Definition of MLM
Multi-Level Marketing (MLM) is a marketing strategy or business model for which is characteristic that the income of distributors includes their personal sales and a percentage of the profits from the sales team they recruit. Multi-level marketing in Indonesia has become increasingly popular.
Many MLM brands such as Tupperware and Oriflame have already established their authority in Indonesia, with many others ready to enter the market.
In order to guarantee your business success in this flourishing sector without ending at the other side of the law in Indonesia, you need to get the correct multi-level marketing license.
In this article, we will tell you all about the requirements and conditions for compliance.
Requirements and Conditions for Multi-Level Marketing Indonesia
Before applying for an MLM license for sales and marketing activities, you need to register a company in Indonesia.
If you are a foreigner, you need to keep in mind that maximum foreign ownership of 95% is allowed for MLM entities, as described in the Negative Investment List (NIL).
Learn how to comply with limited foreign ownership of Indonesian companies, sign a Special Purpose Agreement.
Once you have incorporated your company, you can move on with applying for the so-called SIUPL (Surat Izin Usaha Penjualan Langsung). According to the Indonesia Investment Coordinating Board (BKPM), multi-level marketing or direct selling companies in Indonesia are required to obtain a SIUPL license for operation and business activities.
There are two types of SIUPL licenses – provisional SIUPL and permanent SIUPL.
In order to qualify for either of the SIUPL licenses, you need to follow the proper steps and get ready the right documents such as:
- Business partner compensation plan
- Code of Ethics and other company regulations.
Differences between Provisional SIUPL and Permanent SIUPL
The validity of provisional SIUPL is one year. Once a company’s provisional SIUPL is approved, they can apply for a permanent SIUPL, which is granted for 5 years.
The process and requirements of applying both types of SIUPL are almost the same. The only difference is that while applying for a permanent SIUPL, you will have to present your company’s financial statement and provisional SIUPL.
Prohibited Activities under SIUPL
Businesses with SIUPL are prohibited from performing the following activities:
- Offer, promote, and, advertise goods and/or service different to the actual condition.
- Offer goods and/or services in manners that may cause physical and psychological interference against the consumer
- Offer goods and/or services by mentioning the standard clause in the agreement that is against the provisions of the legislation in regards to the protection of consumers.
- Sell goods and/or services without the registration mark
- As a business partner, gain benefits through registration or membership dues unfairly
- Receive membership registration as business partners by using the same name more than once
- Persuade a business partner to buy goods and/or services for own use or sale in huge quantities-exceeding his/her ability to sell
- Sell or market goods and/or services listed outside the MLM system specified by SIUPL.
- Trade business for public funding
- Establish prohibited marketing network
- Trade business out of SIUPL’s scope
- Sell and/or market goods and/or services that are outside of SIUPL
- Sell and/or market goods whose product label does not display the direct-selling company name
Multi-level marketing is one of the most prosperous business types in Indonesia and should not be ignored by ambitious entrepreneurs. Read more about company registration before you decide to start one, and contact us!
