New Rules on E-Commerce Licensing and Supervision in Indonesia

Indonesia’s Ministry of Trade (MOT) recently issued a regulation implementing Government Regulation No. 80 of 2019 on Trading through Electronic Systems. The new regulation clarifies some of the requirements to be satisfied by digital platforms and the merchants operating on those platforms in serving Indonesia-based customers, whether their operations are onshore or offshore.

Key issues clarified under the MOT regulation include requirements on business licences and on the appointment of Indonesian representatives by foreign e-commerce business players. 

The newly issued MOT Regulation No. 50 of 2020 on Provisions on Electronic Systems Trading Business Licencing and Advertising, and Guidance and Supervision of Business Actors (MOT Regulation 50) will come into effect in November 2020 (six months after it was enacted).

MOT Regulation 50 clarifies certain aspects of Government Regulation No. 80 of 2019 on Trading through Electronic Systems (GR 80). GR 80 includes a two-year transitional period for existing businesses so needs to be fully complied with by existing businesses by 25 November 2021.

We discuss here some of the issues covered by MOT Regulation 50.

E-COMMERCE BUSINESS LICENCES

GR 80 provides that any domestic or foreign individual or business entity, whether or not a legal entity, intending to carry out E-Commerce Trading¹ (E-Commerce Business Player) must have appropriate business licences issued through the Online Single Submission (OSS) system (E-Commerce Business Licences). E-Commerce Business Players include:

• E-Commerce Platform Operators, which provide electronic communication facilities used for trading activities;
• E-Commerce Merchants, which carry out E-Commerce Trading using (i) facilities they themselves create and operate, (ii) facilities owned by e-commerce platform operators, or (iii) other electronic systems that include facilities for E-Commerce Trading; and
• Intermediary Service Providers, being providers of electronic communication platforms (other than telecommunications operators) which act only as intermediaries in electronic communications between senders and receivers.

The requirement to obtain an E-Commerce Business Licence does not apply to Intermediary Service Providers that (a) do not directly benefit from transactions, and (b) are not directly involved in the contractual relationship between e-commerce traders (Exempted Intermediary Service Providers). Unfortunately, MOT Regulation 50 does not clarify what constitutes direct benefit or direct involvement.

MOT Regulation 50 explains which E-Commerce Business Licences are required by each of the following categories of E-commerce Business Players:

Domestic E-Commerce Merchants²: A domestic merchant that only conducts online retail trading must obtain a Trading Business Licence Certificate (Surat Izin Usaha Perdagangan or SIUP) with the following line of business: “Retail Trading Through Postal or Internet Orders”, under Standard Indonesian Business Classification (KBLI) code 4791.

The emphasis on the word “only” remains to be clarified in practice as the wording may be interpreted as exempting certain groups from the requirement to obtain a SIUP with KBLI code 4791.

On one reading, it could exempt from such requirement domestic merchants that carry out trading activities both offline and online (i.e. those merchants doing not just online retail trading). Rather, these merchants may be able to rely on their customary SIUP for general trading activities to conduct online selling.

On another reading, it could exempt from such requirement domestic merchants that also operate their own E-Commerce Trading platforms in addition to conducting online retail trading. Rather, these merchants may be able to rely on their SIUPMSE licence (see below) to engage in online retail trading.

Further clarification is needed from the MOT on this point.

Domestic E-Commerce Platform Operators: Any domestic E-Commerce Platform Operator (including a domestic E-Commerce Merchant operating an E-Commerce Trading platform) or non-exempt Intermediary Service Provider must obtain a Business Licence for Trading through Electronic Systems (Surat Izin Usaha Perdagangan Melalui Sistem Elektronik or SIUPMSE).

As mentioned above, it is unclear whether a domestic merchant that (i) conducts online retail trading and (ii) also operates its own E-Commerce Trading platform is still required to obtain a SIUP with KBLI code 4791 in addition to the SIUPMSE. Again, this will need to be clarified by the MOT.

A SIUPMSE will be effective after the domestic E-Commerce Platform Operator has satisfied its commitments, which include procuring or having in place:

• an Electronic System Provider Registration Certificate (Surat Tanda Terdaftar Penyelenggara Sistem Elektronik or TDPSE) issued by the Ministry of Communications and Informatics within 14 business days after issuance of the SIUPMSE;
• a website address or application name;
• consumer complaint services in the form of a contact number or email address; and
• consumer complaint services containing information on who to contact at the Directorate General of Consumer Protection and Trade Compliance (Direktorat Jenderal Perlindungan Konsumen dan Tertib Niaga) of the MOT to make complaints.        

Foreign E-Commerce Platform Operators: Any foreign E-Commerce Platform Operator that meets certain criteria (described below) is required to appoint a representative domiciled in Indonesia to act on its behalf. This representative must be appointed (or established) in accordance with the provisions on Foreign Trading Company Representative Offices (Kantor Perwakilan Perusahaan Perdagangan Asing or KP3A) for E-Commerce Trading under MOT Regulation 50 (E-Commerce KP3A).

A foreign E-Commerce Platform Operator must appoint (or establish) an E-Commerce KP3A representative if it has:

• completed more than 1,000 transactions with consumers (in Indonesia) in a year; or
• delivered more than 1,000 packages to consumers (in Indonesia) in a year.

An assessment as to whether these criteria are satisfied will be conducted by a team formed by the MOT and involving other related ministries or agencies.

An E-Commerce KP3A representative:

• may only represent one foreign E-Commerce Platform Operator;
• must obtain a representative office trade business licence (Surat Izin Usaha Perwakilan Perusahaan Perdagangan Asing or SIUP3A);
• is only permitted to act for the foreign E-Commerce Platform Operator in relation to: (i) fulfilment of obligations relating to consumer protection; (ii) developments to increase the competitiveness of domestic products; and (iii) dispute settlement; and
• must obtain the TDPSE for the foreign E-Commerce Platform Operator that it represents within 14 business days after issuance of the SIUP3A.

PUBLICATION ON MOT WEBSITE

MOT Regulation 50 introduces a requirement for domestic E-Commerce Platform Operators, non-exempt Intermediary Service Providers which have obtained an SIUPMSE, and foreign E-Commerce Platform Operators which have appointed a representative in Indonesia, to be published on the MOT website.

These E-Commerce Business Players must provide clear information which can be easily seen by consumers on the MOT website explaining that they have been registered.      

REGISTRATION OF FOREIGN MERCHANTS

MOT Regulation 50 requires foreign E-Commerce Merchants that carry out E-Commerce Trading through a domestic E-Commerce Platform to register information regarding their business licences (issued by their respective supervising authorities) with the relevant domestic E-Commerce Platform Operator.

ONLINE ADVERTISING

GR 80 generally allows E-Commerce Business Players to create or send online advertisements for marketing or promotional purposes. E-Commerce Business Players that create, facilitate or disseminate online advertising must ensure that the substance of the advertising does not contravene any laws and regulations, and will be held liable for its truthfulness.

MOT Regulation 50 restates these principles and sets out general requirements that must be met for online advertising. For instance, the function to close the advertisement’s window must be clearly displayed so that it is easy for customers to stop the advertisement. There are also general provisions on the supervision and cessation of online advertisements.

PRIORITISATION OF LOCAL PRODUCTS

GR 80 requires E-Commerce Business Players to support government programs to:

• prioritise trading of locally produced goods and services
• increase the competitiveness of locally produced goods and/services
• provide promotional space for locally produced goods and services (in the case of local E-Commerce Business Players).

MOT Regulation 50 also explains how these government programs can be achieved. For instance, prioritising trading of locally produced goods and services may take the form of (i) developing partnerships with small and micro businesses, which may include business meetings, trading forums and local trading missions, or other forms of partnership either within or outside a network, or (ii) increasing marketing access for small and micro business products.

The wording of the relevant provisions suggests that the requirement has to be satisfied not only by domestic E-Commerce Business Players, but also by foreign E-Commerce Business Players. It remains to be seen how foreign E-Commerce Business Players can practically comply with the requirement.

ADMINISTRATIVE SANCTIONS

In general, a breach of the requirements set out in GR80 and MOT Regulation 50 may lead to the imposition of prescribed administrative sanctions. Depending on the type of breach, the administrative sanctions range from warning letters, inclusion in a list of “monitored parties”, inclusion in a “blacklist”, temporary suspension of access, through to revocation of business licence.

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Footnotes:
1. A sequence of activities relating to goods or services transactions within the country or across national borders for the purpose of delivering entitlement to goods or services for a fee or compensation, carried out through a series of electronic devices and procedures (E-Commerce Trading)

2. “Domestic” in this article refers to Indonesian national or Indonesia-incorporated legal entities.