Putting the Brakes on 'Unfair Fees'? Indonesia Proposes New Rules to Curb Platform Rate Hikes

[Ebrun Original] May 25th, 2024 - According to foreign media reports, the Indonesian government is currently developing a new regulatory policy aimed at reshaping the tense dynamic between major e-commerce platforms and micro, small, and medium enterprises (MSMEs).

It is reported that Indonesia's Ministry of Cooperatives and SMEs is drafting specialized regulations to standardize the fee-charging practices of digital platforms like TikTok Shop and Shopee, prohibiting them from unilaterally and abruptly raising service fees or commission rates for sellers. This move is seen as a significant step by the government to foster a healthier, more stable digital commerce ecosystem that benefits MSME development.

Minister of Cooperatives and SMEs Teten Masduki recently revealed that the proposed rules would require e-commerce platforms to sign cooperation agreements with sellers for a minimum term of one year. During the contract period, platforms would be prohibited from arbitrarily increasing service fees or commissions. Any fee adjustments must be communicated to sellers at least three months in advance, providing merchants with sufficient time to respond.

The minister stated that the relevant provisions would be incorporated into a ministerial regulation concerning the protection and competitiveness of MSMEs. This regulation has completed its legal harmonization process and is currently awaiting enactment by the State Secretariat.

According to the explanation, the new rules will focus on simplifying the current platform fee structures, which have left many MSME operators "confused." The government plans to standardize the various complex fee items into three main categories: registration fees, service fees, and promotion fees.

"Platform A's fee items differ from Platform B's, leading people to mistakenly believe there are many different fees, but in reality, they mainly consist of these three components," said Masduki.

Simultaneously, the government is encouraging platforms to offer service fee discounts of up to 50% for micro-enterprises and merchants selling domestic products. This aims to protect smaller businesses, preventing them from being at a disadvantage in digital competition against medium and large enterprises.

He emphasized, "The government cannot allow micro-enterprises to compete freely with large companies without any protection; supportive policies must be introduced."

It is understood that over the past few years, the three major e-commerce platforms in Southeast Asia have significantly increased their commission rates, adjusted free shipping mechanisms, and introduced multiple new fee types. This has led to a continuous increase in the operational burden on local sellers, severely impacting their cash flow and profit margins. Complaints about frequent changes in platform policies have also been growing.

Recently, the issue of e-commerce platforms raising commissions has sparked widespread discussion among online seller communities on social media. Indonesia's Ministry of Cooperatives and SMEs noted the public sentiment and summoned several major platforms for clarification.

During the discussions, the platforms explained that they "had not increased core commission rates but had indeed adjusted the free shipping mechanisms, particularly concerning logistics costs for returns or problematic goods—under the new mechanism, return shipping costs would now be shared between the platform and the seller."

Despite this, the government still believes it is necessary to introduce clearer regulations to prevent future misunderstandings arising from fee changes. It is also coordinating with relevant ministries to explore specialized incentive measures for digital MSMEs.

To ensure effective policy implementation, the government is establishing a new regulatory system through a digital platform called SAPA UMKM.

In the future, this system will be directly integrated with major e-commerce platforms, enabling the government to more effectively monitor the enforcement of platform policies. Currently, SAPA UMKM has entered a limited pilot phase in regions like West Java, Sulawesi, and Bali. The government hopes to officially launch it nationwide as soon as possible after evaluation.

Analysis suggests that these new regulations could reshape the landscape of Indonesia's e-commerce industry in the coming years. For a long time, e-commerce platforms holding channel advantages have dominated their relationships with sellers. Requirements such as one-year contracts, advance notification, and prohibitions on unilateral price adjustments are expected to promote a more balanced relationship between the two parties.

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