Breach of Non-Competition Clause in Franchise Agreements Related to Unfair Business Competition
DOI:
https://doi.org/10.19166/lr.v22i3.6537Keywords:
Non-Competition Clause, Franchise Agreement, Unfair Business CompetitionAbstract
The non-competition clause in the franchise agreement is the franchisee's commitment not to run a similar business or potentially become a competitor to the franchisor's business within a certain period as a form of protection of the franchisor's intellectual property rights and appreciation for the transfer of know-how that the franchisor has carried out in the form of knowledge, concept, and experience to the franchisee. There are two purposes of this article. First is to explore and analyze cases of breach of the non-competition clause in franchise agreements in Indonesia carried out by franchisees can be qualified or not as a form of unfair business competition as regulated in Article 1 number 6 Law Number 5 of 1999 concerning Prohibition of Monopolistic Practices and Unfair Business Competition. Second is to investigate the legal remedies taken by the franchisor against the franchisee who breaks the non-competition clause in the franchise agreement. This research project uses qualitative method. This research involved respondents and informants from business owners of national franchisors. There are two results of this study. First, breaking non-competition clauses in franchise agreements, which have been read before signing, can qualify as unfair business competition. Second, if a franchisee or former franchisee breaks a non-competition clause, it is necessary to communicate with the violating party first before giving a summons/warning. Moreover, if it is still not heeded, the franchisor can file a lawsuit in court or submit a complaint to The Indonesia Competition Commission (KPPU).
References
Laws and Regulations
Law Number 5 Year 1999 concerning Prohibition of Monopolistic Practices and Unfair Business Competition.
Government Regulation Number 42 of 2007 concerning Franchising.
Minister of Trade Regulation Number 71 of 2019 concerning Franchise Implementation.
The Decision of the Commission for the Supervision of Business Competition Number: 57/KPPU/Kep/III/2009 concerning Guidelines for the Implementation of the Provisions of Article 50 letter b of Law Number 5 of 1999 concerning Prohibition of Monopolistic Practices and Unfair Business Competition against Agreements Related to Franchise.
The World Franchise Council's Principles of Ethics.
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Personal Communications
Interview with Anang Sukandar and Veronica Linda, Chair of the Indonesian Franchise Association. July 07, 2022.
Interview with Andrew Nugroho, Director of PT Top Food Indonesia, Es Teller Franchise 77. June 07, 2022.
Interview with Chandra Setiawan (Commissioner) and Ima Damayanti (Head of Legal Bureau), Indonesia Competition Commission (KPPU). August 01, 2022.
Interview with Eko Pratomo, Director of PT Melia Pilar Utama, Franchisor of Melia Laundry & Drycleaning. June 09, 2022.
Interview with Gideon Hartono, Director of PT K-24 Indonesia, Franchisor for K-24 Pharmacy. June 17, 2022.
Interview with Grace Amelia Senggu, 2022, Legal Consultant. July 08, 2022.
Interview with Hendy Setiono, Director of PT BABA RAFI INDONESIA, Franchisor of Kebab Turki Baba Rafi. June 28, 2022.
Interview with Utamiwati (General Manager) and Pery Andiani (Business Development Manager) PT Cantika Puspa Pesona, Franchisor of Martha Tilaar Salon and Day Spa. June 28, 2022.
Interview with Utomo Njoto, Franchise Consultant. July 07, 2022.
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