company responsibility towards consumers in mlm business

8/8/2019 Company Responsibility Towards Consumers in MLM Business

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MM 5001

BUSINESS ETHIC AND BUSINESS LAW

FINAL TERM ASSIGNMENT

Company Responsibility towards Consumers

In Multi-Level Marketing Business (PT. CNI)

La Ode Muhamad Arief Akbar

29109367

MASTER OF BUSINESS ADMINISTRATION

BANDUNG INSTITUTE OF TECHNOLOGY

BANDUNG

2010


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BA

K RO

One of the juridical aspects that interesting to observe in Multi-Level Marketing

business is a matter of protection for consumers, which is closely related to the

responsibilities of the company. Consumers become very important because the

user a wide range of products of goods or services produced by businesses is the

consumer. In this era, in which business actors have managed to produce and

offer a wide range of products or services, consumers will be the object for

businessmen or company who only think about their own interests by ignoring

the rights of consumers.

According to United Nations resolution No. 39/248 of 1985 about Guidelines for

Consumer Protection, has been clear that the consumer is a party which is very

important to get the attention and protection in business transactions. While it

cannot be denied there is still a lot of problem in terms of consumer protection in

Indonesia. Businesses and governments are still quite often disregarding the

rights of consumers, even to the most fundamental rights though. Various

dishonesty of company businesses still often found, either in the offer or advertise

or produce a particular good.

This problem becomes increased when in reality; consumers do not know their

rights, as well as the persistence of a culture of 'accept' though it has been treated

unfairly. If consumers want to fight for their rights, they are often faced with the

mechanisms that are considered complicated and inefficient both in terms of cost

and time.

With the Law No 8 of 1999 on Consumers Protection (Undang-undang

Perlindungan Konsumen), problems are expected to be resolved. This law clearly


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states as the umbrella act in the field of consumer protection. Therefore, the

formulation of rights and duties of consumers and the rights and duties of

company are clearly in Law No 8 of 1999 on Consumers Protection. Although it

must be recognized that consumer protection in Indonesia is relatively more

secure legal certainty, but Law No 8 of 1999 on Consumers Protection, which has

more than 5 years old are in fact not be optimal to guarantee and protect

consumer rights. Various cases involving consumer protection is still fairly

common in many economic transactions are conducted consumer, including food

and beverage products.

If these consumer protection issues associated with the Multi-Level Marketing

system, there are other legal issues that also should be observed, namely the use

of the mechanism of 'intermediary' in this business commonly referred to as

'distributors'. In addition, due to problems of protection for consumers who

purchase and use products that are available on the markets.

Conceptually, the distributor is an intermediary who performs activities on behalf

and for its own interests. Therefore, all the burden of responsibility towards third

parties (in these case consumers) should be shifted from manufacturers to

distributors. This is different to the concept of agents who perform activities on

behalf of and for the benefit of the manufacturer. If this is associated with

protection for consumers, then from the juridical aspect, there are some things

that should be taken seriously.

Consumers as mentioned in Article 1 paragraph 2 Law No 8 of 1999 on

Consumers Protection, is any person users of goods and/or services that are

available in the community, both for their self, family, others, as well as other


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living beings and not for sale. This clearly indicates that what is meant by the

consumer according to Law No 8 of 1999 on Consumers Protection is the end-

user or ultimate consumer.

For companies that use traditional marketing system, which is the consumer, is

the one who get the product to be used by ourselves and not for resale to other

parties. But in a Multi-Level Marketing System, who referred the consumer? This

question relates to the self-consumption programs commonly used in the Multi-

Level Marketing system.Self-consumption is basically a program where a

distributor can at the same time as end-users of a particular product. Distributor

is an independent person (not bound by employment contracts with the

company) who then formed a network to market their product or service. Based

on personal sales results and their networks, every month the company will take

into account bonuses and commissions as a result of his efforts. Thus, it can be

argued that in the Multi-Level Marketing system, end user consumers can be

divided into two, namely non-distributor of end users and end consumers but

also as distributors. It means, at the same time the consumers have two positions

at once that as the end-users and as a distributor.

There is a question from the standpoint of the business responsibilities, who

should be responsible and how these accountability mechanisms in the event of

loss or claim from goods end-user consumer who plays as a distributor and not a

distributor?


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I

ER E IAR

RA E

According to Abdul Kadir Mohamad, Agent Company are the people who

represent employers to establish and implement agreements with third parties on

behalf of employers. Agent Companys function is as an intermediary between

entrepreneurs with third parties as well as representatives of employers1.

In business activities, agents are usually defined as a legal relationship whereby a

person or a principal party to carry out business transactions with other parties.

Thus, the main criteria to be said of an agency are the authority possessed by the

agent acting for and on behalf of principals2.

Therefore, in running his business, agent representative on behalf of the company

or principal, then as a party that represented the company or principal will be

responsible for the actions committed by an agent, as long as it is done within the

limits of authority given to him. In other words, if an agent was acting beyond its

authority, then the agent itself is responsible for its actions.

Unlike the agent, a distributor does not act for and on behalf of another party who

appointed him as a distributor (usually the supplier or manufacture). A

distributor acting for and on behalf of its own3. Thus, all the deeds and actions of

the distributor is his responsibility, not the responsibility of companies or

principals.

1

Abdul Kadir Muhamad, 1991, Introduction to Indonesian Corporate Law, Bandung: Citra Aditya

Bakti, p. 302

Simatupang, Richard Burton, 2003. Legal Aspects in Business, Jakarta: PT. Rineka Cipta, p.533Simatupang, Richard Burton, 2003. Legal Aspects in Business, Jakarta: PT. Rineka Cipta, p.54


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COR ORA

E RE O

IBI I

In commerce, commonly known as a distribution chain that allows a product

reaches the end-user consumers. The supplychain process are includes

distributors, wholesalers and retailers. This condition has implications for

consumers if a moment of loss due to using the product. The implication is to

whom that consumers will prosecute legal accountability.

It required an effort to protect consumers for the use of products produced or

traded by the company, which the company should be responsible for the

products produced or traded it. This responsibility is commonly referred to as

product liability.

Erman Rajagukguk provide a definition of product liability as a legal

responsibility of the person or entity that produces a product (producer,

manufacturer) or from persons or entities to process and assemble a product

(processor, assembler) or of the person or entity that sells or distribute (sellers,

distributors), the product4.

Meanwhile, according to Johannes Gunawan, product liability is a civil liability of

producers (which can include other parties in the trade supply chain) to

indemnify certain parties (buyer, user, or even third party) for any objects, injury

and or death as a result from the use of its products5.

Thus, it can be argued that product liability is ba sically a civil liability companies

(producers and trade supply chain) to the aggrieved consumer as a result of use

4

Erman Rajagukguk, et.al., 2000. Consumer Protection Law, Bandung: Mandar Maju, p. 46.5

Johannes Gunawan, 1999. Consumer Protection Law, Bandung: Faculty of Law Parahyangan

University, p.8.


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oruseofproductsproducedortraded.IntheLawNo8of1999onConsumers

Protection,corporateresponsibilitycanbefoundinArticle19ofthecontents:

(1) TheCompanyisresponsibletoprovidecompensationforthedamage,and/orlossofconsumersfromconsumingthegoodsand/orservicesthatproduced

ortraded

(2) The compensation referred to in paragraph (1) canbe either a refund orreplacementgoodsand/orservicesthataresimilarorequalvalue,orhealth

careand/ortheprovisionofcompensationinaccordancewiththeprovisions

ofthelegislationinforce.

(3) Granting compensation implementedwithin the period of 7 (seven) daysafterthedateofthetransaction.

(4) Thecompensationreferredto inparagraph (1)andparagraph (2)doesnoteliminatethepossibilityofcriminalchargesbasedonfurtherevidenceabout

theexistenceofelementerror.

(5) Theprovisionsreferredtoinparagraph(1)andparagraph(2)doesnotapplyifthebusinesscanprovethattheerroristhefaultofconsumers.

In addition toproduct liability, there is also known the concept of contractual

liability.AccordingtoJohannesGunawan,contractualliabilityiscivilliabilityon

thebasisofagreementorcontractofgoodbusinessforgoodsorservicesforany

losssufferedbyconsumers fromconsuming the goods theyproduceoruse the


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services they provide6. So the concept of contractual liability requires the

existence of an agreement or contractbetween the companiesby consumers.

Therefore there is agreement, and then the companywas engagementwith

consumers.

Thus,theresponsibilityofthiscompanycouldbebasedontheprovisionsofBook

IIIKUHPerofCommitments.Inaddition,withrespecttocontractualliability,the

LawNo8of1999onConsumersProtectionhasbeensetup inseveralarticles.

Article19paragraph1statesthat,

Company is responsible to provide compensation for the damage,

pollution,and/or lossofconsumers fromconsuming thegoodsand/or

servicesthatproducedortraded.

With the presence of theword 'traded', then this indicates the existence of

contractual relations that common referred the purchase agreementbetween

companieswiththeconsumer.

LE

AL RELA

IO

I

A !

LTI"LEVEL

ARKETI

BUSI

ESS I

# TCITRA

USA I

SA

CE ERLA

In this paper, will expose corporate social responsibility in a multi-level

marketingbusinessthatconsistsof3(three)parties.Thefirstpartyisacompany,

namely PT Citra Nusa Insan Cemerlang (PT CNI). Then the second is a

distributor,which issomeonewhohasobtainedapproval from thecompany to

becomeamemberofthecompany'sbusiness.Thirdistheconsumer,whichisthe

6Johannes Gunawan, Indonesian Consumer Protection and Free Trade, at Ida Susanti, Bayu Seto,

ed., 2003, Legal Aspects and Free Trade, Bandung: Citra Aditya Bakti, p. 117


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enduserofCNIproducts inorder forhisownuse.Eachof these threeparties,

havingitsownlegalrelationships,namely:

1.Legal $ elation% & i' ( etween ) T Citra 0 1 % a In % an Cemerlang an2 3

i%tri

(

1 tor

LegalrelationshipbetweenPTCitraNusaInsanCemerlangwithdistributorsis

essentially a legal relationship in the form of a distributor agreement. In

business,thedistributorisdefinedasalegalrelationshipwherebyapersonget

the power (the appointment) from another party (principal) but in the

operations,nottoactforandonbehalfofthepartywhoappointedhimasa

distributor.Thus,adistributoractsforandonbehalfofi tsown.

TheagreementbetweenPTCitraNusaInsanCemerlangwithdistributors,first

initiatedbysubmittingamember,byfillingoutthe formprovided.Afterthe

completedform,signedandthensubmittedtothecompany.

In the membership application form, there are clauseswhich reinforce and

simultaneouslyprovethattheagreementisadistributoragreement.Itcanbe

seenfromclausestatementnumber1and2,whichstates:

1) After the proposal hasbeen accepted and approvedby the company,I/wewillbecome an authorized distributor of PT Citra Nusa Insan

Cemerlang.

2) I/we do not become (or claiming to be) employees, agents orrepresentatives of PT Citra Nusa Insan Cemerlang. I/we are self-

employedandwillbepersonallyresponsibleforthingsthatrelatetothe

businessI/weare.


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It also reaffirmed in the Code of Conduct and CNI Distributor Rules,

particularlyChapterIIaboutMembershipaDistributoratoneofitsclausesis

said:"A distributor is a stand-alone (no work commitments) and not be

representativeof thecompany."Distributorsshouldnotadmit thathehasa

positionortorepresentthecompanyinthisexample,createaworkingbond,

tosellcompanystock,ordeliverinformationtomassmedia.

From the description indicates that as a distributor in general, then a

distributorPTCitraNusaInsanCemerlangintheoperationsmustnotactfor

andonbehalfofthecompanybuttoactforandonbehalfofitsown.Inother

words, all efforts and actions that distributor do will become personal

responsibilityandnottheresponsibilityofthecompany.However,inpractice,

companiesincertainrespectsisstillresponsibleforwhathasbeendonebythe

distributors, for example, the company is still responsible in the form of

replacementofdamagedorexpiredgoodstoconsumerseven ifthegoodsor

productspurchasedfromdistributors.

WiththemembershipapplicationformandCodeofConductwhichhavebeen

madepreviouslybythecompanyshowsthattheagreementmadebetweenPT

CitraNusaInsanCemerlangwithadistributorisastandardcontract.Asstated

byMunirFuady,thatthestandardcontractisawrittencontractthatismade

onlybyonepartytoacontract,evenoftentimesthecontracthasbeenprinted

(boilerplate) in the form of a particular form by either party7

.Therefore,

clausesinstandardagreementshavebeenmadeunilaterallybyoneparty,and

thenthereisatendencythatthestandardagreementisusuallyveryone-sided.

7Munir Fuady, 2003, Hukum Kontrak (dari Sudut Pandang Hukum Bisnis), Bandung: PT Citra

Aditya Bakti, p. 76.


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Suchproblems also appear in the agreement madebetween PT Citra Nusa

Insan Cemerlang with distributors. In its clauses either in the form of

membershiporofthecodeofconductmoreabouttherestrictionsandliability

set for the distributor than the restrictions and liability for the company.

Similarly, arrangements concerning the rights tend tobenefit the company

thanthedistributor.Arrangementsregardingsanctionsorpenaltiesforthose

whobreakapromise,bothinthemembershipformorthecodeofconduct,nor

balanced, given in his clause only regulates sanctions for violations or

distributorswhodonotobey the codeof conduct, the formof revocationof

membership.Meanwhile, there areno sanctions orpenalties for companies

thatdonotmeettheobligationorwhichcanharmthedistributor.

2.Legalrelation4

5

i6

7

etween8

i4tri

7

9

toran@Con

4

9

mer

Legal relationshipbetween the distributor and the consumer isbasically a

sales and purchase agreement. In the purchase agreement between the

distributors with customers, distributors bind themselves to deliver the

required goods or products, andconsumers have a liability to pay a

predeterminedprice.Meanwhile, adeal considered to have occurred at the

timeof thedeclarationof thewillofbothparties.So the saleandpurchase

agreementbetween thedistributorsby the consumermade orally.Although

madeorally,thisdoesnotaffectthevalidityoftheagreementbecauseoneof

the principles of contract law is the principle of consensus.That is already

happening along the consensus (agreement) of theprincipal agreement, the

agreementhasbeenbornanditisconsideredlawful.


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Asaseller,thedistributorhasanobligationtoensuretwothings,namely:a)

ensure themastery of thegoods soldare safeand secure,andb)guarantee

against anydefectshidden items.Thebuyer isobliged topay thepurchase

priceatthetimeandplaceasstipulatedintheagreement.Ifnotstipulatedin

theagreement, thepayment ismade inplaceandat the time thegoodsare

delivered.

In the concept of civil law, especially concerning the engagement, the

agreement made between a distributorswith a customer delivery of the

engagement,which isa legal relationshipbetween twopeoplewho gave the

rightstowhichonetodemandsomethingfromothers,whiletheothermoney

required meeting that demand. This means that each party has the

achievementsthatmustbefulfilled.Theachievementthatmustbemetbythe

distributor is to provide/submit something, in this case the goods as a

principal agreement,while the consumerhas theperformance tohandover

themoneyaspaymentforthepriceofthegoods.

3.Legal relationA B iC D etween E T Citra F G A a InA an Cemerlangan

H

ConA

G mer

PTCitraNusaInsanCemerlang isabusiness thatproducescertainproducts

withintenttoselltothepublicthroughatieredmarketingsystem.Marketing

the product through the chain of commerce is called the distributor.Thus,

basically there isnodirect relationship (contractual)betweenPTCitraNusa

Insan Cemerlang with consumers. Although no direct relationship

(contractual), thisdoesnotmean there isno engagementbetweenPTCitra

Nusa Insan Cemerlangwith consumersbecause other than raisedby the


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agreement,theengagementwasalsotherebecauseofthelaw.Basedonthis,it

remains an engagement between PT Citra Nusa Insan Cemerlang with

customers,onthebasisofthelaw.

When associated with consumer protection issues, PT Citra Nusa Insan

Cemerlang as the producer of the product have the responsibility for their

product.ThismeansthatPTCitraNusaInsanCemerlangmustberesponsible

iftheproductwasproventobedamagedordefectiveorcontaminatedornot

meet the statutory provisions that result in harm to consumers. This

responsibilityinLawNo8of1999onConsumersProtectionistheconceptof

productliability.

CORI

ORATE RESPOP

SIBILITYTOQ

ARR

COP

SUMERS OS

PTCITRA

P

USA IP

SAP

CEMERLAP

T

To determine the responsibility of business actors, writers distributing

questionnaires to 10 peoplewho had harmed consumers in consuming the

product of PT Citra Nusa Insan Cemerlang and 5 distributorswho sell to 10

customers.Thisisdonebecausetheauthorsdidnotobtainprimarydatafromthe

headofPTCitraNusaInsanCemerlang.

Basedonquestionnaireresponses from10consumers,datashowed thatall (10

people)consumerssubmitclaimsthroughadistributor.Threeconsumersgetthe

replacementofthegoodsfromPTCitraNusaInsanCemerlang,threecustomers

only get an explanation from the distributor because it did not request a

replacementproduct,oneconsumers consultation services fromadoctorofPT

CitraNusa InsanCemerlang, and 3 customersdonot get a response fromPT


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Citra Nusa Insan Cemerlangbecauseboth consumers and distributors do not

makeaclaimtoPTCitraNusaInsanCemerlang(seetable1below).

Table1

TheAggrievedConsumer

ConU

V mer ProW

V ct Complaint ClaimstoCorporate

Response

1 PhytohoneyBlisterpackaging

Distributor

PTCitraNusaInsanCemerlangreplacingaftertheproducthasbeenexist

2 Organik Constipation DistributorDistributorgivean

explanationtoconsumer

3 EsterCThecoloroftheproductisnotasusual

Distributor

PTCitraNusaInsanCemerlangreplacingwiththesameproduct

4 LibilonFeelingdizzyafterdrinking

Distributor

DistributorinvitesconsumerstoconsultwithadoctorofPTCitraNusaInsanCemerlang

5 NutrimoisAcnemultiplyafteruse Distributor -

X Lasy

Productwashardtoget

Distributor

DistributorexplainedthatLasy

wasnotmarketedanymore

Y EsterC

Blisterpackaging

Distributor

PTCitraNusaInsanCemerlangreplacingaftertheproducthasbeenexist

8 PastaGigiTeethbecomedullafteruse

Distributor -

Shampoo

Dandruffmultiplyafteruse

Distributor -

10 MieChlorelaStockoutforthreemonths

DistributorDistributoraskingconsumerstowait

Source:www.cni.co.id(2005)8

8jurnal.pdii.lipi.go.id/admin/jurnal/8205134150.pdf


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Dataofthedistributorisasfollows(seetable2below):

Table2

DistributorResponsibilitytoConsumers

Distria

b tor ConsumersClaim Responsia

ility

1TheexistenceofsideeffectsafterconsumingEsterC

ReceivingcomplaintsandbringtoadoctorofPTCitraNusaInsanCemerlangforconsultation

2TheexistenceofsideeffectsafterconsumingOganik

Findingthecauseanditisthefaultofconsumerswhodonotobeytherulesofconsuming.Thengivethecorrectexplanationoftherulesof

consuming.

3PackagingPhytohoneyandEsterChasbubbled

Requestamemorandumofpurchase,ifstillthereitwillbeusedtomakeaclaimtothePTCitraNusaInsanCemerlangasanappropriateprocedures

4ThecolorofEsterCisnotasusual

ReceivecomplaintsandthenforwardtoPTCitraNusaInsanCemerlang

5Lasyproductwashardtogetforalongtime

ForwardconsumercomplaintstoPTCitraNusaInsanCemerlang(distributorasmediatorsonly)

Source:www.cni.co.id(2005)9

From the questionnaire results above, can be explained that all forms of

consumerclaimslargelypassedontoPTCitraNusaInsanCemerlang,butthere

areasmallportioncompletedbythedistributoritself.Inthecaseofclaimsfrom

consumers who forwarded to PT Citra Nusa Insan Cemerlang, then the

distributorpositiononlyasa "bridge"betweenPTCitraNusaInsanCemerlang

withconsumers.Thus,thedistributorisnotresponsibleforalloftheclaimsfrom

consumers.

9jurnal.pdii.lipi.go.id/admin/journal/8205134150.pdf


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FormofconsumerresponsibilityofPTCitraNusaInsanCemerlangitselfstated

inCustomerSatisfactionGuarantee,namely:

a. 10DaysCoolingOffWarranty provided by distributor PT Citra Nusa Insan Cemerlang to

consumers compensation is form of return of 100% (consumer's price), if

consumersfindthe factsofproductssolddoesnotmatchtheneeds,services

providedlessthansatisfactoryorforotherreasons.

b. QualityWarrantyWarrantyreplacementformofaproductwiththesameorsimilarproducts,if

thepurchasedproducthave:1)contentlessorempty,whilesealing/securityis

stillingoodcondition,2)theproductisdamagedornotinaccordancewiththe

standardslistedonthepackaging,brochuresorotherpublications;3)product

qualitychangesafterconsumptionoruse(note:thecompanyhastheauthority

toconductqualitytestsinthelabfirstbeforedecidingwhetherornotworthy

replacementproducts),4)defectiveproductpackaging.

c. MoneyBackGuaranteeGuaranteeofrefundiftheproductpurchasedwascausingirritationtotheskin

disorder or functions are not in accordancewith company standards, as

indicated on the packaging, brochures, media publications or any other

company.


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Ac

ALYSIS

In conducting transactionswith the company, consumers are legallyprotected

their rightsby law (in this case especially Law No. 8 of 1999 on Consumers'

Protection). Based on the results of consumer research on 10 people,was a

violationoftherightsofconsumers.ViewedfromtheprovisionsofArticle4Law

No.8of1999onConsumers'Protection,violationsincludedthefollowing:

a. Therighttocomfort,securityandsafetyinconsuminggoodsand/orservicesThis happens on a first consumer who gets Phytohoney product with

packagingthathasbeeninastateofinflatedsothatconsumersfeelafraidand

uncomfortablewhen going to consume the product; second consumer feel

uncomfortableduringdefecateafterconsumingOrganic;thirdconsumer feel

suspicious and uncomfortablebecause the color of Ester C products is not

usually;fourthconsumer feelveryuncomfortableafterconsumingLibilondue

todizziness; fifthconsumeralsobecomeveryuncomfortableafterconsuming

Nutrimoisbecauseevencauseacnetomultiply;seventhconsumerssimilarto

thefirstcustomerthatfeelworriedanduncomfortablebecausethepackaging

Ester C,whichbought already in a state ofbloated; eighth consumers feel

uncomfortable after usingWinz Toothpastebecause the teethbecome dull;

and ninth consumers feel uncomfortable after using the shampoo from PT

CitraNusaInsanCemerlang,becauseitactuallygainalotofdandruff.

b. The right to choose the goods and/or services and obtain goods and/orservices inaccordancewithexchange ratesand the conditionand guarantee

thepromised.


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This happens on a first consumer who gets Phytohoney product with

packaging that hasbeen in a state of inflatedwhen going to consume the

product; the third customerwasdisappointedbecause although ithasbeen

consumingorganicasmuchas3bottlesbuttherewerenotangibleresultsas

describedbythedistributor; fifthconsumeralsobecomeveryuncomfortable

after consuming Nutrimoisbecause even cause acne to multiply; seventh

consumerssimilar to the firstcustomer that feelworriedanduncomfortable

because the packaging Ester C,whichbought already in a state ofbloated;

eighthconsumersfeeluncomfortableafterusingWinzToothpastebecausethe

teethbecome dull; and ninth consumers feel uncomfortable after using the

shampoofromPTCitraNusaInsanCemerlangbecauseitactuallygainalotof

dandruff.

Against violations of these rights, consumers are entitled to receive

compensation, damages, and/or replacement due to get items that are not in

accordancewiththeagreementornotasitshould.

Basedonresearchresultscanbeseenthatoutof10consumerswhofiledaclaim

for a loss, most lodge a claim to the distributor. This is understandable

considering that dealdirectlywith customers are distributors. However,when

seendata from thedistributor then it is clear that almost alldistributorsonly

actedasamediatorbetweenconsumerswithPTCitraNusaInsanCemerlang.It

means,thedistributorgavethisresponsibilitytoPTCitraNusaInsanCemerlang.

Conceptually,inconductingitsactivitiesdistributorshouldacton itsown.Thus,

allthedeedsandactionsofthedistributorweretobeonitsownresponsibilities,

notcompaniesorprincipals.Thisisdifferentfromtheagent,whoinperforming


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itsactivitiesisforandonbehalfofthecompany'sprincipals.Soifthereareclaims

fromconsumers,thenitisentirelytheresponsibilityoftheprincipal.

Meanwhile,whenanalyzedbasedontherightsand liabilityofthedistributoras

specifiedintheDistributorAgreementbetweenPTCitraNusaInsanCemerlang

anddistributors,veryclearlysaidthatthedistributorisobligedtoperformafter-

salesservicetoeverycustomer.Thismeansthatthedistributorhasresponsibility

forallmattersrelatingtotheproductspurchasedbyconsumers.

Inthiscontext,itisevaluatedintermsofconsumerprotectionlaw;therearetwo

businesses, namely PT Citra Nusa Insan Cemerlang as a manufacturer and

distributor of supply chain and trade. Therefore, the responsibility of each of

thesebusinessescanbeanalyzedasfollows:

a.Prod uctliabilityProductliabilitybasically isacivilliabilityofcompany(producerandtrading

supplychain)

tothe

consumers

who

suffer

as

aresult

ofthe

use/wearing

of

goodsthatproducedortraded.Basedonthisunderstandingcanbeexplained

that the concept of responsibility between the company and consumer

productscanoccurwhetherornotthecontractualrelationship.

It also canbe inferred fromArticle 19 paragraph 1 Law No. 8 of 1999 on

Consumers'Protection,"thecompanyresponsibleforprovidingcompensation

for the damage, pollution, and/or loss of consumers from consuming the

goods and/or servicesproduced or traded.Theuse of theword 'produced'

course isintendedforproducers,while 'trade' isintendedfortraders/sellers.

Withproducers,consumersdonothaveadirectrelationship(contractual), but

withtraders/sellers,consumershaveadirectrelationship(contractual).


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As already noted, in the Multi-Level Marketingbusiness, there are three

parties involved in it,producercompanies (in thiscasePTCitraNusaInsan

Cemerlang), distributors, and consumers. There is no direct relationship

(contractual) between PT Citra Nusa Insan Cemerlang with consumers,

whereasthereisadirectrelationship(contractual)betweenthedistributorsto

theconsumer.

Whencustomershaveloss(materialorimmaterial)fromconsumingproducts

fromPTCitraNusaInsanCemerlang,consumershavetherighttofileclaims

forcompensationtothecompany.Problemsthatariseareconfusedconsumers

filed claims for compensationbecause in this context there are two parties

namely producers (PT Citra Nusa Insan Cemerlang) and distributors.

Therefore,muchneededflair indeterminingwhichpartywillbeprosecuted.

This is importantbecause thedamage theseproducts can only occur at the

timestillintheprocessofproduction,oratthetimeofdistribution(including

bythedepositbythedistributor).

In practice, this problem is its own difficulties tobe facedby consumers

becauseiftheconsumerfiledalawsuitagainstthewrongpartywouldresultin

theclaimfailed/notmet.Thedeterminationofwhichpartywillbeprosecuted

alsowill determinewhat the appropriate legalbasis to use.If there is a

contractual relationship between the company's and the consumer, so

consumers can use the basic law of contract, which in this case is in

default.Thismeans that the companyhadmadedefaultbecause theydonot

meettheperformanceaspromised.Butifthereisnocontractualrelationship

between company and consumer, it will use the basic of tort. So when

consumerswilldemandcompensation fromPTCitraNusaInsanCemerlang,


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thentheconsumer ismoreappropriateonthebasisoftort,namelyPTCitra

NusaInsanCemerlanghasviolatedthelaw(inthiscasetheLawNo.8of1999

on Consumers' Protection) which among other requiring businesses to

guarantee the quality of goods produced under the applicable standards of

qualitygoods(article 7 LawNo.8of1999onConsumers'Protection).

Meanwhile,whenconsumerswilldemandcompensationtothedistributor,so

consumers canuse abasicbreach of contract, i.e. thedistributorhasmade

achievementsindefaultofcomplianceisnotaspromised.

Formof indemnitywhich are the responsibilityofbusiness actors,bothPT

Citra Nusa Insan Cemerlang or distributor can be either a refund or

replacement item of similar or equalvalue, or health care and / or the

provisionofcompensationinaccordancewiththeprovisionsofthelegislation

inforce(article 7 paragraph2LawNo.8of1999onConsumers'Protection).

The results showed that therewere three peoplewho get a replacement

consumer the same products from PT Citra Nusa Insan Cemerlang. This

means that PT Citra Nusa Insan Cemerlang has met the release of the

ConsumerSatisfactionGuaranteeaswellasmeetingtheprovisionsofarticle 7

paragraph2LawNo.8of1999onConsumers'Protection.

b.ContractualliabilityContractual liability isbasicallyacivil liabilityon thebasisofagreementsor

contracts ofboth companies for goods or services for any loss sufferedby

consumers from consuming thegoods theyproduceorutilize the services it

provides.So the conceptof contractual liability requires the existenceof an

agreementorcontractbetweenthecompanyandconsumer.


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Multi-LevelMarketingbusinessatPTCitraNusaInsanCemerlang,consumer

contractual relationship onlywith distributorsbecause consumersbuy the

productsofPTCitraNusaInsanCemerlangfromdistributors.Thus,whichhas

acontractualresponsibilitytotheconsumeristhedistributor.Inthiscontext,

thedistributorpositionasasalesmanwithalltherightsand liability.Sothe

engagementbetweenthedistributorswithconsumersappearsbecauseofthe

agreement,i.e.saleandpurchaseagreement.

According to theprovisionsofArticle 1457 KUHPer,buying and selling are

opposite sides of an agreementwhereby one party (the seller) promises to

handoverownershipofanitem,whiletheotherparty(buyer)promisestopay

thepricethatconsistsofasumofmoneyascompensationfromtheacquisition

ofrightssuchproperty10.Basedonsuchunderstanding,theprincipalelements

thatmustexistinthepurchaseagreementaregoodsandprices.

Asa seller,oneof theobligationsof thedistributor is theguaranteeagainst

hidden defects of goods,which resulted in the goods cannotbe used for

intendedpurposes or reduce thebenefits of using it. Sowhen consumer is

awareofanyhiddendefects,thenconsumerwillnotbuyit.

Ifthesellerhadbeenawareofanydefects,theseller isobligedtoreturnthe

purchasepriceaswellasreplaceanylossessufferedbythebuyerasaresultof

consuming the goods. However, if the seller does not know the defect, the

sellerisonlyobligatedtoreturnthepurchasepriceandreimbursedexpenses

incurredby thebuyer in order tobuy goods.While from the standpoint of

article19paragraph1LawNo.8of1999onConsumers'Protectionstatedthat

10Article 1457 KUHPerdata


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thecompanyisobligatedtoprovidecompensationforthedamage,pollution,

and/or consumer losses resulting from consumptionofgoods tradedby the

company. With the word 'trade', it is the company in this article is

traders/sellers, including in this contextdistributor of PTCitra Nusa Insan

Cemerlang.Formsofresponsibilityofthisdistributorcanbeeitherarefundor

replacementgoodsand/orservicesthataresimilarorequalvalue,orhealth

careand/ortheprovisionofcompensationinaccordancewiththeprovisions

ofthelegislationinforce.

However,accordingtoresearchresultsofalmostallconsumerclaims,without

first investigatedwhat orwho causes,by the distributors passed on to the

company(PTCitraNusaInsanCemerlang).Thisindicatesthatthedistributor

isnotresponsiblefortheproductitsells.Though,itmaybedamageddueto

improperdistributorinstoreorcarryoftheproduct.

When analyzed from the concept of trading intermediaries, distributors in

conducting its activities are for and onbehalf of itself and has its own

responsibilityregardlessofitsprincipals.Thiswasalsoconfirmedinoneofthe

distributor liabilitycontainedintheDistributorAgreementbetweenPTCitra

Nusa InsanCemerlangwithdistributors, thateverydistributor isobliged to

provideafter-salesservicetoeverycustomer.

COe

CLUSIOe

Basedontheresultsofthediscussionabove,itcanbeconcludedthattheMulti-

LevelMarketingBusiness(inthiscasePTCitraNusaInsanCemerlang),thereare


24/24

threepartiesinvolved,namelyPTCitraNusaInsanCemerlangasmanufacturers,

distributors and consumers. Between PT Citra Nusa Insan Cemerlang with

distributors there is a legal relationship that is based on the Distribution

Agreement,whilebetweenPTCitraNusaInsanCemerlangwithconsumersthere

isnodirectrelationship,buttheengagementthatmayariseisbecauseoftheAct

(e.g.incaseofclaimsforcompensationbasedontheconceptofproductliability).

Corporateresponsibility intheMulti-LevelMarketingBusinesscanbeanalyzed

basedontheconceptofproductliabilityandcontractualliability.Theconceptof

productliabilitycanbeusedeithercontractualornotthereareties,sointhiscase

PTCitraNusaInsanCemerlangstillberesponsibletotheconsumerifthedamage

resulted in loss of consumerproducts thatproved to result fromhismistakes.

However, ifthe fault lies inthedistributor,thenwhoshouldberesponsibleisa

distributor(Article19paragraph1,LawNo8of1999onConsumersProtection).

Besides that, the responsibility of PT Citra Nusa Insan Cemerlang is a

replacementofsimilargoods.Thiswasinaccordancewithcustomersatisfaction

guaranteedPTCitraNusaInsanCemerlangandprovisionsArticle19paragraph

2,LawNo8of1999onConsumersProtection.Whiletheconceptofcontractual

liabilityentailsadirectrelationship(contractual).Sowhoshouldberesponsible

totheconsumeristhedistributor.Fromthecivilaspect(KUHPer),thelawused

is the default,while from the aspect of Law No 8 of 1999 on Consumers

ProtectioncanbeusedprovisionsofArticle19.Butaccordingtoresearchresults,

thedistributorisnotresponsiblefortheirowninaccordancewiththeconceptof

adistributor,becauseonlycontinuingtheclaimsofconsumerstoPTCitraNusa

InsanCemerlangastheproducer.

company responsibility towards consumers in mlm business

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