Comply with Behavior Change, ICC Halts PT Kobe Boga Utama Case.

Friday, January 5, 2024

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Jakarta (5/12) – The Indonesia Competition Commission (ICC) issued a stipulation for the termination of Case Number 11/KPPU-L/2023 related to the alleged violation of Law Number 5 Year 1999 in the Distribution Agreement of PT Kobe Boga Utama (KOBE), along with the implementation of the Behavior Change Integrity Pact by KOBE. The decision was made at the Preliminary Examination Commission Assembly Session with the agenda of the Commission Assembly Assessment regarding the supervision of the Integrity Pact of Behavior Change held yesterday, December 4, 2023, at the ICC Head Office in Jakarta. Acting as Chairman of the Commission Panel in the hearing, Commissioner Yudi Hidayat was assisted by Commissioner Chandra Setiawan and Commissioner Dinni Melanie as Members of the Commission Panel.

KOBE has been a seasoning flour manufacturer located in Tangerang since 1995. Starting in 2006, they launched their Food Service division to serve the food industry and retail customers. In 2009, through its marketing team, it sought and offered cooperation to businesses to become its distributors with standardized terms in a distribution agreement. The terms and implementation of this distribution agreement were the origin of the case stemming from the public report. It is alleged that these provisions are contrary to Law Number 5 Year 1999, including the requirement that,

(i) the selling price of the products is set by KOBE;

(ii) distributors are not allowed to distribute, market, and sell similar products owned by other parties that are competitive; and

(iii) distribute, market, and sell with a coverage of modern and traditional outlets in the distribution area or territory given by KOBE. The distribution agreement started in 2009, and based on the evidence documents, the provisions in the agreement are still valid until 2022.

During the preliminary examination, KOBE admitted that the distribution agreement contained provisions that were in violation of Law No. 5/1999. However, it emphasized that the agreement was an old one, as it did not have a legal team. KOBE itself had begun to change the format of the distribution agreement, and at least at the time of the examination, it was using a distribution agreement format that had eliminated these provisions. For this reason, KOBE submitted a change of behavior on September 26, 2023, followed by the signing of the Change of Behavior Integrity Pact on October 10, 2023.

ICC then conducted behavior change supervision for 45 working days, starting on October 11, 2023. Based on the results of the supervision, it is concluded that KOBE has implemented changes in behavior as stated in the Behavior Change Integrity Pact. The points of behavior change implementation include:

  • Cancellation of agreements and cessation of activities that violate Article 8, Article 15 paragraph (1) and paragraph (3), and Article 19 letter C of Law Number 5 Year 1999;
  • Cancellation of distribution agreements and/or Memorandum of Understanding to distributors who have cooperated with KOBE;
  • Improvement of distribution agreements and submission of evidence of the implementation of behavioral changes; and
  • Have been active and cooperative in every process of verification, clarification, and/or validation of evidence.

With the implementation of all the contents of the Behavior Change Integrity Pact, the Commission Panel issued a stipulation stating that KOBE had implemented the Behavior Change Integrity Pact and terminated Case Number 11/KPPU-L/2023.