Indonesian Government introduces a More Developed E-Commerce Regulation

The  Indonesian Government has responded to  the rapid growth of E-commerce sector in Indonesia by issuing an implementing regulation on E-Commerce business as mandated under  Article 66 of Law No. 7 of 2014 dated March 11, 2014, on Trade, On November 20, 2019, the Indonesian Government finally issued Government Regulation No. 80 of 2019 on Trading through Electronic System (“GR on E-Commerce”).

The primary purpose of RG on E-Commerce is to regulate broad aspects of the e-commerce business, which will apply on the 2nd anniversary after its promulgation date, GR on E-Commerce. We will briefly elaborate some of the key provisions relating to the provisions of e-commerce business under GR on E-Commerce.

  • Operational aspect

First, Article 15 (1) of GR on E-Commerce now requires all Business Players to obtain a business license in conducting e-commerce. Business Players include domestic and foreign merchants, electronic platforms (Penyelenggara Perdagangan Melalu Sistem Elektronik – “PPMSE”), as well as intermediary services providers. While merchants offering goods and/or services temporarily and non-commercially are exempted from the classification, no strict threshold is stipulated to determine the temporary and commercial nature of such merchants. This means that every merchant, both in the formal and informal sectors, regardless of its size and business, is now required to obtain a business license.

Second, Business Players, particularly platform providers, are now prohibited from accepting neither domestic nor foreign Merchants that is incompliance with the requirements , among others, the licensing requirement.

The GR on E-Commerce now reimposes possible taxation towards e-commerce. Further, foreign Business Players actively offering and/or conducting e-commerce services towards Indonesian consumers that have met a certain threshold of (i) number of transaction; (ii) value of transaction; (iii) number of shipping; and/or (iv) number traffic or access would be deemed to have established a physical presence and conduct a permanent business in Indonesia. Such businesses now must appoint a representative domiciled in Indonesia that will act as and on behalf of the business owner.

Business Players now must also maintain the records of data and information on their e-commerce businesses. Data and information related to financial transactions shall be kept at least for 10 (ten) years, while data and information unrelated to financial transactions shall be kept for a minimum of 5 (five) years from the obtainment of such data or information.

  • Contract Processing

Article 28 of GR on E-Commerce requires Business Players to provide and maintain receipts of e-commerce transactions. The receipt will be legal and binding evidence towards the parties involved. Further, receipt of e-commerce transactions is now treated as valid evidence in procedural law, whereby written verifiable e-signed receipts of e-commerce transactions may even be acknowledged as authentic evidence. Electronic receipts of transactions shall no longer be rejected as evidence before the court merely for its electronic form.

GR on E-Commerce also specifically regulates electronic offer, acceptance, confirmation, as well as contract. An electronic offer shall include at least the following information:

  1. Specification of goods and/or services;
  2. Prices of goods and/or services offered;
  3. Terms and conditions;
  4. Mechanism and system of payment and payment period;
  5. Mechanism and system of shipping;
  6. Risks and unforeseeable conditions; and
  7. Limitation of liability.

An electronic offer is deemed valid and binding if it contains a clear and specific statement of intent of offer conducted in an honest and fair manner, and provides time limitation. Once an electronic offer is accepted, it shall not be withdrawn unless such withdrawal is agreed upon by the accepting party. Business Players are also required to respond to electronic acceptance by a consumer within a certain time period, in the form of electronic or non-electronic confirmation that may be used as evidence of agreement.

Meanwhile, Electronic Contracts may be in the form of sales and purchase agreement or licensing agreement, including end-user license agreement; amendment/development/modification of license agreement; public license agreement; creative common license agreement; and relicensing agreement. An Electronic Contract shall include at least:

  1. Identity of the parties;
  2. Specification of goods and/or services agreed;
  3. Legality of goods and/or services;
  4. Value of the transaction;
  5. Terms and conditions and payment period;
  6. Operational procedure of shipping;
  7. Return procedure;
  8. Cancellation procedure; and
  9. Choice of law for dispute resolution.

Business Players are also required to provide downloadable Electronic Contract.

  • Consumer Protection

Article 13 (1) of GR on E-Commerce requires Business Players to inform correct, clear, and honest information regarding the condition and assurance on the goods and/or services offered and the Electronic System used. Business Players must protect consumers’ rights in every aspect of e-commerce transaction, among others by accommodating a customer service which shall at least comprises:

  1. Address and contact number of customer service;
  2. Procedure of consumer complaint;
  3. Mechanism of complaint handling process;
  4. Competent officers to process consumer complaint; and
  5. Period of complaint settlement.

GR on E-Commerce further stipulates that Business Players must ensure that any advertisement is in accordance with the ethical standards of advertisement and consumer protection as governed under the applicable laws and regulations. This requirement is not only limited to the owner of such advertisement, but also to the parties who produce, provide any means for, and/or propagate the advertisement. Substance and material of any electronic advertisement that contradicts with consumer rights must be stopped, and relevant institutions have the authority to stop such marketing activities should Business Players fail to do so. Consumer protection is not only supervised under advertisement but also in Electronic Contracts where Article 53 (2) of GR on E-Commerce prohibits any standard clauses that may disadvantage consumers.

Business Players must also ensure customer protection to the extent of the delivery and return of goods and/or services. GR on E-Commerce emphasizes that in the event of there is an acceptance of the purchase of goods and/or services, the seller must deliver such goods and/or services to the buyer accordingly. The delivery must also ensure:

  1. Safety of the goods and/or services;
  2. Conditions of the goods and/or services;
  3. Confidentiality of the goods and/or services;
  4. Conformity of the goods and/or services; and/or
  5. Punctuality of the delivery of goods and/or services;

In addition, Business Players must inform the buyer about the delivery of the goods. In the event the delivery is done by PPMSEs, they must inform periodically to the buyer upon the delivery status. Besides goods, Digital Services is acknowledged in GR on E-Commerce. According to Article 68 of GR on E-Commerce, Business Players which distribute free or paid Digital Goods and/or Services must ensure that such goods and/or services can be operated. In the event such Digital Goods and/or Services incur any loss to the user, such loss shall be borne by the Business Players.

Exchange of goods and/or services is also provided under GR on E-Commerce in which sellers are required to provide a period of at least 2 (two) business days for an exchange of goods and/or services, if:

  1. There is an error and/or non-conformity of the goods and/or services;
  2. There is an error and/or non-conformity of the actual period delivery of the goods and/or services;
  3. There is a hidden defect;
  4. The product is broken; and/or
  5. The product is expired.

Provided that any of the above conditions have been met, consumers shall not bear the cost of the shipping fees. In connection with such provision, all PPMSEs are now required to have a mechanism that can ensure a refund for the consumers in case of an exchange. With regard to any dispute that may arise between the PPMSEs and/or sellers with consumers, such dispute may be settled through a new dispute resolution mechanism, an online dispute resolution. However, no further explanation or regulation is provided regarding the process.

  • Personal Data Protection

Pursuant to Article 59 (1) of GR on E-Commerce, Business Players must ensure data protection in accordance with data protection standards or developing business practices. According to GR on E-Commerce, the standards itself shall at least comply with the following data protection principles:

  1. Personal data must be obtained lawfully from the owner, accompanied by the choice and guarantee of safeguarding and preventing loss of the data owner;
  2. Personal data must be kept for only one purpose or more specifically described and may not be further processed in any other way;
  3. Personal data obtained must be appropriate, relevant and not too broad in relation to the goals as previously informed to the data owner;
  4. Personal data must be accurate and must always be up-to-date by giving the data owner an opportunity to update his/her personal data;
  5. Personal data must be processed according to the purpose of obtainment and may not be maintained longer than the period required;
  6. Personal data must be processed according to the subject’s rights as governed under the applicable laws and regulations;
  7. The party storing personal data must have a security system that is appropriate for preventing leakage or prevent any activities of the processing or utilization of personal data against the law, as well as being responsible for unexpected loss or damage towards the personal data; and
  8. Personal data must not be sent to any countries or regions outside Indonesia except if such countries or regions have been declared by the Minister to have the same standard and protection level as Indonesia.

Notwithstanding the abovementioned, the implemented data protection standards must also take into account the data protection standards as set out in Europe and/or APEC Privacy Frameworks. Given the adoption of that international standards, it remains to be seen whether there may be further regulations (i.e., personal data protection law) to be issued in the context of personal data protection.

Furthermore, it is now regulated that PPMSEs must store financial transaction-related data and information in a period of at least 10 years and non-financial transaction-related data and information in a period of at least 5 years, that at least include data and information in relation to:

  1. Customer;
  2. Electronic offers and electronic acceptance;
  3. Electronic confirmation;
  4. Payment confirmation;
  5. Delivery status of goods;
  6. Trade complaints and disputes;
  7. Electronic Contracts; and
  8. Types of Goods and/or Services traded.

Nevertheless, in the event that data owners have stopped subscribing to or using the services in the E-Commerce transactions before the required period of data storage, such data owners have the right to request the Business Players to erase all relevant data.

  • Conclusion

GR on E-Commerce raises many questions that will be the subject of further debate as the implementing rules are yet to be seen. Some of the provisions are clearly having a stringent approach than ever. Whilst numbers of implementing regulations are expected to be issued, e-commerce businesses should seek advice on the effect of this regulation on their business operations to ensure its compliance with the regulation by the time in which GR on E-Commerce will enter into force.

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December 12, 2019

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