Amendment to the Indonesia Consumer Protection Law (CPL)

The Indonesian government is currently amending the CPL. There is no estimated date yet on when the amendment will be issued. Some major changes in the working draft amendment concern the following:

• reasserting the definition of “consumers” as end users, thus explicitly excluding intermediaries or manufacturers that use the relevant goods as part of their production;
• dividing the definition of “business actors” into two categories, namely those that produce goods and those that provide services;
• affirming consumers’ liability by stipulating that their failure to fulfil their obligations will result in no liability for the business actors, meaning that judges should no longer rule on consumers’ liability on a case-by-case basis;
• introducing additional rules on standard clauses by specifying that standard agreements for industries or businesses will be modelled and determined by the relevant authorities through government regulations; and
• imposing strict liability on business actors whereby, if a customer suffers losses due to defective products, the business actor will be held liable irrespective of the fault element.

Development of Consumer Protection in Financial Services

In January 2023, the Indonesian government enacted the so-called “Omnibus Law for the Financial Sector” under Law No 4 of 2023 on Financial Sector Development and Reinforcement. The so-called PPSK Law, which became effective immediately upon introduction, amends 16 laws and revokes one law within the financial sector.

Structured around five primary pillars, one of which is strengthening state protection for consumers of financial products/services, the PPSK Law emphasises obligations and prohibitions for business actors in the financial sector. Under the PPSK Law, a business actor in the financial sector must fulfil specific obligations, such as enhancing consumer financial literacy and inclusion, tailoring products/services to consumer needs, establishing consumer complaint mechanisms, and safeguarding consumer data confidentiality and security. The PPSK Law also prohibits business actors from engaging in actions such as providing misleading information or information or documents in languages other than Indonesian, and charging fees for complaint-resolution services. Non-compliance with these obligations and prohibitions may result in administrative sanctions, including product/service restrictions or suspension, fines, and/or licence/product revocation. If a business actor that has been subjected to administrative sanctions fails to comply with or implement the sanctions, it may face criminal sanctions of up to 10 years’ imprisonment and a maximum fine of IDR250 billion.

Moreover, the PPSK Law also imposes additional obligations and prohibitions aimed at safeguarding consumers. Failure to comply with these obligations and prohibitions will immediately subject a business actor to criminal sanctions of up to 10 years’ imprisonment and a maximum fine of IDR1 trillion. These obligations encompass maintaining the security of consumer savings, funds, or assets under the business actor’s responsibility, providing clear and accurate information regarding products/services, and preserving the confidentiality of consumer data and personal information. Meanwhile, the prohibitions include not offering products and services to consumers via private communication channels without the consumer’s consent, employing standard agreements containing prohibited standard clauses, and engaging in business activities other than those regulated in the PPSK Law.

To implement the provisions of the PPSK Law, particularly concerning consumer protection in the financial sector, Bank Indonesia has issued Bank Indonesia Regulation No 3 of 2023 on Bank Indonesia Consumer Protection, while the Financial Services Authority (the Otoritas Jasa Keuangan, or OJK) has issued OJK Regulation No. 22 of 2023 on Consumer and Public Protection in the Financial Services Sector. These implementing regulations further outline the application of rules on consumer protection as specified under the PPSK Law, encompassing reporting, documentation and procedural requirements, in alignment with the responsibilities and authority of Bank Indonesia and the OJK.

The enactment of the PPSK Law and its implementing regulations carry significant implications for business actors, notably in terms of consumer protection in the financial sector. It is also worth noting that other laws and regulations related to consumer protection in the financial sector still apply if they do not contradict the PPSK Law.

Heading towards Mandatory Halal Certification in Indonesia

As part of consumer protection in Indonesia, Law No 33 of 2014 on halal product assurance and its implementing regulations (HPA Law) require all products entering, circulating and being traded on Indonesian territory be halal certified unless they originate from materials prohibited under Islamic law (haram). Halal-certified products must include a halal label on their packaging or on certain parts of the product that must be easy to see, read, and not easily erased, removed, or tampered with; products derived or made from non-halal materials must attach a non-halal label. Failure to comply with the obligation for halal certification will result in administrative sanctions ranging from fines to product recalls.

The halal certification obligation aims to provide reassurance and increase trust and certainty that halal products are available for the public, and constitutes a form of legal validation and a guarantee for more than 80 per cent of the Indonesian population, who are Muslim. More broadly speaking, it also encourages the development of the halal industry in Indonesia, boosting exports of Indonesian halal products to the global market.

Under the HPA Law, products and services subject to the halal certification obligation include the following.

• Goods: food and beverages, pharmaceuticals, cosmetics, chemicals, biological, and genetic engineering products.
• Services: slaughter (butchery), processing, storage/warehouse, packaging, distribution, marketing/sales, and delivery services.

The implementation and enforcement period of the halal certification obligation for the above products may vary from one product to another. The earliest deadline is set for 17 October 2024, and is applicable for: (i) food and beverage products; (ii) raw materials, food additives, and auxiliary materials for food and beverage products; and (iii) slaughtered products and related services. Subsequent stages will apply to the remaining product categories, with deadlines for mandatory halal certification ranging from 17 October 2026 to 17 October 2034.

In general, business actors have two alternative routes to apply for the halal certification, namely regular and “self-declare” registrations. Unlike regular registration, which requires an inspection and/or testing of the halal status of the products, self-declare registration is carried out based on self-declared halal statements from the business actors. However, the self-declare mechanism can be exercised only by micro and small businesses, and is applicable only for products that:

(i) do not contain any risks or use ingredients whose status halal is confirmed; and

(ii) involve a production process that is guaranteed to be halal and simple.

Currently, the primary body in charge of the halal product assurance in Indonesia is the Halal Product Assurance Administering Agency or Badan Penyelenggara Jaminan Produk Halal(BPJPH), authorised to issue and revoke halal certificates and halal labels for products registered by business actors.

It is worth mentioning that the obligation for halal certification also applies to products made outside Indonesia but distributed within the country. For imported products, halal certificates issued by foreign halal agencies can be used and recognised in Indonesia, provided that such foreign halal agencies have engaged in mutual recognition of halal certification with the BPJPH. In that case, halal-certified products will only need to be registered with the BPJPH, without undergoing the certification process. In contrast, if foreign halal agencies are not yet recognised by the BPJPH, products with halal certificates issued by foreign halal agencies and intended to be marketed in Indonesia must still apply for Indonesian halal certification.

Revitalising Consumer Protection in Indonesia – Strategic Reinforcement of BPSK and the Advent of Online Dispute Resolution

On 3 April 2024, the President of the Republic of Indonesia ratified Presidential Regulation No 4 of 2024 outlining a comprehensive National Strategy for Consumer Protection (“PR 4/2024”). One aspect of this initiative is the enhancement of the Consumer Dispute Resolution Agency, or Badan Penyelesaian Sengketa Konsumen (BPSK), tasked with resolving disputes between consumers and business actors through various forms of alternative dispute resolution, including arbitration, mediation, and conciliation.

Historically, BPSK has served as a vital forum for resolving consumer-business conflicts. However, the effectiveness of BPSK’s decisions has often been tempered by the requirement for court assistance to enforce these decisions unless the involved parties voluntarily comply. Although the CPL asserts that decisions by the BPSK are final and binding, it paradoxically allows these decisions to be contested in district courts all the way up to the Supreme Court.

Addressing these concerns, in PR 4/2024 the Indonesian Government plans to update the CPL to reinforce BPSK’s authority and ensure that its decisions provide clear and final outcomes. The aim is to make BPSK decisions more conclusive and enforceable without the need for costly legal battles.

Furthermore, PR 4/2024 introduces plans for an online dispute-resolution (ODR) system. This development aligns with broader regional objectives under the Association of Southeast Asian Nations (ASEAN) Strategic Action Plan on Consumer Protection 2025, which envisages the creation of an ASEAN ODR Network to streamline dispute resolution across member states. The Indonesian Ministry of Trade is at the forefront of this project to create a user-friendly online system where consumers can submit complaints. This initiative is expected to reduce the need for in-person visits to distant legal venues, cutting down on time and litigation costs.

This move towards online dispute resolution highlights a modern approach to consumer protection, aiming to streamline processes and make it easier for consumer-business actors to resolve conflicts. However, as this ODR system is not yet covered by the CPL, new regulations are anticipated in order to fully integrate and legitimise this innovative approach.

Through these updates, Indonesia is taking significant steps to ensure that consumer rights are supported by effective, efficient and modern dispute-resolution mechanisms and to minimise litigation costs for consumer and business actors.