusion, or mitigate exclusionary practices enabled by AI, thereby limiting the enforcement capabilities of institutions such as KPPU. Therefore, it emphasizes the urgent need to establish a hybrid regulatory model, combining traditional legislation with a regulatory sandbox for balancing innovation with market fairness. By enabling supervised AI experimentation and proactive regulatory learning, a sandbox-based model strengthens oversight capacity, mitigates risks of AI-driven monopolistic practices, and advances fair competition in Indonesia^s rapidly expanding AI economy.

Keywords: artificial intelligence- competition- economy- regulatory sandbox

Topic: Governance, Policy, and Education of Coastal Area