NEWS ALERT: E-Commerce License Issuance Put to Halt

Recently the Ministry of Trade (“MOT”) has issued Minister of Trade Regulation Number 31 of 2023 regarding Business Licensing, Advertisement, Development, and Supervision of Business Activities in Trade via Electronic System (“MOT Regulation 31/2023”).

This came after intense pressure from small and medium enterprise (“SME”) retailer communities, particularly those who do retails offline and in traditional markets perceiving that the increasing number of retail transactions happening on social media platforms, namely TikTok Shop, have been damaging to their businesses. The regulation came into place in an effort to battle presumed unfair practices in the online commerce environment against SME communities.

SME and offline retailers voiced their concerns that their revenue has decreased significantly because of the increased presence of online retail transactions on TikTok Shop. Many also struggle to compete with online retailers on social media platforms.

As a response, the MOT finally issued MR 31/2023 to curb retail transactions on social media platforms. The regulation differentiates marketplace and social media platforms (referred to as Social-Commerce) in trade via electronic systems. MOT Regulation 31/2023 defines marketplace as a platform provider – in which platform, transaction processes take place in an electronic system, and platform of which is in the form of a commercial website or application for merchants to offer their goods and/or services (e.g., Tokopedia and Shopee). Meanwhile, Social-Commerce is defined as a social media provider that lays out features, menus and/or certain facilities that allows merchants to place an offer for their goods and/or services. Article 21 (3) of MR 31/2023 explicitly forbids Social-Commerce providers to facilitate any payment transaction on its platform, thus banning any online retail transactions on social media platforms.

Around the time as the issuance of MOT Regulation 31/2023, the Ministry of Investment/Investment Coordinating Board (“BKPM”) has temporarily restricted several business lines (Standard Classification of Indonesian Business Fields or Klasifikasi Baku Lapangan Usaha, “KBLI”) within the Online Single Submission system (OSS). The affected KBLI codes are as follows:

1. KBLI 62012 (Development of Trade Application through Internet (E-Commerce));

2. KBLI 63122 (Web Portal and/or Digital Platform with Commercial Purposes);

3. KBLI 47911 (Retail Trade through Media for Food, Beverage, Tobacco, Chemical, Pharmaceutical, Cosmetic, and Laboratory Equipment Goods);

4. KBLI 47912 (Retail Trade through Media for Textile, Clothing, Footwear, and Personal Needs Goods);

5. KBLI 47913 (Retail Trade through Media for Household Equipment and Kitchen Equipment Goods);

6. KBLI 47913 (Retail Trade through Media for Household Equipment and Kitchen Equipment Goods);

7. KBLI 47914 (Retail Trade through Media for Mixed Goods as specified in KBLI code 47911 to 47913); and

8. KBLI 47919 (Retail Trade through Media for Other Goods).

As the consequence of such restriction, the process for obtaining the relevant business licenses for the KBLI codes mentioned above is delayed for an uncertain period. However, for companies that had previously obtained these KBLI codes are not affected and can proceed to obtain their corresponding business licenses without disruption.

As of the writing of this article, BKPM has not made any official announcement nor notification of such restriction. While, the MOT as the government agency in charge of the business activities that are currently restricted, also has not made an official announcement regarding the restriction.

For the time being, it seems that the fate of companies that wish to carry out their activities in the e-commerce sector is in a limbo. We hope that the government will soon be able to lift this restriction – stay tuned for the update.

By: Nicole Huang, Della Puspita Loga and Rizky Akbar Idris

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