HOW TO PROTECT YOUR ONLINE PLATFORMS AND E-COMMERCE MERCHANTS BUSINESS IN INDONESIA

BEFORE-IMPORTING-COSMETICS,-UNDERSTAND-THE-LEGALITY-FIRST-LICENSING
BEFORE IMPORTING COSMETICS, UNDERSTAND THE LEGALITY FIRST (LICENSING)
July 11, 2017
THE-INSPECTION-MECHANISM-OF-THE-PARENT-COMPANY-TO-ITS-SUBSIDIARY
THE INSPECTION MECHANISM OF THE PARENT COMPANY TO ITS SUBSIDIARY
July 14, 2017

Online business has been getting increasingly popular in Indonesia, which sees both multinational companies and large retailers as well as personal entrepreneurs using the online more and more. A part of this trend is due to the easiness offered in online shopping, and also the internet network getting more affordable and attainable for the general public.

In online business, one of the most popular models is the “User Generated Model” electronic system otherwise known as “Online Platform”. The Online Platform allows entrepreneurs to join as users and participate by registering for user accounts, which allows them to upload and input their data and/or information be seen by all on that Online Platform.The User Generated Model of an Online Platform helps the entrepreneurs to achieve more visibility for their products and services with minimum cost, while giving creative control to each entrepreneur on how they market their products and services. Online Platform in the form of mobile application is even more practical, with increasing popularity in Indonesia.

LEGAL RISKS IN RUNNING AN ONLINE PLATFORM
However, allowing users to freely upload and input data to the Online Platform create significant risks for the Online Platform providers themselves. One of them is that the users misuse the Online Platform to sell prohibited items or provide illegal services, and use the Online Platform to actively break the law.

While Online Platform providers can claim that they are not directly responsible of their users’ misconducts, it remains that such actions can be heavily damaging to customers and other users, and the Online Platform itself becomes a media which allows such violations to be conducted. It can lead to the loss of trust by the customers at the Online Platform, and in extension, the loss of trust at the Online Platform provider, resulting in lower use and lower revenues, not to mention the damage to the provider’s reputation.

MINISTRY ISSUES NEW REGULATION
In response to such risks, the Indonesian government through the Ministry of Communication and IT issued the Ministerial Circular Letter Number 5 of 2017 (“SE 5/2017”) concerning the Limits and Liabilities of Platform Providers and Merchant through Electronic System (E-Commerce) in the User Generated Platform (“UGC”) model.

In terms of E-Commerce regulations, SE 5/2017 is quite the game changer. It is the first government-issued guideline to regulate both the online platform providers, whether user-based or non-user based, as well as the users using them, especially for merchant users. It shows that the government is committed to not only protect the interests of the customers, but also prepare the best legal guidelines for online merchants in Indonesia going forward.

OBLIGATIONS FOR USER-GENERATED CONTENT PLATFORM PROVIDERS
Pursuant to the provisions included in the Circular Letter No. 5 of 2017 issued by the Minister of Communication and IT, the platform providers whose content are fully or partially user-generated has the obligations as follows:

  1. SET UP TERMS AND CONDITIONS OF PLATFORM
  2. Terms and Conditions are standard staples of any online platforms, not just E-Commerce platforms. At minimum, such terms and conditions are regulated to consist of the following clauses:

    1. Merchant and User Rights and Obligations in using the platform services;
    2. Platform Provider Rights and Obligations in providing and running the online platform;
    3. Terms and conditions concerning the liability for the uploaded contents.
  3. SET UP REPORTING AND COMPLAINTS CENTER IN THE PLATFORM
  4. All online platforms must now have a reporting and complaints center available for access in its platform and/or application. Such center must be used for all reports and complaints concerning prohibited contents.
    What constitutes as prohibited contents are any products and/or services displaying:

    1. Pornographic contents;
    2. Gambling, lottery and/or betting contents;
    3. Hateful contents;
    4. Disturbing graphic contents;
    5. Hacking contents;
    6. Access to and/or Drugs, addictive substances, psychotropic substances contents;
    7. Misleading, dishonest, and fraudulent contents;
    8. Human trafficking and/or human organs market contents;
    9. Cigarettes, tobacco, and smoking contents.
  5. FOLLOW-UP AND ACT ON THE REPORTS
  6. Once a report from customers or other users is received, the online platform providers must then follow-up with their merchants in regards to the content, including to request more information from the merchant and the reporting party to verify the reports.

  7. DEADLINES TO BLOCK OR TAKE DOWN PROHIBITED CONTENTS
  8. The online platform providers must make sure that the prohibited contents displayed in their sites are taken down or blocked within the regulated deadline. Since taking down or blocking contents in general must be based on strong evidence, it becomes important for the Online Platform provider to be aware of the deadline and make sure that their teamwork within that deadline.

  9. CONSTANT EVALUATION AND MONITORING OF MERCHANT ACTIVITIES
  10. This obligation ensures that Online Platform providers can no longer claim that they are not responsible nor liable for the conduct of their merchant. Not only that the merchants must be constantly monitored, but the Online Platform provider must continue to evaluate the performance and conduct of their Merchant.

Basically, the obligation of Online Platform provider is to ensure that the maintenance and operation of the electronic system and the content display within the Online Platform is conducted professionally, securely, and responsibly.

OBLIGATIONS AND LIABILITIES FOR MERCHANTS
Meanwhile, Merchants who are selling their products or services in an Online Platform has the obligations as follows:

  1. MERCHANT OBLIGATIONS
    1. Provide complete and accurate information concerning: (1) terms and conditions of contract; and (2) products and/or services on offer;
    2. Ensure that all uploaded materials and contents are not in violation of the prevailing laws and regulations;
    3. Perform all obligations pursuant to the Online Platform terms and conditions.
  2. MERCHANT LIABILITIES
    1. Liability of all contents and substances uploaded by the Merchant;
    2. Liability of all reports or complaints of its uploaded contents;
    3. Liability pursuant to the terms and conditions of the Online Platform.

IN CONCLUSION
With this newly issued regulation, the obligation and liabilities of each party in an Online Business become clear, especially for the Online Platform provider and the Merchant. It creates a legal certainty, which is turn serves as a guarantee for e-commerce users and costumers, that their purchase is conducted within a responsible and professional environment in the Online Platform. The intended result, of course, is so that all parties are secure and guaranteed with the sale and purchase of products: The Online Platform provider, the Merchant, and the Customers.

How can SMART Legal Consulting help you?

SMART Legal Consulting is a corporate legal services provider with experience and capability to assist Clients in drafting and preparing their terms and conditions in running an online business. We help our Clients with effective contract drafting, and for Clients to achieve their business goals while also ensuring their legal compliance with the laws and regulations.

Contact SMART for more details about our services, or schedule meeting with us at:
E: info@smartcolaw.com
H: +62821-1234-1235
O: +6221-8067492

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