Indonesia: Competition authority puts more emphasis on partnerships with small and micro enterprises

In short

KPPU, the Indonesian competition authority, is taking an increasingly aggressive stance, as evidenced by its latest decision on partnerships between a large company and small and micro-enterprises (“SMEIn this case, a maximum fine of IDR 10 billion (approx. of SMEs, including one we have already covered, in which the KPPU said there were no violations, this recent development could indicate the start of a more rigorous approach to enforcement by the KPPU against SME partnerships.

The key factor that led the KPPU to issue an infringement decision was that the large company was deemed to assume “ownership” and/or “control” of the SMEs with which it associated. It has done this, among other things, by limiting the duration of the partnership and limiting to whom SMEs can transfer and/or sell their assets if they wish to end the partnership, and at what price.

In one of its social media campaigns, the KPPU said that its decisions on SME partnership matters were final and binding, which became a source of debate among businessmen, lawyers and the academics.

Under the SME Law (Law No. 20 of 2008), the KPPU can impose penalties in the form of revocation of business licenses and/or fines of up to IDR 5 billion for medium-sized enterprises and up to IDR 10 billion for large enterprises, if they find a violation of the SME law by large and/or medium-sized enterprises.

Large and medium-sized enterprises that engage in partnership-type cooperation with SMEs need to be vigilant and take proactive steps to review their agreements and arrangements.

Some issues to spot include:

  • The duration of the cooperation period
  • The extent or depth of involvement of the large and/or medium-sized enterprise in decision-making in the business of the SME
  • Any restriction or prohibition
  • All asymmetric layouts

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