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In brief

KPPU, Indonesia’s competition authority, is taking an increasingly aggressive stance, as seen in its latest decision on partnerships between a large corporation and small and micro enterprises (“SME“). In that case, a maximum fine of IDR 10 billion (approx. USD 670,000) was imposed on a large corporation that was viewed by KPPU as controlling the SMEs it partners with. After starting 2022 with a couple of decisions on SME partnerships, one of which we previously covered, in which the KPPU declared that there were no infringements, this recent development could indicate the start of a more rigorous approach to enforcement by KPPU against SME partnerships.


Don’t take it lightly

The key factor that led KPPU to issue an infringement decision was that the large corporation was deemed to assume ‘ownership’ and/or ‘control’ over the SMEs it partners with. It did this, by, among other things, restricting the partnership period, and restricting to whom the SMEs can assign and/or sell their assets if they would like to end the partnership, and at what price point.

In one of its social media campaigns, KPPU said that its decisions on SME partnership matters are final and binding, which has become a source of debate among businesspeople, lawyers and academics.

Under the SME Law (Law No. 20 of 2008), KPPU may impose sanctions in the form of revocation of business permits and/or fines of up to IDR 5 billion for medium corporations and up to IDR 10 billion for large corporations, if they find an infringement of the SME Law by large and/or medium corporations.

Navigate the law with confidence

Large and medium corporations that have a partnership-like cooperation with SMEs need to be vigilant and take proactive steps to take stock of their agreements and arrangements.

Some issues to spot include:

  • The length of the cooperation period
  • The extent or the depth of decision-making involvement by the large and/or medium corporation in the SME’s business
  • Any restrictions or prohibitions
  • Any asymmetric arrangements

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Author

Mita Djajadiredja is a senior partner in the Mergers & Acquisitions Practice Group and the key contact for Technology, Media & Telecommunications in Indonesia. She has more than 20 years of experience in M&A and private equity, as well as corporate alliances, including joint ventures, shareholder agreements and strategic business alliances. Mita advises a wide range of domestic and international clients across various industry sectors, including real estate, insurance, finance, manufacturing and trading.

Author

Dyah Ayu Paramita is an Associate Partner in Hadiputranto, Hadinoto & Partners, Jakarta office.

Author

Hari is a principal in the Competition & Antitrust Practice Group at Baker McKenzie Wong & Leow. His practice covers competition law and regulation-related advisory work in Singapore and the Southeast Asia region. Hari was the Director of the Enforcement Division at the Competition and Consumer Commission of Singapore (CCCS), where he supervised the CCCS’s Intelligence Unit and IT Forensics Taskforce, in addition to the supervision of case teams on various investigations, mergers and notifications. He was also responsible for managing leniency applications made to the CCCS, overseeing the secret complainant and reward schemes, planning and executing dawn raids, and recording investigative statements of persons under investigations. Hari led teams involved in defending appeals brought against the CCCS’s decisions before the Competition Appeals Board. Prior to joining the Baker McKenzie Wong & Leow, Hari completed stints in private practice and as a Justices' Law Clerk with the Singapore Legal Service. Hari is recognised as one of "Who's Who Legal: Competition Future Leaders - Partners" in the 2020 Who's Who Legal Competition law survey conducted in conjunction with Global Competition Review.

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