Provisions on guideline of arrangement and development of traditional market, shopping centre, and modern market are particularly regulated in Minister of Trade Regulation No. 70/M-DAG/PER/12/2013 (“MR No. 70/2013”) as amended by Minister of Trade Regulation No. 56/M-DAG/PER/9/2014. MR No. 70/2013 becomes effective as of the date of its promulgation on 20 December 2013. Since the promulgation of MR No. 70/2013, Minister of Trade Regulation No. 53/M-DAG/PER/12/2008 is revoked and declared invalid.

Meaning Of Tranditional Market, Modern Market, And Shopping Centre

Traditional Market

Market is an area or trading place where there is more than one or more sellers that can be called as shopping centre, traditional market, store, mall, plaza, trade centre or any other terms. Whereas, traditional market means a market which is built and managed by Government, Regional Government, Private, State-Owned Enterprise (“SOE”) and Regional-Owned Enterprise (“ROE”) including cooperation with private parties with premises in the form of store, kiosk, los and tent owned/managed by small and medium scale seller, non-governmental or cooperative with small-scale business, small capital and with trading process through bargaining (“Traditional Market”).

Modern Market

Modern market means a store with self-service system which sells several of goods in retail, in the form of minimarket, supermarket, department store, hypermarket or distributor in the form of wholesale (“Modern Market”).

Shopping Center

Shopping Center is a certain area which consists of one or more buildings established vertically or horizontally, sold or rented to a businessman or self-managed to perform a trading of goods activities (“Shopping Center”).

Establishment Of Traditional Market, Shopping Center, And Modern Market

Establishment of Traditional Market, Shopping Center, and Modern Market shall refer to the Regional Landscaping Plan and Regional Landscaping Detail Plan of Province/Regency/City, including zoning regulation. Provisions on regulation of establishment, number, and distance between Shopping Center and Modern Market and Traditional Market or retail market are determined by local regional government.

Enterpreneur may establish (i) a stand-alone Shopping Center and Modern Market , and/or (ii) Modern Market integrated with Traditional Market, Shopping Center, or other building/area.

To establish a stand-alone Shopping Center and Modern Market , enterpreneur shall complete the document of analysis of society social economic condition, which includes:

a. structure of the population according to their livelihood and education;

b. income level of household economy;

c. the level of population growth and density in each area according to the cencus data of Board of Statistic Center (“BSC”) on the last year;

d. plan of partnership with Micro, Small, and Medium Business (“UMKM”);

e. absorption of manpower;

f. endurance and growth of Traditional Market as a means of UMKM;

g. availability of social facility and public facility;

h. positive and negative impact of the establishment of Shopping Center and Modern Market towards Traditional Market or traditional retail market which existed before; and

i. corporate social responsibility directed to assist the management of Traditional Market.

To establish the Modern Market integrated with Traditional Market, Shopping Center, or other building/area, the enterpreneur shall complete the document of analysis of society social economic condition, which includes:

a. partnership plan with UMKM;

b. absorption of manpower;

c. endurance and growth of Traditional Market as means for UMKM;

d. positive and negative impact of the establishment of Shopping Center and Modern Market towards Traditional Market or traditional retail market which existing before; and

e. corporate social responsibility directed to assist the management of Traditional Market.

Modern Market in the form of minimarket is excluded from document of analysis of social economic condition of society obligation. However, the rate of density and growth polulation according to the census data of BSC of the last year, still need to be considered. The analysis of society social economy condition is conducted by education institution, research, or competent independent consultant.

The floor area of Modern Market for trading consists of: (i) minimarket, less then 400 m2; (ii) supermarket, more than 400 m2; (iii) department store, more than 400 m2; (iv) hypermarket, more than 5,000 m2, and wholesale, more than 5,000 m2.

Trading system and type of goods which shall be applied in the Modern Market iare:

a. minimarket, supermarket, and hypermarket sell various types of retail consumer goods, especially food product and/or other household product which may be in the form of buildings material, furniture, and electronic;

b. department store sells various types of retail consumer goods especially clothing product and its equipment with the structure based on gender and/or age level of consumer;

c. wholesale sells various types of consumer goods in retail.

Modern Market can only sell the supporting goods for main business maximum at 10% from the total goods that is sold in the store of Modern Market. Nevertheless, the Ministry of Trade after considering the recommendation from the Communication Forum of Arrangement and Development of Traditional Market, Shopping Centre, and Modern Market, may grant a permission to Modern Market which sells supporting goods of main business more than 10% of total goods sold in Modern Market outlets.

Requirement Of Trading Between Supplier And Modern Market

Cooperation agreement between supplier and Modern Market shall contain the trading requirements at least on:

a. supplier may only be imposed by the expenses which is directly related to the sales of goods with the 15% maximum expenses from the total expenses of trading terms excluding the regular discount, except provided otherwise based on agreement which has been agreed together between supplier and Modern Market;

b. supplier and Modern Market together make a goods promotion arrangement whether for the new goods or the old goods for the period that has been agreed;

c. the use of distribution service of Modern Market shall not be forced to supplier which is able to distribute its own goods as long as it fulfills the critetaria (time, quality, goods price, quantity) which has been agreed by both parties;

d. supplier may be imposed by fine according to the agreement of both parties, if it does not fulfiil the quantity and punctuality of  supply;

e. Modern Market may be imposed by fine according to the agreement of both parties if it does not fulfill the payment on time;

f. Modern Market may return the goods that just be marketed to supplier without sanction as long as after 3 (three) months evaluation cannot fulfill the target that has been mutually determined;

g. Modern Market shall submit a written information at least 3 (three) month in advance to the supplier if it intends to stop order delisting or decrease the kind of goods or stock keeping unit (“SKU”) of supplier.

The costs imposed to the supplier as referred in the letter (a) above may be in the form of:

a. regular discount. This regular discount is not applicable to the supplier who applies the nett price system published transparently to all the Modern Market and agreed with the Modern Market;

b. fixed rebate is conducted periodically maximum for 3 months, and maximum for 1%;

c. the amount of regular discount and fixed rebate are determined using percentage of sales from supplier to Modern Market whether on transaction or periodically;

d. conditional rebate provided by the supplier from nett purchase including return of goods, if the Modern Market may achieve or exceed the sales target according to the trading agreement, with the sales cretaria as follows:

(i) achieving the 100% of targeted number according to the agreement, shall obtain conditional rebate maximum in the amount of 1%;

(ii) exceeding the targeted amount between 101% and 115%, its excess shall obtain a conditional rebate maximum for 5%;

(iii) exceeding the targeted amount more than 115%, its excess shall obtain a conditional rebate maximum for 10%.

e. promotion discount is provided to the last customer or consumer within the time that is limited according to the arrangement between the Modern Market and the supplier;

f. promotion cost borne by the supplier as determined by the Modern Market according to the arrangement by the parties comprises:

(i) promotion cost in mass media or printing, e.g. brochure or email, determined transparantly and reasonably according to the fare from media and other creativity costs;

(ii) in-store promotion is only imposed for promotion area out of the display/regular display market such as floor display, promotion gondola, block shelving of cashier place (check-out counter), wing gondola, billboard inside or outside the store, and the other place used for the promotion place;

(iii) promotion expenses to promote the goods of supplier such as sampling, demo of goods, rewards, games and etc.;

(iv) expenses deducted or withheld towards promotion activity conducted no later than 3 (three) months after the program based on the confirmation of both parties;

(v) unused promotion expenses shall be utillized for the other promotion activity whether for the current period or for the next period in 3 (three) months period in accordance with the agreement of both parties;

The other expenses excluding the expenses as referred to this letter (f) cannot be borne by the supplier.

g. expenses incurred for promotion of new goods is included under the promotion expenses;

h. administration expenses of goods listing (listing fee) are only for the new goods with the amount:

(i) for hypermarket is maximum Rp 150,000.- for every type of goods in each outlet with the maximum expense of Rp 10,000,000.- for each type of goods in all outlet;

(ii) for supermarket is maximum Rp 75,000,- for every type of goods in each outlet with the maximum expense of Rp 10,000,000.- for each type of goods in all outlet;

(iii) for minimarket is maximum Rp 5,000.- for every type of goods in each outlet with the maximum expense of Rp 20,000,000.- for each type of goods in all outlets.

The change of administration expenses as reffered under this letter (h) may be adjusted annually based on inflation growth. As for the UMKM which supplies the goods to the Modern Market is not charged for the administration expense of the registered goods.

The goods payment for the amount until Rp 10,000,000.- by Modern Market to the supplier in form of UMKM may be performed in direct payment of cash or in the period of 15 (fifteen) days after the document of the collector is receieved. This provision is applicable to every 1 (one) outlet or in the work connection.

Whereas, trading reuqirements for cooperation agreement between supplier and departement store, shall include:

a. trading terms expenses is not applicable;

b. the supplier shall only be imposed a margin expense and may be imposed with additionals expenses in accordance with the agreement of both parties.

The amount of money under the lease agreement and sale and purchase agreement between the Shopping Center and the owner or the lessee shall be stated in the Rupiah currency.

Partnership

The Shopping Center and Modern Market may perform partnership with UMKM based on written agreement which shall be made in Indonesian language and based on Indonesian law. The mentioned partnership may be performed in the form of general trading and/or franchise.

The form of general trading may be performed in the way of:

a. marketing the produced goods of UMKM packaged or re-packaged with the trademark of the goods owner, trademark of the Modern Market or other agreed trademark to enhance the sale value of the goods;

b. providing the commercial space in the Shopping Center area to the UMKM; and/or

c. providing the goods from the supplier to the Traditional Market, Shopping Center and Modern Market.

Whereas, for partnership with the form of franchise, is performed based on laws and regulations concerning franchise.

The enterpreneur may only establish and manage their own (company owned outlet) outlet of Modern Market for maximum 150 outlets. If the enterpreneur already has 150 outlets of Modern Market, and will perform outlet addition, it shall be performed by the partnership with the UMKM. Modern Market shall prioritize the supply of national goods production produced by UMKM as long as it fulfills the requirements determined by the Modern Market.

Management Of Traditional Market

The management of Traditional Market may be performed by cooperative, private parties, BUMN and BUMD  to develop their competitiveness. The development of the mentioned competitiveness is by: (i) rejuvenation or revitalization of Traditional Market building, (ii) the application of professional management, (iii) providing goods with a good quality and competitive price; and/or (iv) facilitating the financing process to the market merchant for the working capital and ownership credit for commercial space.

The manager of Traditional Market has a role among others (i) adding the supply quantity of goods in order to stabilize the price, (ii) to confirm the suitability of weight and size standard, (iii) training, mentoring and supervising the merchant, and (iv) providing the commercial space for the merchant.

The Role Of Shopping Center And Modern Market

Shopping Center is obliged to provide or offer “counter image” and/or commercial space which is proportional and strategic for the goods marketing with national trademark in certain floor.

Modern Market may market goods with its own trademark by prioritizing the goods produced by UMKM and include the name of UMKM producing the goods. Modern Market that markets its own trademark is liable to obey the provisions on safety, health and environmental safety (K3L), intellectual property rights, wrapped goods and/or provision of other goods in circulation.

Modern Market may only market its owned trademark goods no more than 15% of SKU sold in the Modern Market’s outlet, except for (i) Modern Market within the framework of partnership with UMKM, and (ii) Modern Market which sells the goods with criteria not manufactured in Indonesia, high quality goods and/or high technology goods.

In connection with the supply of trade goods, self-managed Shopping Centre and Modern Market  performing goods trading shall provide national goods production of at least 80% from the quantities and types traded. Minister of Trade shall permit the supply of national goods production less than 80% to Modern Market in the form of stand-alone brand and/or outlet/speciality stores if the  goods :

a. requires uniformity of production and deriving an integrated global supply chain;

b. possess its own premium product trademark and does not have its own production base in Indonesia;

c. originated from certain country to meet the needs of its citizen living in Indonesia.

Licensing

The entrepreneur of Traditional Market, Shopping Centre, and Modern Market are obliged to own business license. Traditional Market managed by department handling in market affairs is however excluded to own Traditional Market Management License (“IUPPT”).

Business license consists of (i) IUPPT; (ii) Shopping Centre Business License (“IUPP”), or (iii) Modern Market Business License (“IUTM”), issued by Head of Department responsible in  trade affairs or Regional Head of One-Door Integrated Services. Business License will be issued no later than 5 working days since the application form as well as the required documents are accepted in complete and true form.

Company of Traditional Market Management, Shopping Centre and Modern Market has previously obtained a business license as mentioned above is not obliged to have trading business license (SIUP). IUPPT, IUPP, and IUTM must be registered every 5 years; and (ii) applies only to one business location. If the relocation occurs, the management must submit the new business license aplication.

To submit application of IUPPT, IUPP or IUTM, the entrepreneur shall submit the application form signed by the owner or the company representative attaching these required documents, namely:

a. For stand-alone IUPPT :

i. a copy of Principle License from the Governor of Government Province of DKI Jakarta or regent/mayor;

ii. the result of people’s socio-economic condition analysis as well as recommendation from authorized institution;

iii. a copy of location permit;

iv. a copy of laws on disturvance license (HO);

v. a copy of the building permits (IMB);

vi. a copy of the deed of establishment and/or the deed of company amendment and its endorsement for a limited liability company or cooperative.

b. the required documents for the stand-alone IUPP and IUTM are the same as the stand-alone IUPPT, added by the partnership plan with UMKM.

c. for IUPPT and IUTM that are integrated with Shopping Centre or other building/region:

i. the result of people’s social-economy analysis including the recommendation from authorized institution;

ii. a copy of IUPP or other building where the Traditional Market or Modern Store is established;

iii. a copy of the deed of establishment and/or the deed of company amandment and its endorsement for a limited liability company or cooperative; and

iv. partnership plan with UMKM for Shopping Centre or Modern Market (Attachment II of MR No. 70/2013).

Report

Entrepreneur who owns IUPPT, IUPP, and IUTM is obliged to submit a report every semester to (i) Head of Service Ofiice responsible on trade affairs, and (ii) for DKI Jakarta Provincial Government, the report is submitted to the Head of the Provincial Sercive Office responsible on trade affairs;

a. number of outlets owned;

b. turnover of all outlets;

c. number of UMKM in partnership and the model; of partnership;

d. the amount of absorbed labor.

Prohibitions

Modern Market with minimarket is prohibited from:

a. sell fresh product in bulk;

b. sell alcoholic beverages for Modern Market located around the neighborhood, worship places, terminal, station, hospital, youth center and school;

c. impose UMKM producers, that would market their products in the Modern Market, to use trademarks of Modern Market for UMKM products that already has its own trademark.

Sanctions

The entrepreneur of Shopping Centre and/or Modern Market Shopping Center business operators and/or Modern Stores that:

a. sells main supporting products over 10% from the total quantities of total goods sold in the Modern Market or sells main supporting products over 10% from the total quantities of goods sold in Modern Market without obtaining license from Minister of Trade;

b. forms a cooperation agreement with supplier but does not meet the minimum trading requirements specified in this rule;

c. does not or late to make payment for the goods price to the UMKM supplier with a value of up to Rp 10,000,000. – for each outlet or in a business network, at the time specified in this rule;

d. establish more than 150 owned and self-managed outlets of Modern Market or establish more than 150 owned and self-managed outlets without partnership with UMKM;

e. does not provide or offer “counter image” and/commercial space that is proportional and strategic for the marketing of goods with national trademark in certain floor;

f. does not supply national goods production at least 80% of the quantities and type traded;

g. has obtained the IUPP and IUTM but has not submitted the semester report;

h. perform prohibited action for Modern Market in the form of minimarket;

will be subject to administrative sanctions.

Administrative sanction is imposed in stages that includes:

a. written warning;

b. business license suspension, imposed if the written warning has been carried out three times with a grace period of 7 working days; and

c. revocation of business licenses, imposed if the enterpreneur does not perform the remedy during the license suspension for the period of maximum 3 months.

Transitional Provisions

Manager of Traditional Market, Shopping Centre and Modern Market which has been in operation and does not own business license under this rule, must adjust their business license according to its purposes no later than 6 months as from the date of promulgation.

Cooperation agreements between supplier and wholesaler, hypermarket, department stores, supermarket, and the minimarket network management existed before this regulation applies, shall remain valid until the termination of the said agreement.

The entrepreneur of Modern Market which has been in operation and owned more than 150 self-owned outlets before this regulation applies, may remain to operate and own outlets as the said quantities.

The entrepreneur of Modern Market which has been in operation and marketed its own trademark goods more than 15% SKU sold in Modern Market outlet before this regulation applies, must adjust to this rule no later than 2 years.

Self-managed Shopping Centre and Modern Market performing goods trading which has been in operation and supply the national goods product less than 80% before this rule applies, must adjust to this rule no later than 2 years.

As the Minister of Trade Regulation No. 56/M-DAG/PER/9/2014 is applicable, the term of Traditional Market is read as “People’s Market”, and the term Modern Market is read “Convenience Store” as referred to in the Law Number 7/2014 on Trade.

Aditya Rahardiyan, S.H., M.H.