LEGAL UPDATES BY BEPARTNERS
Technology, Media & Telecommunication
New Implementing Regulation related to E-Commerce
24 June 2020
As the demand for online transactions has soared due to the current ‘new normal’ of social distancing to prevent the spreading Covid-19, the government has finally issued the implementing regulation on E-Commerce. Anticipating the scale of prospective developments of E-Commerce activities, the Ministry of Trade (“MoT”) has issued Regulation No. 50 of 2020 concerning Provisions on Business Licensing, Advertising Guidance and Supervision of Business Actors in E-Commerce Sector on 19 May 2020 (“MoT Regulation 50/2020”).

The enactment of such regulation will hopefully provide clearer elaboration for the implementation of Government Regulation No. 80 of 2019 concerning E-Commerce (“GR 80/2019”). The government also provides a transitional period of 6 (six) months for the effectiveness of MoT Regulation 50/2020.

As such, please find below several relevant areas which are incorporated within this regulation. Due to the wide scope of the regulation, this update will focus on selected matters. 
 
1. Classification on Business Actors in E-Commerce Sector
 
It is worth noting that GR 80/2019 recognizes four types of parties involved within the engagement and practice of E-Commerce activities, which are:

• Business Actors (Pelaku Usaha);
• Consumers (Konsumen);
• Non-Business Individuals (Pribadi);
• Government Institutions (Lembaga Pemerintah).

In order to provide a clearer understanding on the different type of business actors (“BA”) under this regulation, we have summarized the definition of business actors under GR 80/2019 which covers three types of Business Actors in E-Commerce activities, namely:
 
 
Note that the above Business Actors may either cover domestic or foreign businesses. Furthermore, a merchant shall also include any businesses that carry out e-commerce activities through social media platforms which provides E-Commerce facilities.
 
2. Further Clarification on Licensing Requirement for Business Actors
 
(i). Domestic Merchant
 
Domestic merchant which conducts general online trading is required to obtain a trading business licenses with the Indonesian Business Classification Code (Klasifikasi Baku Lapangan Industri or “KBLI”) of 4791 for online retail trade activities. This is also applicable to any domestic merchant which can be categorized as small medium enterprise under prevailing laws.
 
On the other hand, for other certain sectors of online trading, the merchant is required to obtain other applicable business license under the prevailing laws related to the specific sectors.

(ii). Foreign Merchant
 
Foreign merchants can only conduct E-Commerce activities by registering the number, name and issuing agency of an effective business license from the relevant country of origin to the domestic E-Commerce Organizers who provides electronic communication facilities to the foreign merchants. Additionally, domestic E-Commerce Organizers are required to store data of any registered foreign merchant within their facilities.
 
(iii). Domestic E-Commerce Organizer
 
Under this regulation, Domestic E-Commerce Organizer must secure a business license for E-Commerce (or locally known as Surat Izin Usaha Perdagangan melalui Sistem Elektronik – “SIUPMSE”). The effectiveness of SIUPMSE will be conditional subject to the fulfillment of following requirements:

• Obtainment of Electronic System Registration Certificate issued by Ministry of Communications and Informatics;
• Provision of website address and/or application name;
• Establish accessible consumer service’s contact details i.e., contact and/or email address; and
• Establish a consumer service which contains contact details of Directorate General of Consumer Protection and Trade Compliance.
 
SIUPMSE shall also be imposed upon any domestic merchant who has its own electronic communication facilities in conducting E-Commerce activities.
 
(iv). Foreign E-Commerce Organizer
 
An extremely important point under GR 80/2019 was the requirement of certain foreign business actors to have a local representative office in Indonesia if such foreign business actors satisfied several criterions[2].  While GR 80/2019 has not yet defined the specific number to determine the criterions, this regulation has now further clarified these criterions in determining which Foreign E-Commerce Organizer is required to appoint a local representative, if they have:
 
• Have completed over 1,000 transactions with Indonesian consumers within a year; and/or
• Have delivered over 1,000 packages to Indonesian consumers within a year.
 
Accordingly, following the above clarification under this regulation, Foreign E-Commerce Organizers who have fulfilled the above criterions are expected to have a local representative in Indonesia.
 
(v). Intermediary Service Organizers
 
Intermediary Service Organizers is required to secure SIUPMSE similar to Domestic E-Commerce Organizer (as described in point iii above). The exception from SIUPMSE is only applicable to Intermediary Service Organizers who meet the following conditions, (i) must not be direct beneficiaries of E-Commerce transactions; or (ii) must not be directly involved in any contractual relationship between parties to E-Commerce activities.
 
Note that any application of license as outlined above will be submitted to the relevant Ministry through the Online Single Submission (“OSS”) Agency. Furthermore, Domestic and Foreign E-Commerce Organizers are required to submit data and/or information to the Information Statistic Agency.

3. Appointment of Representative Offices by Foreign E-Commerce Organizer
 
As described above, Foreign E-Commerce Organizers who meets the above criteria shall be required to have a local representative office in Indonesia in the form of an ‘E-Commerce Representative Office’ (“E-Commerce KP3A”). E-Commerce KP3A is required to secure a business license for the representative of foreign E-Commerce trade companies (“E-Commerce SIUP3A”) from OSS by submitting the following requirements, among others: proof of appointment as a representative office, copy of Foreign E-Commerce Organizers’ articles of association, and statement letters on Foreign E-Commerce Organizers’ information.
 
The proof of appointment must at least incorporate information on E-Commerce KP3A’s authority to represent the Foreign E-Commerce Organizers for the following points:
 
• Fulfillment of consumer protection;
• Conduct development to increase competitiveness; and
• Dispute settlement.
 
4. Electronic Advertisements
 
The regulation has also provided a more detailed provision on electronic advertising compared to the previous enacted regulations. Under this regulation, Business Actors are allowed to create and/or disseminate electronic advertisements provided that the materials incorporated within such advertisements are in compliance with the advertising codes of ethic and prevailing regulations.
 
Furthermore, electronic advertisement must fulfill the following conditions:
 
• not deceiving consumers in regard to quality, quantity, materials, usage and prices of goods and/or services, including the accuracy for the receipt of goods and/or service;
• not making any false claims on guarantees or claims upon the relevant goods and/or services;
• not containing any false, incorrect or inaccurate information on the goods and/or services;
• containing information on the usage risk of the goods and/or services;
• not exploiting any incident and/or individual without permission or consent from the relevant party; and
• providing an exit function from the aired electronic advertisements, reflected by either a skip or close signs which is clearly positioned for the purpose to help consumers in closing the said electronic advertisements.

The regulation also encourages the public to be more proactive in conducting supervision upon electronic advertisements. Accordingly, the public is able to submit complaints on the substance of electronic advertisements directly to the relevant Business Actors or through the Director General of Consumer Protection and Trade Compliance.
 
5. Sanctions
 
MoT Regulation 50/2020 also stipulates there are administrative sanctions for violation, in the form of:
 
a. warning letters
b. temporary suspension of access
c. enlistment into priority list of supervision
 
Closing Remarks

GR 50/2020 does offer equitable clarifications on business Licensing, advertising guidance’s and clear supervision of Business Actors in the E-Commerce Sector. One of the most beneficial aspects of this regulation is the clarity it provides in stipulating how the government will determine which Foreign E-Commerce Organizer will have to appoint a local representative.

However, there are still ambiguities in its practicality. For example, setting the standard of criteria that completing over only 1,000 transactions and 1,000 deliveries with Indonesian consumers within a year requires Foreign E-Commerce Organizers to establish some form of permanent presence. This threshold number is relatively low and It is plausible to state that the reasons for such low thresholds is the government attempt to oversee all E-Commerce sales within Indonesia. The government’s aim may be to ensure that the consumer protection of Indonesian nationals is upheld and possibly for the strengthening of governmental oversight on taxation purposes involving all E-Commerce transactions in Indonesia.

There is a six-month transitional period under the regulation, from which it is necessary to continue in monitoring the enforcement of several provisions and the reaction of business on the issuance of MoT Regulation 50/2020. Therefore, it is pertinent for businesses to stay observant to the development of the market following the enactment of this regulation.
 
If there are any queries with regards to how this may affect your business, please contact us for further legal consultation.
 
This information does not, and is not intended to, constitute as legal advice; instead, all information, content, and materials are for general information only
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[1] Art. 14, GR 80/2019

[2] Please refer to our article titled: “Brief of Indonesian E-Commerce Enactment”.