The government has issued Minister of Trade Reg. No. 31/2023 which revokes Minister of Trade Reg. No. 50/2020. This regulation was promulgated in connection with legal issues, including the rise of social commerce activities that provide transaction services. In essence, this regulation regulates licensing, prohibitions on social commerce activities from carrying out transactions, as well as consumer protection provisions and fair business competition

1. Social-Commerce in the Wake of Minister of
Trade Regulation Number 31 of 2023
Legal Brief

2. Overview of Social-Commerce in Indonesia
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Over the past few years, online retail has witnessed substantial expansion, characterized by
robust consumer demand and an expanded product offering. This surge in online shopping began
in 2019, driven by the necessity for consumers to adapt their purchasing behavior during the COVID-
19 pandemic. Statistical data indicates that in 2022, a noteworthy 79% of the Millennial and Gen Z
demographic in Indonesia engaged in online shopping activities.
The landscape of e-commerce in Indonesia has evolved significantly, extending
beyond dedicated e-commerce platforms to include social media channels such
as Instagram and TikTok. Data from 2022 reveals a remarkable surge in the Gross
Merchandise Volume of transactions on TikTok Shop in Southeast Asia, amounting to a
staggering US$4.4 billion, approximately equivalent to IDR 66.7 trillion. This
phenomenon is known as social commerce.
CNBC, TikTok Shop, a rising threat to Shopee and Lazada in Southeast Asia, 2023
To encourage sustainable e-commerce development in Indonesia, the Government of Indonesia issued
Government Regulation Number 80 of 2019 on Trade Through Electronic Systems. This was further regulated by
the Minister of Trade Regulation Number 50 of 2020 on the Licensing, Advertising, Guidance, and Supervision of
Business Operators in Electronic Trading Systems. Nonetheless, despite the existence of prior regulations
governing e-commerce, concerns remain towards the growing field of social commerce.
IND Research Institute, Indonesia Gen Z Report 2022, IDN Media, 2022, pg. 58.
From E-Commerce to Social-Commerce
Previous Regulations

3. Considerations for the Issuance of MoT Reg. 31/2023
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• Urgent need for standardized product regulations within the e-commerce sector;
• Unfair trading practices conducted by foreign enterprises;
• Small and medium-sized enterprises and domestic products struggle to compete; and
• The e-commerce ecosystem lacks equitable competition, and new business models pose
potential disruption.
Ministry of Trade, Zulhas Resmi Berlakukan Permendag 31/2023, 2023
The enactment of MoT Reg. 31/2023 was conducted to reconfigure regulations concerning
business permits, advertising, guidance, and supervision of electronic commerce operators. Such
purposes was backed with the following principles:
• Supporting the empowerment of micro, small, and medium-sized enterprises, as well as
electronic commerce operators within the country;
• Consumer protection efforts;
• Promotion of the development of electronic commerce; and
• Adapting to dynamic technological advancements.
In light of these developments, the Indonesian Government has introduced regulations to support the development of
electronic commerce through the Minister of Trade Regulation of the Republic of Indonesia Number 31 of 2023 on Licensing,
Advertising, Guidance, and Supervision of Business Operators in Electronic Trading Systems (“MoT Reg. 31/2023”).
Preamble of MoT Reg. 31/2023
Preamble of MoT Reg. 31/2023
Reasoning for the Enactment of MoT Reg. 31/2023
Social-Commerce Issues

4. E-Commerce and Social Commerce: The Basics
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MoT Reg. 31/2023 refers to e-commerce as Trade Through Electronic System (Perdagangan
Melalui Sistem Elektronik or “PMSE”). PMSE itself is defined as the trade of goods and/or
services that are transacted through a series of applications and/or electronic procedures.
Art. 1 (2) MoT 31/2023
Business Actors
Art. 1 jo. Art. 2 MoT Reg 31/2023
PPMSE Business Model
Art. 2 MoT Reg 31/2023
In accordance with Indonesian regulations, e-commerce or
PMSE refers to the overall trade of goods and/or services
that are conducted through electronic means.
This differs from Social-Commerce, which refers to a category of
PPMSE or provider of e-commerce.
Differentiating E-Commerce and Social-
Commerce
Domestic Business Actors
International Business Actors
Domestic PPMSE Business Models
Online Retail Marketplace
Online Classifieds Price Comparison Platforms
Daily Deals Social-Commerce
Domestic Merchants
Domestic Provider of Electronic Trading
or Penyelenggara Perdagangan Melalui Sistem Elektronik (“PPMSE”) is a
business entity that offers electronic communication facilities used for trade
transactions
Domestic Intermediary Services Provider
or Penyelenggara Sarana Perantara (“PSP”) is a business entity that offers
electronic communication facilities, apart from telecommunications providers,
which solely function as intermediaries in electronic communication between
senders and recipients.
International Merchants International PPMSE
International PSP
What is E-Commerce?

5. PPMSE Business Models in accordance with MoT Reg. 31/2023
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PPMSE Business Models
Online Retail
Refers to a merchant that conducts e-
commerce (PMSE) through means
such as a website or commercial
application that is created, managed,
and/or owned independently.
Art. 1 (12) MoT Reg. 31/2023
Marketplace
A provider of facilities in which some or
all of the transaction processes are
within an electronic system, such as a
commercial website or application, as
a platform for merchants to post offers
for goods and/or services.
Art. 1 (13) MoT Reg. 31/2023
Online Classified Ads
A means to operate an electronic
system, such as a website or
application, for commercial purposes,
which brings together sellers and
buyers where the entire transaction
process occurs outside of the website
or application.
Art. 1 (14) MoT Reg. 31/2023
Price Comparison Platform
A means to operate an electronic
system, such as a website or
application, for commercial purposes
that displays price comparisons for
goods and/or services sold on other
websites or applications.
Art. 1 (15) MoT Reg. 31/2023
Daily Deals
A means to operate an electronic
system, such as a website or
application, for commercial purposes
involving the sale of discount coupons
and/or other convenience facilities that
can be used as a payment method by
consumers to make purchases.
Art. 1 (16) MoT Reg. 31/2023
Social-Commerce
Social-Commerce is a social media
platform that provides specific features,
menus, and/or facilities that enable
merchants to post offers for goods
and/or services. Social media in MoT
Reg. 31/2023 refers to a website or
application that allows users to create
and share content or engage in social
networking.
Art. 1 (17) and (18) MoT Reg. 31/2023
It is interesting to note that, while MoT Reg. 31/2023 has brought forward six categories of PPMSEs, the treatment on licensing,
advertisement, and monitoring towards each category is generally not distinguished. Exceptions are as follows:
According to Article 29 MoT Reg. 31/2023, PPMSE
should not display ads conflicting with prevailing
regulations and must remove such ads when
found. If PPMSE (aside from Online Retailers)
repeatedly removes prohibited ads from the same
business account three times, they are required to
terminate access to that account on their platform.
The varying treatment can be
attributed to the distinct nature of
Online Retail, where
advertisements are not generated
by users, unlike, for instance,
online classified ads.
Specifically for Marketplace and/or
Social-Commerce, there are
restrictions towards their business
activities

6. Social Commerce based on MoT Reg. No. 31/2023
The classification of domestic PPMSE business models in MoT Reg. 31/2023, which includes
Social-Commerce, is completely new. Previously, there was no such categorization in MoT
Reg. 50/2020. Thus, the treatment of all PPMSE business models was completely the same.
There were no particular limitations on Social-Commerce.
With the enactment of MoT Reg. 31/2023, MoT Reg. 50/2020 is revoked and is no longer
applicable. MoT Reg. 31/2023 shall apply starting for the date of issuance. MoT Reg. 31/2023
was issued on 25 September 2023.
What’s Different?
Art. 66 MoT Reg. 31/2023
Limitations of Social Commerce
1. PPMSE with Marketplace and/or Social-Commerce business models are
prohibited from acting as producers in accordance with the provisions of the
laws and regulations in the field of goods distribution
2. PPMSE with a Social-Commerce business model are prohibited from
facilitating payment transactions on their electronic systems.
Art. 21 (2) and (3) MoT Reg. 31/2023
The Case of TikTok
After MoT Reg. 31/2023 enters into force, Article 21 (2) and (3) MoT Reg. 31/2023
would be applicable towards Social-Commerce business models such as TikTok
Shop. Consequently, TikTok Shop is now prohibited from facilitating payment
transactions – their platform may only advertise goods and/or services. Payment
transactions for goods and/or services advertised through TikTok may only be
conducted through other platforms.
A H R P L e g a l B r i e f

7. Positive List for Buying and Selling Goods from Abroad
Art. 19 (1) and (2) MoT 31/2023
Minimum Goods Prices
PPMSEs engaged in cross-border PMSE activities are
required to enforce a minimum product price (equivalent to
Freight on Board USD 100 per unit) on its electronic system
for merchants. This applies specifically to the sale of
finished goods imported directly from overseas to Indonesia.
Art. 19 (3) MoT 31/2023
Exchange Rate Value
In the event that the price of goods is
stated in a different currency, The
conversion is carried out using the
exchange rate value determined by the
Minister of Finance.
Art. 19 (4) MoT 31/2023
List of Goods Below the Minimum Price
Goods with prices below the minimum product price, which
are allowed to enter directly through PPMSE conducting
cross-border PMSE activities, shall be determined by the
Minister of Trade based on the results of coordination
meetings at the ministerial/head level of relevant non-
ministerial government agencies.
Art. 57 MoT 31/2023
Administrative Sanctions
PPMSEs found to be in contravention of
these regulations may face
administrative penalties, including
receiving written warnings or
experiencing temporary suspension.
As per the Minister of Trade's statement, there is ongoing collaboration with
other Government ministries, including the Ministry of Cooperatives and
Small and Medium Enterprises and the Ministry of Agriculture, to jointly
develop a positive list.
Tempo, Segera Tetapkan Positive List Barang Impor, Zulhas Bakal Rapat dengan Kementerian
Terkait, 2023
A H R P L e g a l B r i e f

8. Sanctions for Social-Commerce that Still Sells Services
1. PPMSEs with Marketplace and/or Social-Commerce business models are
prohibited from acting as producers in accordance with the provisions of
the laws and regulations in the field of goods distribution.
2. PPMSEs with Social-Commerce business model are prohibited from
facilitating payment transactions on their electronic systems.
Art. 21 (2) and (3) MoT Reg. 31/2023
Art. 50 (1) dan (2) MoT Reg. 31/2023
PPMSE may be subject to administrative sanctions by the MoT, which includes:
Written Warning Included in the priority monitoring list
Blacklisted
Temporary blocking of domestic PPMSE services and/or
foreign PPMSE by the relevant authorities
Revocation of Business License
Limitations of Social Commerce
The Minister of Trade delegates the authority to impose administrative sanctions to the
Director General of Consumer Protection and Orderly Commerce. The authority to
impose administrative sanctions in the form of written warnings is carried out by the
Directorate General of Consumer Protection and Orderly Commerce.
Art. 50 (3) and (4) MoT Reg. 31/2023
Sanction Imposition
Administrative Sanctions
A H R P L e g a l B r i e f

9. Prohibition of Buying and Selling on Social Commerce,
What’s Next?
Art. 13 (2) MoT 31/2023
The Role of PPMSE in Achieving an
Environment of Healthy Competition
PPMSEs are required to take proactive measures to detect,
prevent, and address any instances of unfair competitive
practices or price manipulation, whether explicitly or
implicitly mentioned in their standard operating procedures.
Art. 13 (3) MoT 31/2023
To foster a fair business environment, PPMSEs must
guarantee: (i) there are no links or connections between the
electronic systems employed within PMSE facilities and
electronic systems external to PMSE facilities; and (ii) there
is no inappropriate use of user data control, which may be
employed by PPMSEs and/or its associated companies
within the system.
Art. 13 (4) MoT 31/2023
-
If there is an accusation of unfair business competition,
whether involving traders or price manipulation practices,
either directly or indirectly, PPMSE is obliged to collaborate
with the relevant business competition oversight authority
(i.e., Indonesia Competition Commission) within three
working days from the moment the suspicion or reports are
identified or received by PPMSE.
W
Additionally, there is a need to optimize the supervision and
guidance for PMSE implementation, especially in areas like
the monitoring of electronic advertising, as stipulated in
Article 31 of MoT 31/2023.
What’s Next?
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10. We will continue to follow the developments on this topic and provide additional information as it
becomes available. If you have any questions on this topic, please contact:
Adnan
adnan@ahrplaw.com
Tariq Hidayat Pangestu
tariq@ahrplaw.com
Thea Mutiara Khalifa
thea@ahrplaw.com
This publication has been prepared by AHRP for educational and informational purposes only. The information contained in this publication is not
intended and should not be construed as legal advice. Due to the rapidly changing nature of law, AHRP makes no warranty or guarantee concerning
the accuracy or completeness of this content. You should consult with an attorney to review the current status of the law and how it applies to your
circumstances before deciding to take any action.
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