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- Dec 4, 2023
- 8 min read
Enhanced Responsibility Standards for E-Commerce Platforms: Minister of Trade Regulation Number 31 of 2023
1. Background
The issuance of Minister of Trade Regulation Number 31 of 2023 on Business Licensing, Advertising, Development, and Supervision of Business Actors in Trading Through Electronic Systems (“MOT 31/2023”), signifies both a revision and the concurrent revocation of Minister of Trade Regulation Number 50 of 2020 on Provisions on Business Licensing, Advertising, Guidance, and Supervision of Businesses in Trade Through Electronic System (“MOT 50/2020”).
MOT 31/2023 represents a proactive measure by the Government to safeguard and empower micro, small, and medium-scale enterprises (“MSMEs”), domestic trade through Electronic Systems (Perdagangan Melalui Sistem Elektronik, hereinafter referred to as “PMSE”) business actors, and consumers, as well as to stimulate the growth of PMSE. MOT 31/2023 has introduced certain modifications affecting the scope of electronic commerce.
MOT 31/2023 responds to public concerns and criticisms, which have prompted the implementation of this regulatory framework. These concerns have arisen from the significant decline in consumer engagement with MSMEs and traditional merchants, attributed to the disruptive business models of certain PMSEs that heavily rely on social media data and information. MOT 31/2023 is designed to preserve fair competition in the market for domestic products, particularly in response to unfair business practices, such as the sale of imported goods at exceptionally low prices.
2. Trading Through Electronic Systems Business Models and Business Licensing
MOT 31/2023 has introduced a comprehensive framework for categorizing the Organizer of Trade through Electronic Systems’ (Penyelenggara Perdagangan Melalui Sistem Elektronik, referred to as “PPMSE”) business models. These categories encompass:
a. Online retail;
b. Marketplaces;
c. Online classified ads;
d. Platforms for price comparison;
e. Daily deals; and
f. Social-commerce.
Article 3 of MOT 31/2023 outlines that business actors must possess a business license to engage in trade sector activities, aligning with the risk-based business licensing provisions specified in Indonesia’s applicable laws and regulations. This particular article, as featured in MOT 31/2023, entails a more rigorous regulatory stance when compared to the counterpart provision in MOT 50/2020. MOT 31/2023 underscores the importance of adhering to the stipulations found in the laws and regulations concerning risk-based business licensing.
Another pivotal development within the electronic commerce framework is that Articles 21 MOT 31/2023 addresses the prohibition of social commerce from facilitating payment transactions on their electronic systems and restricting their role in accordance to promotional activities and product offerings [1]. Furthermore, PPMSEs operating under the social-commerce business model and marketplaces are also prohibited from engaging in the production of goods [2].
3. Requirements for Domestic and Foreign PPMSEs
A. Foreign PPMSEs
Foreign merchants intending to engage in commerce through PPMSEs providing a platform for cross-border PMSE activities are obligated to fulfill specific provisions [3]:
a. Submission of the foreign merchant’s identity, including name and address of origin;
b. Presentation of a business license issued by an authorized institution in the merchant’s
country of origin, legalized by either:
(i) The competent authority of the state party to Konvensi Penghapusan Persyaratan Legalisasi Terhadap Dokumen Publik Asing (“Convention Abolishing the Requirement of Legalization for Foreign Public Documents”); or
(ii) The representative of the Republic of Indonesia for non-participating countries of
the Convention Abolishing the Requirement of Legalization for Foreign Public
Documents.
The fulfillment of points a and b above should be complemented with a certificate or inspection report on data validity issued by an independent survey institution in the merchant’s country of origin;
c. Bank account number used in the transaction;
d. Evidence of compliance with standards or technical requirements for the goods and/or
services offered. This includes adherence to Standar Nasional Indonesia (“SNI”) or
other technical requirements for goods and/or services mandated by SNI or other
technical requirements obligatory under laws and regulations, as well as compliance
with the standards or technical requirements specified by the merchant’s country of
origin for the relevant goods and/or services; and
e. Presentation of a halal certificate for goods and/or services necessitating halal
certification in accordance with applicable laws and regulations.
In addition to these requirements, foreign merchants planning to conduct commerce through PPMSEs providing a platform for cross-border PMSE activities must, firstly, use Bahasa language that is easily understood in describing the goods and/or services offered and secondly, provide information about the country of origin of the goods and/or services.
In order to engage in PMSE activities in Indonesia, Article 18 MOT 31/2023 stipulates that foreign PPMSEs are obliged to appoint a representative located within the jurisdiction of the Republic of Indonesia (Kantor Perwakilan Perusahaan Perdagangan Asing di Bidang Perdagangan Melalui Sistem Elektronik referred to as “KP3A”), who will act on behalf of the foreign PPMSE. The criteria to select a domestic representative for foreign PPMSE are as follows:
a. The foreign PPMSE must have conducted transactions with a minimum of 1,000
consumers within a one-year period;
b. The foreign PPMSE must have delivered more than 1,000 packages to consumers
within a one-year period;
c. The foreign PPMSE must have generated a traffic volume or accesses equivalent
to at least 1% of domestic internet users within a one-year timeframe. This provision
in regard to the traffic volume requirement is a newly introduced provision in
MOT 31/2023, as it was not present in MOT 50/2020.
Foreign PPMSEs that meet the aforementioned requirements are then eligible to appoint a KP3A. However, for a KP3A to act as the representative of the foreign PPMSE, they must first obtain a Surat Izin Usaha Perwakilan Perusahaan Perdagangan Asing (“SIUP3A”) by submitting an application to the Online Single Submission (“OSS”) system [4].
B. Domestic PPMSEs
Based on Article 6 MOT 31/2023, domestic PPMSEs and Penyelenggara Sarana Perantara or Intermediary Services Providers (“PSP”) who are not exempted from the obligation to have a business license are mandated to acquire a PMSE Business License. Additionally according to Article 7 MOT 31/2023, to obtain a business license in the field of PMSE, the aforementioned domestic PPMSEs and PSPs are required to initiate the application process for PMSE Business License through OSS.
Slight distinction exists between MOT 31/2023 and MOT 50/2020 regarding the business license for the operation of PMSE business activities. In the context of MOT 50/2020, this license is referred to as a Surat Izin Usaha Perdagangan Melalui Sistem Elektronik (“SIUPMSE”).
In comparison with MOT 31/2023, pursuant to Article 8 MOT 50/2020, domestic PPMSEs
and PSPs who are not exempted under Article 3 paragraph (2) MOT 50/2020 are required to
have a SIUPMSE. The process for obtaining a SIUPMSE includes the submission of an application by domestic PPMSEs and PSPs to the Minister through OSS.
C. Obligations of PPMSE
PPMSE which cater to both domestic and foreign merchants, are mandated to actively ensure compliance with business licensing requirements. This obligation encompasses the following actions:
a. Inclusion of Business Licensing features during the merchant registration process on
the Electronic System;
b. Providing a direct link for Business Licensing registration connected to the OSS system;
c. Conducting informational campaigns to facilitate merchant registration.
PPMSEs, on their part, must facilitate and display the conformity of goods and/or services
with these standards in the following manner [5]:
a. Inclusion of item registration or SNI numbers, or other technical requirements
mandated by SNI or other technical requirements obligatory under laws and
regulations for goods and/or services;
b. Display of halal certificate numbers for goods and/or services requiring halal
certification in accordance with the provisions of laws and regulations;
c. Disclosure of product registration numbers for items related to security, safety, health,
and the environment for goods required to comply with provisions of laws and
regulations;
d. Presentation of license numbers, registration numbers, or certificate numbers for
cosmetics, drugs, and food products, in accordance with the provisions of laws and
regulations.
4. Fair Business Competition
In conducting PMSE activities, PPMSE entities must play an active role in, firstly, ensuring
equitable business opportunities for all merchants. Secondly, preventing price manipulation
practices, both direct and indirect, to maintain the goods and/or services pricing [6].
Moreover, MOT Regulation 31/2023 prescribes specific provisions pertaining to business
competition, whereby PPMSE platforms must ensure the following:
a. Prohibition of interconnections between the electronic systems used as a PMSE
platform and those used for purposes other than PMSE;
b. Prohibition of the misuse of control over user data by PPMSE and its affiliated
companies within its electronic system.
In cases of alleged unfair business competition or reports of price manipulation practices,
PPMSEs are obligated to promptly coordinate with relevant regulatory institutions
specializing inthe respective fields within a period of three days.
5. Cross-border PMSE Operations
MOT 31/2023 prescribes conditions for PPMSEs engaged in cross-border PMSE activities on
their platforms. These entities must adhere not only to prevailing export and import regulations and those governing information and electronic transactions but also to the stipulations outlined in MOT 31/2023. PPMSEs are obligated to set a minimum Freight on Board (FOB) price of US$100 per unit for finished goods intended for direct sale to Indonesia by foreign merchants. If the price of such goods is denominated in a different currency, it must be converted using the exchange rate determined by the relevant Ministry authorized that governs government affairs in the field of trade. Goods that priced below the minimum of US$100 per unit may only enter Indonesia if expressly permitted by the Minister of Trade. Such goods with prices below the specified minimum may enter directly through PPMSE platforms facilitating cross-border PMSE activities. This provision is applicable to all forms of direct merchant sales to Indonesia through cross-border e-commerce platforms without exception [7].
6. Electronic Advertisements
Business actors are permitted to create and/or distribute electronic advertisements for marketing or promotional purposes. The display of electronic advertisements must comply to the following provisions [8]:
a. The content must not mislead consumers regarding the quality, quantity, material,
utility, and pricing of goods and/or services, as well as the timeliness of receipt of
goods and/or services;
b. It must not misrepresent the warranties or guarantees associated with goods and/or
services;
c. The information contained within must be accurate and not include false, erroneous, or
misleading details about goods and/or services;
d. It should provide information concerning the risks associated with the use of goods
and/or services;
e. The use of events and/or individuals without authorized permission or consent is
prohibited;
f. An accessible exit function, indicated by a closing sign or skip option, must be
included in the electronic advertisement, placed in a clear and conspicuous location to
facilitate consumers in closing the specific electronic advertisement.
PPMSE is not allowed to display electronic advertisements that violate the laws and regulations applicable to its electronic facilities. If, by any chance, an electronic advertisement that contravenes the provisions has already been displayed, PPMSE is required to put a stop to access to that electronic advertising content on its electronic facilities, pursuant to Article 29 MOT 31/2023. In the situation where PPMSE, having a business model other than online retail, had to stop access to electronic advertising content on the same business actor’s account up to 3 (three) times, PPSME is then obligated to terminate access to the entire business actor account on their electronic facilities [9]. These requirements to stop access to an electronic advertising content, as stipulated in Article 29 MOT 31/2023, is a recent addition that was no present in MOT 50/2020.
7. Prioritization of Domestic Products
The objective of MOT 31/2023 is not to impose anti-foreign investment regulations but, rather, to reform the licensing provisions in order to protect domestic merchants. The primary purpose of this regulation is to enhance the ease of conducting business in Indonesia and position the country as an attractive investment destination.
Prioritizing the trading of domestically produced goods and/or services, involves activities like business meetings, trade forums, goods aggregation, domestic trade missions, both within and outside a network. Furthermore, it encompasses providing access to market Micro and Small Business products.
In instances where goods aggregation is involved, the business actor responsible for packaging goods is required to include, as the primary identity or brand on the label, at least the producer’s name. This ensures recognition of the goods’ origin. Additionally, the forms of prioritizing the trade of domestically produced goods and/or services are also applied to creative economy actors [10].
8. Sanctions
Noncompliance with the stipulations in MOT 31/2023 result in the imposition of
administrative sanctions, including:
a. Written warning;
b. Inclusion of the entity on the list of monitoring;
c. Inclusion of the entity in a blacklist;
d. Temporary suspending of domestic PPMSE and/or foreign PPMSE services by the
authority;
e. Revocation of business license.
Regulations:
[1] Article 21 jo. Article 31 paragraph (1) jo. Article 24 MOT 31/2023.
[2] Article 21 paragraph (2) MOT 31/2023.
[3] Article 5 MOT 31/2023.
[4] Article 31 MOT 31/2023.
[5] Article 11 MOT 31/2023.
[6] Article 13 MOT 31/2023.
[7] Article 19 MOT 31/2023.
[8] Article 23 paragraph (1) jo. Article 28 MOT 31/2023.
[9] Article 29 MOT 31/2023.
[10] Article 33 MOT 31/2023.
MAPS’ team was led by our Associate: Siti Shalima Safitri, Shafa Karina, dan Jose Basita Meliala.
Contact
Siti Shalima Safitri
Associate
siti.shalima@mapslaw.co.id
Shafa Karina
Associate
shafa.karina@mapslaw.co.id
Jose Basita Meliala
Universitas Brawijaya
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