Implementation of Minister of Trade Regulation No. 31 of 2023 On Business Licensing, Advertising, Guidance and Supervision of Businesses in Trade Through Electronic System

Update 10:30 - January 17, 2024

I. Background

1. The issuance of Minister of Trade Regulation No. 31 of 2023 on Business Licensing, Advertising, Guidance, and Supervision of Businesses in Trade Through Electronic System (“ Reg. 31/2023“) on 26 September 2023, is closely tied to the controversy that arose following the closure of TikTok Shop. The closure was rooted in a debate over the lack of regulation in answering whether social media platforms are allowed to conduct trading through electronic systems.

2. The enactment of Reg. 31/2023 is prompted by the fact that Minister of Trade Regulation No. 50 of 2020 (“ Reg. 50/2020”) no longer aligns with legal developments and societal needs. Therefore, the promulgation of Reg. 31/2023 aims to support the empowerment of micro, small, and medium-sized enterprises, and trading business actors through domestic electronic systems. It also aims to protect consumers, promote the development of electronic commerce, and consider the dynamic technological advancements.

3. Although Reg. 31/2023 revoked Reg. 50/2020, Reg. 31/2023 still retains some provisions that were previously set out in Reg. 50/2020, for example provisions regarding business actors, electronic advertisements, representative offices of foreign trading companies in the trade through electronic systems sector, and guidance and supervision. However, new provisions are introduced, among others provisions regarding business licensing, trading through cross-border electronic systems, prohibitions for PPMSE, etc.

4. This Legal Update will mainly discuss new provisions stipulated in Reg. 31/2023, particularly those related to obligations and prohibitions affecting merchants, Organizer of Intermediary Facility (Penyelenggara Sarana Perantara (PSP)), and Organizer of Trade Through Electronic System (Penyelenggara Perdagangan Melalui Sistem Elektronik “PPMSE”).

 

II. Key Provisions

A. Business Model of PPMSE

 5. Previously, Reg. 50/2020 did not specifically regulate domestic and foreign PPMSE business models. Meanwhile, Article 2 paragraph (3) of Reg. 31/2023 stipulates provisions regarding business models of PPMSE,

No. Business Model Definition
1. Online Retail a merchant engaged in PPMSE through a commercial website or application created, managed, and/or owned independently (see Article 1 number 12 of Reg. 31/2023).
2. Marketplace a provider of facilities in which part or entire of the transaction process is in an electronic system, in the form of a commercial website or an application as a forum for merchants to be able to place offers for goods and/or services (see Article 1 number 13 of Reg. 31/2023).
3. Online Classified Advertisement a facility to run an electronic system in the form of a commercial website or application that brings together sellers and buyers, with the entire transaction process occurs outside the website or application (see Article 1 number 14 of Reg. 31/2023).
4. Price Comparation Platform a facility to run an electronic system in the form of a commercial website or an application that displays price comparison for goods and/or services sold on other websites or applications (see Article 1 number 15 of Reg. 31/2023).
5. Daily Deals a facility to run an electronic system in the form of a commercial website or application for selling discount coupons and/or other convenient facilities that may be used as a means of payment by consumers to purchase goods and/or services from other business actors (see Article 1 number 16 of Reg. 31/2023).
6. Social-Commerce a social media provider that offers specific features, menus, and/or facilities that enable merchants to place offers for goods and/or services (see Article 1 number 17 of Reg. 31/2023).

 

B. Risk-Based and Electronic Commerce Business Licensing

6. 31/2023 emphasizes risk-based business licensing as stipulated under Article 3 paragraph (1). This article emphasizes the obligation for business actors to obtain business licensing when engaging in commercial activities.

7. Business actors that are only engaged in online retail trade through electronic systems without facilitating the Trade through Electronic Systems (“PMSE”) can use the Indonesian Business Classification Code (Klasifikasi Baku Lapangan Usaha Indonesia “KBLI”) for retail trade through mail order or the internet (see Article 4 of Reg. 31/2023). This provision was also previously regulated in Reg. 50/2020.

8. Furthermore, the amendments in Reg. 31/2023 introduce new provisions, giving more clarity concerning business licensing for domestic PPMSE that needs to use the KBLI for web portals and/or digital platforms for commercial purposes (KBLI 63122) (see Article 8 of Reg. 31/2023). In this case, the company that is engaged in the business models listed in point 5 above must use KBLI 63122.

9. In addition to obtaining business licensing in the trading sector such as Business Identification Number and/or Standard Certificate, PPMSE must possess PMSE business licensing as known in Reg. 50/2020, the Trading Business License through Electronic Systems (“SIUPMSE“). However, in Reg. 31/2023, the terminology ‘SIUPMSE’ has been replaced with the term ‘PMSE Business Licensing’. Moreover, in connection with point 8 above, the obligation to obtain PMSE Business Licensing also applies to domestic merchants that operate and facilitate their own electronic system trading facility and fall under the domestic PPMSE category.

 

C. Provisions for PPMSE in Providing Trading Facilities through Electronic Systems

 10. 31/2023 stipulates that in conducting its business as a provider of electronic system trading facilities, PPMSE must actively take parts in the following aspects:

 

No. Aspect Description
1.       Business Licensing

 

(see Article 12 paragraph (2) of Reg. 31/2023)

 a.     provision of business licensing feature in the merchant registration process on the electronic system;

b.     provision of a business licensing registration link that is connected directly to the Online Single Submission (OSS) system; and/or

c.      implementation of information dissemination for merchants to register their business.
2.       PMSE Activities

 

(see Article 13 paragraph (1) of Reg. 31/2023)

 a.     providing equal business opportunities for merchants; and

b.     maintaining prices of goods and/or services free from price manipulation practice either directly or indirectly.
3.       Fair Business Competition

 

(see Article 13 paragraph (3) of Reg. 31/2023)

 a.     there is no connection or interconnection between the electronic system used as a PMSE facility and an electronic system used outside the PMSE facility; and

b.     there is no abuse of control over user data for use by PPMSE and/or affiliated companies in their electronic systems.

 

 D. Provisions for Foreign Merchants in Conducting Trade through Electronic Systems

11. Pursuant to Reg. 31/2023, foreign merchants that conduct trading activities through PPMSE are obliged to:

 

No. Obligation Description
1.                Provide Legal Information

 

(see Article 5 paragraph (1) of Reg. 31/2023)

 a.     Identity of foreign merchants in the form of the name and address of the foreign merchant’s origin country;

b.     Business license issued by the authorized institution in the origin country and legalized by the competent authority;

c.      Evidence of compliance with standards or technical requirements for the required goods and/or services; and

d.     Bank account number used for transactions.
2.       Transparency of Product Information

 

(see Article 5 paragraph (2) of Reg. 31/2023)

 

 a.     Using easily understandable Indonesian language in the description of traded goods and/or services; and

b.     Displaying information about the country of origin for shipping goods and/or services.
3.       Fulfill required Goods and/or Services Standards

 

(see Article 5 paragraph (4) of Reg. 31/2023)

 a.     Fulfillment of Indonesian National Standards (SNI) or other technical requirements for goods and/or services that have been mandated by Indonesian National Standards (SNI) or technical requirements pursuant to applicable  laws and regulations;

b.     Fulfillment of standards or technical requirements in the home country for goods and/or services that have not been mandated by Indonesian National Standards (SNI) or technical requirements; and

c.      Halal certification for goods and/or services that are mandatory to be halal-certified according to the provisions of laws and regulations.

 12. Foreign merchants and PPMSE that provide facilities for foreign merchants must comply with the obligations above. This is because, in line with Article 5 paragraph (5) of Reg. 31/2023, if foreign merchants fail to fulfill the three obligations as described above, then the PPMSE providing facilities to these foreign merchants must reject the registration request of the said foreign merchant. Violations of the obligations outlined above may result in the imposition of administrative sanctions (see Article 50 paragraph (1) of Reg. 31/2023).

 E. Fulfillment of Standards of Goods and/or Services Traded Through Electronic Systems

 13. To comply with the standards for goods and/or services traded through PMSE, Article 11 paragraph (1) of Reg. 31/2023 regulates that merchant must display information regarding proof of compliance with the standards for goods and/or services in the form of:

    • Registration number of goods or certificate of Indonesian National Standards or other technical requirements for goods and/or services that have been stipulated by Indonesian National Standards (SNI) or technical requirements in accordance with the provisions of laws and regulations;
    • Halal certification number for goods and/or services that are mandatory to be halal-certified according to the provisions of laws and regulations;
    • Product registration number related to safety, health, and environmental aspects for goods mandated according to the provisions of laws and regulations; and
    • License number, registration number, or certificate number for cosmetics, drugs, and food products in accordance with the provisions of laws and regulations.

14. Pursuant to Article 11 paragraph (2) of Reg. 31/2023, PPMSE must facilitate and display information about the country of origin of foreign merchants, the country of origin of internationally shipped goods, and proof of compliance with the standards for goods and/or services.

 F. Trading Through Cross-border Electronic Systems

15. Pursuant to Article 19 of Reg. 31/2023, PPMSE engaging in cross-border PMSE activities must apply a minimum price for goods, specifically set at Freight on Board (FOB) USD100 (one hundred United States Dollars), on their electronic systems for merchants selling finished goods directly from abroad to Indonesia.

16. The minimum price of goods allowed to enter directly through PPMSE conducting cross-border PMSE activities is determined by the minister based on the results of a coordination meeting at the Ministerial level/the head of the relevant non-ministerial government institution.

 17. Furthermore, cross-border PMSE must comply with the laws and regulations concerning export or import and the laws and regulations in the field of information and electronic transactions (see Article 20 of Reg. 31/2023).

 

 G. Prioritizing Domestic Products

 18. Previously, Reg. 50/2020 has regulated provisions regarding prioritization of domestic products. However, such provision has been more comprehensively regulated in Article 33 paragraph (1) letter a of Reg. 31/2023, which details the forms of prioritization through:

a. Business collaborations, trade forums, product aggregations, and local trade missions or other types either within networks or outside networks; and/or

b. Access to marketing for micro and small businesses.

19. If the prioritization of domestic products is carried out in the form of product aggregation, where the process includes repackaging, management assistance, warehouse provision, and other activities that prevent merchants from directly delivering their goods to consumers, businesses engaged in repackaging must still include at least the name of the product’s manufacturer on the label as the primary identity or brand (see Article 33 paragraph (2) of Reg. 31/2023).

 20. Furthermore, in accordance with Article 33 paragraph (3) of Reg. 31/2023, product aggregation can only be done for domestic products proven through the submission of the Business Identification Number (NIB) of the manufacturer to businesses conducting product aggregation.

 H. Prohibitions for PPMSE

 21. Article 21 of Reg. 31/2023 stipulates prohibitions for PPMSE in conducting its business activities, among others:

    • PPMSE with marketplace and/or social-commerce business models are prohibited from acting as producers in accordance with the provisions of laws and regulations in the field of distribution of goods.
    • PPMSE with a social-commerce business model is prohibited from facilitating payment transactions on its electronic system.

 I. Administrative Sanction

 22. 31/2023 provides administrative sanctions for business actors who violate the provisions outlined in this regulation. These administrative sanctions include:

a. written warning;

b. be included in the supervision priority list;

c. blacklisted;

d. temporary blocking of domestic PPMSE and/or overseas PPMSE services by relevant authorized agencies; and/or

e. revocation of business licenses.

 

III. Impacts on Business Actor

Business actors most affected by the implementation of Reg. 31/2023 are PPMSE and merchants, whether domestic or foreign. This regulation sets out new provisions that must be complied with by PPMSE and merchants in conducting PMSE activities. On the other hand, the positive impact of the implementation of Reg. 31/2023 is adding new obligations for PPMSEs and merchants prior to conducting PMSE activity as well as increasing the level of compliance of PPMSEs and merchants, which will enhance consumer protection in Indonesia and maintain fair competition with small, micro, and medium-sized businesses.

 

For further information, please contact us at:

Marieta Mauren

Menara Global – 7th Floor

Jln. Gatot Subroto Kav. 27 Jakarta Selatan 12950, Indonesia

Phone: +62 21 5292 0918 / 0919

E-mail: info@marietamauren.id

Website: http://marietamauren.id

 

Disclaimer:
This article is intended for general information only. It is not intended to be, nor should it be construed as, legal advice applicable to your particular situation. You should seek the advice of legal counsel of your choice before acting upon any of the information in this article.

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