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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