Three years after the issuance of a regulation on the licensing and supervision of electronic transactions, the Indonesian government (through the Minister of Trade) issued yet a new regulation to govern electronic transactions in Indonesia. The Minister of Trade (MoT) Regulation No. 31 of 2023 (Reg 31) is issued to revoke the previous regulation, i.e., MoT Regulation No. 50 of 2020 (Reg 50). The MoT clarifies that the purpose of the issuance of Reg 31 is to complete Reg 50, especially to create fair and square competition between the e-commerce players (in the attempt to give more protection to the small, micro, and medium enterprises, the consumers and the local undertakings). Reg 31 has been effective and came into force on 26 September 2023. This article will highlight the new updates and major differences regulated in Reg 31 in comparison to Reg 50.
Elaboration of Undertakings in Trading Through Electronic System
While Reg 50 only provides explanation of Undertakings in Trading Through Electronic System (PPMSE), Reg 31 provides examples of activities that will be categorized as PPMSE. The activities of PPMSE according to Reg 31 are retail online, marketplace, online classified advertising, price comparison platform, daily deals, and social commerce.
In addition, the MoT clarified the difference between social media and social commerce in the press conference. He states that social commerce can advertise on its platform, but social media cannot. However, social commerce is not allowed to carry out the transaction through its platform.
New Obligations for Merchants
Reg 31 provides new obligations for merchants, among others:
- Foreign merchants are required to submit certain supporting documents to the PPMSE (identity, license, evidence on fulfilment of standard certification, and bank account for the transactions),
- Merchants are required to publish the evidence on fulfilment of standard certification, e.g., Indonesian National Standard (Standar Nasional Indonesia), halal certificate, and FDA registration number.
New Obligations for PPMSE
Reg 31 mandates the PPMSE to actively (i) provide equal opportunities for merchants and (ii) guard the price of the goods/services against price manipulation. The PPMSE is expected to supervise and prevent any kind of unfair business competition or price manipulation, including ensuring that there is no misuse of the customer’s data benefiting the affiliated party of the PPMSE. If the PPMSE finds any indication of unfair business practices or price manipulation, it must report it to the relevant authority within three days of finding such indication.
Reg 31 sets minimum price requirements for foreign products to be sold in the local electronic system. The minimum price is USD 100 per unit. The MoT will determine the goods below the minimum price that can be sold on the platform.
- Representative Office Requirements
Both Reg 50 and Reg 31 require PPMSE which meets certain requirements to appoint a representative office in Indonesia. While there are only two requirements in Reg 50 (minimum transactions and deliveries), Reg 31 adds one more requirement, i.e., internet traffic. Reg 31 regulates that a foreign PPMSE that has traffic of 1% of local internet traffic within one year must also appoint a representative office in Indonesia.
- Prohibited Activities
Reg 31 clearly prohibits marketplace and social commerce from also acting as a manufacturer.
- Prioritizing Local Products
Reg 31 stipulates that the PPMSE should prioritize local products by among others increasing the competitiveness of the local products or providing facilities for local products to promote its products.
Failure to comply with the requirements of Reg 31 may lead to the imposition of administrative sanctions in the form of written warnings, being listed in watch-out lists or blacklists, temporary blocking of the PPMSE facilities, or revocation of its license.
Due to the rapid development of technology and business models, there is no doubt that the regulations concerning e-commerce must keep being updated so that the regulations are always on par with the factual circumstances. As has been explained by the MoT himself during the press conference, it is clear that Reg 31 provides more protection for local merchants (especially the micro, small and medium enterprises). The protection can be seen by among others the stipulation of the minimum price of foreign goods/services that can be traded through the platform. The MoT also toughens the requirements for foreign merchants to sell their goods in Indonesia, among others by adding traffic as one of the requirements to establish a representative office in Indonesia and requiring the foreign traders to comply with certain standards first before being able to sell the goods. This clearly provides more protection for the customers because nowadays a lot of foreign products can be sold through the electronic platform even without obtaining such standards/certifications (e.g., food and cosmetic products that must first be approved by the Food and Drugs Association). Hopefully, the goals of the MoT to create fair and equal treatment for all e-commerce market players can be fulfilled through the issuance of this Reg 31.
For Further Information, Please Contact:
MetaLAW, Legal Consultant, Jakarta, Indonesia