The Business Competition Supervisory Commission (KPPU) has issued Decision No. 57/KPPU/Kep/III/2009, dated 12 March 2009, regarding Guidance to Implement Provisions in Article 50 (b) of Law No. 5 of 1999 regarding Prohibition of Monopoly Practice and Unfair Business Competition Relating to Franchise-Related Agreements (“KPPU Guidance”).
The KPPU Guidance relates to business agents and parties having interests in understanding the provisions in Article 50 (b) which exempts franchise related agreement from application of the provisions in Law No. 5 of 1999.
The KPPU Guidance basically states that:
a. Article 50 (b) of Law No. 5 of 1999 on Prohibition of Monopoly Practice and Unfair Business Competition deals with the exception in the application of Law No. 5 of 1999 to franchise related agreements.
b. The exception referred to in Article 50 (b) cannot be absolutely applied, considering that franchise related agreements may contain clauses which have the potential to result in monopolistic practice or unfair business competition.
c. The exception referred to in Article 50 (b) can be applied, provided that it meets the criterion of franchise as provided for in Article 26 (c), Article 29, Article 35 and Article 36 (1) of Law No. 20 of 2008 on Micro, Small and Medium Businesses and Government Regulation No. 42 of 2007 on Franchise.
The Provision in Article 50 (b) cannot be absolutely applied so that the objective of enacting Law No. 5 of 1999 as specified in Article 3 of the Law will not be ineffective. Therefore, the conduct of franchise business agents that may lead to monopolistic practices and unfair business competition is not exempted from the provisions in Article 50 (b) of Law No. 5 of 1999.
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