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13 January 2020
Key definitions in Government Regulation 80/2019
E-commerce regulatory scheme
E-commerce providers: requirements and obligations
Liability for illegal content
Personal data protection
Despite being mandated by Article 66 of the Trade Law,(1) which entered into force on 11 March 2014, a government regulation specifically focused on e-commerce has only recently been issued after having been under discussion since 2015.
The new regulation (Government Regulation 80/2019 on Electronic Commerce)(2) entered into force on 25 November 2019. However, a grace period of two years (running until 25 November 2021) is provided to allow existing e-commerce operators to comply with the regulation.
Government Regulation 80/2019 comes hard on the heels of the issuance of Government Regulation 71/2019(3) (effective 10 October 2019), which is also relevant to e-commerce as it regulates electronic systems and transactions in general.(4)
Overall, Government Regulation 80/2019 attempts to provide a comprehensive framework for the regulation of e-commerce, encompassing such aspects as:
As with Government Regulation 71/2019, Government Regulation 80/2019 incorporates detailed provisions on electronic contracts that build on the skeletal framework set out in the Electronic Information and Transactions Law (as amended)(5) and its implementing regulations. This article describes the key aspects of Government Regulation 80/2019 that directly affect e-commerce operators and consumers.
Under the regulation, 'commerce' refers to activities relating to transactions in goods and services on a domestic or cross-border basis that are conducted for the purpose of transferring title to or ownership of a good or service in return for remuneration or compensation (this is the same definition as set out in the Trade Law).
As regards the scope of a good or service, Government Regulation 80/2019 introduces two definitions that are new to Indonesian law and will be important for, among other things, the taxing of e-commerce transactions – namely:
'E-commerce' is defined as a form of commerce where transactions are conducted using electronic equipment and procedures (this is the same definition as set out in the Trade Law). Unfortunately, this definition appears rather inadequate as it could conceivably be construed as encompassing, for example, a transaction involving a medical examination or treatment at a doctor's surgery using electronic equipment where the patient is physically present, or the making available of electronic games in a video arcade where the customer is physically present. By contrast, the EU e-Commerce Directive (2000/31/EC)(6) provides that e-commerce transactions (referred to in the directive as 'information society services') are confined to those that are provided:
An 'e-commerce provider' is an individual or undertaking, whether incorporated or unincorporated and whether domestic or non-domestic, that engages in commercial operations in the e-commerce field ('e-commerce provider' is a catch-all term that is used throughout Government Regulation 80/2019 for all types of commercial provider of e-commerce services). The Elucidation on Article 5 of Government Regulation 80/2019 explains that a payment gateway provider is also classified as an e-commerce provider, but is subject to separate regulation by the relevant authority (currently Bank Indonesia).
A 'consumer' is an individual who uses a good or service – whether in their own interest or in the interest of a family member or another person or living creature – for non-commercial purposes.
E-commerce providers are differentiated into three classes:
Electronic communication facilities may function to provide information, facilitate communication, conduct transactions, facilitate payments (payment systems) or function as part of a delivery system.
E-commerce providers may be domestic or non-domestic individuals or enterprises.
Crucially, Government Regulation 90/2019 is of extraterritorial effect due to Article 7, which provides that non-domestic e-commerce providers will be deemed to be present physically and carry on business on a permanent basis in Indonesia (as a permanent or fixed business establishment) if they actively make offers to, or engage in transactions with, consumers who are resident in Indonesia, provided that certain criteria are satisfied. These criteria focus on:
Should a non-domestic e-commerce provider satisfy these criteria, it must appoint a representative in Indonesia to act on its behalf. More detailed provisions on the criteria will be set out in a ministerial regulation.
Under Article 15 of Government Regulation 80/2019, e-commerce providers must obtain a licence using the online single submission system (for further details please see "New online single submission system: what is it?"), except in the case of intermediary service providers that:
Further provisions on licensing will be set out in a ministerial regulation.
Other requirements and obligations
Government Regulation 80/2019 imposes a lengthy list of other requirements and obligations on e-commerce providers, including as follows:
General rule of liability
Article 22 of Government Regulation 80/2019 makes all e-commerce service providers and intermediary service providers generally liable for the civil and criminal consequences that arise from illegal content, except in circumstances where they take prompt measures to remove or disable such content, or the relevant link, on becoming aware of it.
Exemptions from liability for intermediary service providers
As regards intermediary service providers, Government Regulation 80/2019 provides several exemptions from liability (so-called 'safe harbours'), which for the most part are taken verbatim (as translated) from the EU e-Commerce Directive. The exemptions include:
General duty to monitor
E-commerce providers must protect consumer rights in accordance with Indonesian law and provide a mechanism for responding to and resolving consumer complaints.
The principal problem with this provision is that Indonesia's consumer protection legislation has not been updated since 1999, when e-commerce was still in its infancy. To help provide relief for abuses that fall outside the ambit of the existing consumer protection legislation, losses suffered by consumers may be reported directly to the Ministry of Trade. In such circumstances, the e-commerce service provider must act to resolve the complaint. Should it fail to do so, it will be placed on a publicly accessible priority watch list maintained by the Ministry of Trade.
Government Regulation 80/2019 provides tighter protections for personal data than the general protections incorporated in Government Regulation 71/2019. For example, Article 59(2)h of Government Regulation 80/2019 prohibits offshore personal data transfer unless the recipient country or territory has been certified by the Ministry of Trade as having at least the same level of personal data protection and standards as Indonesia. Meanwhile, the Elucidation on Article 59(2) states that such standards should have regard to European data protection standards (presumably the EU General Data Protection Regulation)(7) and the Asia-Pacific Economic Cooperation Privacy Framework.(8)
As Government Regulation 80/2019 marks Indonesia's first foray into e-commerce, it should come as no surprise that it has elicited criticism from some industry participants, particularly micro, small and medium-sized enterprises, which strongly object to what they see as unduly burdensome licensing requirements.
Nevertheless, by contrast with Indonesia's previous approach to regulating digital businesses, Government Regulation 80/2019 (like Government Regulation 71/2019) adopts a much lighter touch that aligns with the government's commitment to improving the country's ease of doing business. However, on the other hand, Government Regulation 80/2019 means that Indonesia has joined a growing list of jurisdictions that have resorted to extraterritoriality to regulate and tax the Indonesian operations of overseas-based e-commerce providers.
Overall, Government Regulation 80/2019 should be cautiously welcomed for the greater legal certainty that it provides. Nevertheless, its approach to certain aspects of e-commerce appears quite simplistic and, in some cases, already rather outdated. For example, a number of key aspects of Government Regulation 80/2019 are clearly influenced by the EU e-Commerce Directive, which is 20 years old and looks set to be reviewed in the near future (the new president of the European Commission, Ursula von der Leyen, has committed to upgrade the European Union's liability and safety rules for digital platforms, safety and products with a new Digital Services Act). In addition, by comparison with the recently adopted EU Digital Content Directive,(9) there seem to be some significant areas of concern as regards content that have not been specifically addressed, or have been addressed only superficially, by Government Regulation 80/2019.
For further information on this topic please contact Agus Ahadi Deradjat or Mahiswara Timur at Ali Budiardjo, Nugroho, Reksodiputro by telephone (+62 21 250 5125) or email (email@example.com or firstname.lastname@example.org). The Ali Budiardjo, Nugroho, Reksodiputro website can be accessed at www.abnrlaw.com.
(4) Further information is available here.
(6) EU Directive 2000/31/EC on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market.
(7) EU Regulation 2016/679 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing the EU General Data Protection Regulation Directive (95/46/EC), OJ 2016 L 119/1.
(8) The Asia-Pacific Economic Cooperation Privacy Framework is a set of principles and implementation guidelines that were created in order to establish effective privacy protections that avoid barriers to information flows and ensure continued trade and economic growth in the Asia-Pacific Economic Cooperation region. The framework was first adopted in 2005 and was subsequently updated in 2015.
(9) EU Directive 2019/770/EU on certain aspects concerning contracts for the supply of digital content and digital services.
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