Newly issued Minister of Trade Regulation providing further clarity on E-commerce

  NEWLY ISSUED MINISTER OF TRADE REGULATION 

PROVIDING FURTHER CLARITY ON E-COMMERCE

Background

In an attempt to provide clarity with regard to the implementation of Government Regulation Number 80 of 2019 on E-Commerce (“GR 80/2019”) which was enacted last November, Minister of Trade has issued Minister of Trade Regulation Number 50 of 2020 on Provisions regarding Business Licensing, Advertising, Development of and Supervision of E-Commerce Business Practitioners (“MoT Reg 50/2020”) on 13 May 2020. GR 80/2019 and MoT Reg 50/2020 collectively serves as the implementing regulations of Law Number 7 of 2014 on Trade (“Trade Law”) in the field of trading activities where the transactions of which are carried out through a series of electronic devices and procedures (“E-Commerce”) in order to accommodate the advancement of e-commerce business which increasingly has become a huge part of the daily life of Indonesian citizens as well as in the framework of national economy. Please see our previous publication on GR 80/2019 here.

Content and Implication

MoT Reg 50/2020 reaffirms the classification of business practitioners conducting E-Commerce which encompass offshore and local (i) merchants; (ii) E-Commerce Business Administrators (Penyelenggara Perdagangan Melalui Sistem Elektronik/ “PPMSE”); and (iii) Intermediary Services Providers (collectively referred to as “Business Practitioners”), as stipulated under GR 80/2019. However, under MoT Reg 50/2020, it is now clear that sellers conducting E-Commerce by way of utilizing social media will also be classified as merchants and therefore shall be subjected to the prevailing e-commerce regulations.

In addition, MoT Reg 50/2020 also provides more in-depth provisions with regard to the requirement which must be fulfilled by the Business Practitioners prior to conducting E-Commerce business in Indonesia, particularly with regard to the business license for such Business Practitioners, as well as the requirement to establish representative office for foreign PPMSE.

MoT Reg 50/2020 also further regulates electronic advertisement, in particular MoT Reg 50/2020 determines the general provision on the material of an electronic advertisement as well as the supervision over electronic advertisement. In addition, whilst GR 80/2019 mandated the prioritization of local products it does not specify on the know-how of such prioritization, thus MoT Reg 50/2020 serves as the minister regulation which stipulates the implementation of such prioritization.

It is also worth noting that while GR 80/2019 provides two-year grace period as of its enactment on 20 November 2019, MoT Reg 50/2020 appears to have stipulated a shorter transitional period by offering only six-month grace period as of its enactment on May 2020. Failure to comply with the provisions stipulated under MoT Reg 50/2020 will subject Business Practitioners to administrative sanctions in the form of written warning, inclusion in the blacklist/ supervision priority list, as well as temporary or even permanent suspension of business. The implementation of such sanctions will be under the authority of Director General of Consumers Protection and Trade Order of Ministry of Trade.

Notable Provisions

1. Requirement for Conducting E-Commerce

In principal, pursuant to GR 80/2019, Business Practitioners are required to possess business license prior to conducting E-Commerce business in accordance with its relevant business sector, however MoT Reg 50/2020 further stipulates certain additional requirement for each of E-Commerce Business Practitioners which shall be fulfilled on top of possessing the relevant business license, as follows:

1. Merchant

Local merchants shall be in possession of Trading Business License (Surat Izin Usaha Perdagangan/ SIUP), or other type of business license for local merchants conducting business activity in the field other than general trading sector in accordance with its relevant business sector. In the event that a merchant only conducts trading business through internet, the SIUP shall be with corresponding Business Classification Number (KBLI) of 4791 i.e., retail trading through postal order or internet. Foreign merchants on the other hand will be required to register number, name, and valid business license issued by authorized institution from its origin country to the relevant local PPMSE.

2. PPMSE

Local PPMSE, as well as local merchants in possession of its own E-Commerce facility, shall obtain E-Commerce Business License (Surat Izin Usaha Perdagangan Melalui Sistem Elektronik/ SIUPMSE). Such business license will be valid for as long as such PPMSE is conducting its business activities and will be effective as of the fulfillment of the following commitments:

1. Electronic System Providers Registration Certificate (Surat Tanda Terdaftar Penyelenggara Sistem Elektronik) issued by the authorized institution at the latest fourteen (14) days after the issuance of the SIUPMSE;
2. web address and/or application name;
3. consumer service in the form of contact number and/or email address; and
4. consumer service containing information regarding the Director General of Consumers Protection and Trade Order’s contact for consumers complaints.

3. Intermediary Services Providers

Intermediary Services Providers are also subjected to the same requirement as local PPMSE as contemplated above, with the exception of Intermediary Services Providers who:

1. do not constitute as a direct beneficiary from the transaction; or
2. were not directly involved in the contractual relationship between the parties conducting E-Commerce.

Further, pursuant to Article 12 of MoT Reg 50/2020, local PPMSE, Intermediary Services Providers and offshore PPMSE who has established local representative office will be registered and displayed in a specific page on the website of the Ministry of Trade, registration of which must be made known to the consumers.

2. Online Advertisement

Article 19 of MoT Reg 50/2020 determines that any electronic advertisement shall fulfill the requirement as follows:

1. shall not deceive the consumer on the quality, quantity, material, purpose and price of the goods and/or service, as well as the accuracy of the receipt time of such goods and/or services;
2. shall be non-deceitful with regard to the warranty or guarantee over such goods and/or services;
3. shall not contain erroneous, untrue, or inaccurate information pertaining goods and/or services;
4. shall contain information regarding the usage risk of such goods and/or services;
5. shall not exploit certain event and/or person without prior approval from the relevant parties; and
6. shall provide the option to exit from such electronic advertisement in the form of an exit, sip, or close button which shall located in a clear location to enable ease of access for the consumer to exit from such electronic advertisement.

Further, MoT Reg 50/2020 also regulates that any electronic advertisement displaying review and testimony from consumer shall include and verify the accuracy of the identity of such legal subject and shall be done responsibly. In addition, MoT Reg 50/2020 also stipulates provisions on the supervision and termination of electronic advertisement by way of complaint submission to the Director General of Consumer Protection and Trade Order, however the implementation of it remains to be seen.

3. Prioritization of Local Products

As previously stipulated under GR 80/2019, Business Practitioners are mandated to support government program in relation to local goods and/or services. GR 80/2019 also determines a set of requirements for e-commerce business practitioners in regard to such matter, however, the implementation of it is rather obscure. MoT Reg 50/2020 further clarifies the implementation of each of the requirement, as follows:

1. Prioritization of trade of local goods and/or services, which shall be implemented by way of:

1. Developing business partnership with micro and small business owners which may be undertaken in the form of business meetings, trade forums, and local trading mission or any other form of partnership both online or offline; and/or
2. Increasing the marketing access for the products of micro and small business.
3. Increasing the competitiveness of local goods and/or services, which shall be implemented in the form of:

1. Online as well as offline education;
2. Online as well as offline meetings in the form of workshop, seminar, discussion, communication forum, technical training and trade counseling for micro and small business owners; and/or
3. Other forms of activities intended to increase the competitiveness of local goods and/or services.
4. Providing platform for the promotion of local goods and/or services, which shall be implemented by way of:

1. Organizing online or offline exhibitions, both independent as well as participatory exhibitions;
2. Providing landing page in the form of main page and/or special page utilized for the promotion of potential local products; and/or
3. Promotional activities which may be in the form of discount, price reduction and/or free delivery for local products.

4. Representative Office

MoT Reg 50/2020 reaffirms the requirement to establish a representative office for foreign PPMSE who satisfy certain requirement i.e., (i) having conducted transactions with more than 1,000 local consumers in the span of one year; and/or (ii) having conducted more than 1,000 shipments to local consumers in the span of one year, as also stipulated under GR 80/2019. MoT Reg 50/2020 further stipulates the requirement and licensing obligation for the establishment of such representative office, including the obligation to possess Foreign Representative Business Permit (Surat Izin Usaha Perwakilan Perusahaan Perdagangan Asing/ “SIUP3A”) in the field of E-Commerce. Such representative office would also be required to submit the Electronic System Providers Registration Certificate (Surat Tanda Terdaftar Penyelenggara Sistem Elektronik) under the name of the represented foreign PPMSE issued by the relevant institution within maximum of fourteen (14) working days following the issuance of its SIUP3A.

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