The Minister of Trade issued the Minister of Trade Regulation No. 31 of 2023 on Business Licensing, Advertising, Guidance and Supervision of Business in Trade Through Electronic Systems (Regulation 31/2023), effective 26 September 2023. The regulation is said to have stemmed from the growing concern among micro, small and medium sized enterprises (MSMEs) towards social media platforms that engage in trading activities via electronic systems (Perdagangan Melalui Sistem Elektronik/PMSE).
The increasing use of social media platforms that facilitate online transactions has negatively affected MSMEs since social media has the potential to generate large profit through the algorithms its users use. This is considered to create unhealthy competition for conventional merchants and MSMEs.
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Regulation 31/2023 revokes and replaces the previous legal framework i.e., Regulation of the Minister of Trade No. 50 of 2020 (Regulation 50/2020), which has the same title as Regulation 31/2023. Regulation 31/2023 retains the scope of domestic and overseas business actors that were featured under Regulation 50/2020:
- Merchants
- PMSE Organizers (Penyelenggara PMSE/PPMSE)
- Intermediary Services Organizers (Penyelenggara Sarana Perantara/PSP)
However, Regulation 31/2023 further clarifies the scope of various business models that are available for domestic and foreign PPMSE, as follows:
| PPMSE Business Model | Platform Examples |
| Online retailers | Foodhall, Klik Indomaret, Gramedia Digital and Lottemart Online |
| Marketplaces | Tokopedia, Shopee, Bukalapak, and Lazada |
| Online-classified advertisements | OLX, Craigslist, Mobil123 and Jobstreet |
| Price comparison platforms | Telunjuk, Pricebook, PriceArea and PricePrice |
| Daily deals | Bucketlist, Dealgoing, Grivy, and Groupon |
| Social-commerce (social media platforms that provide certain features that allow merchant to promote goods/services) | TikTok Shop, Instagram Shopping, and Facebook Marketplace |
In this edition of Legal Update, ET Consultant will discuss further about Regulation 31/2023 and the changes to the legal framework as a result of the issuance of this regulation, which will be divided into three main discussions:
- Restrictions applicable to Social-commerce, Marketplace and Online Retailers
- Prevention of Unfair Business Practices and Price Manipulation
- Minimum Prices for Imported Goods
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Restrictions Applicable to Social Commerce, Marketplace and Online Retailers
Regulation 31/2023 confirms that business actors are required to comply with the relevant laws and regulations to be eligible to engage in PMSE activities, including:
- Business Licensing
- Proof of the fulfillment of technical standards, or requirements for certain goods or services
- Prohibitions and/or restrictions on the trading of certain goods or services
- Goods distribution
- Taxation
Regulation 31/2023 also stipulates several restrictions on PPMSE activities that were previously not featured in Regulation 50/2020, as follows:
- Social-commerce and marketplaces are prohibited from acting as manufacturers in accordance with relevant legal frameworks on goods distribution
- Social-commerce is prohibited from facilitating payment transactions through their electronic systems. Social-commerce is only allowed to facilitate promotion. Any social-commerce that wishes to engage in PMSE activities are required to comply with the abovementioned laws and regulations, and also separate its marketplace entity from the social media platform.
Prevention of Unfair Business Practices and Price Manipulation
Under Regulation 31/2023, PPMSEs are required to actively participate in providing equal business opportunities to all merchants and monitor the prices of goods and services to ensure they are free from manipulation.
Furthermore, PPMSEs are also required to establish adequate Standard Operating Procedures, which should ensure that there is no connection or interconnectivity between the system used for PMSE and the system used for non-PMSE, as well as to ensure that there is no misuse of user data for the respective interests of PPMSEs and their affiliates.
PPMSEs are also required to report and coordinate with the Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha/KPPU) within three days after the finding of any alleged unfair business practices/price manipulation.
Minimum Prices for Imported Goods
As discussed in the early September edition of the Legal Update, the Government has planned to set a floor price for cross-border PMSE. This plan has been realized through the issuance of Regulation 31/2023, which sets the floor price of imported goods at USD 100 per unit of goods. If any goods are valued in other currencies, the price should be converted into the currency determined by the Ministry of Finance.
Exceptions apply to goods below the floor price only if they have been determined by the Minister of Finance. The floor price for cross-border PMSE was not featured in the previous legal framework i.e., Regulation 50/2020.
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