The Benefits of Adopting the Eu Rules on the Exemption From

THE BENEFITS OF ADOPTING THE EU RULES ON THE EXEMPTION FROM

INTERMEDIARY SERVICE PROVIDER LIABILITY FOR ONLINE

MARKETPLACES IN INDONESIA

Master’s Thesis

LLM Law and Technology

Tilburg University

Steven Leonardi

(U1259071/364245)

Thesis Supervisor:

Prof. mr. C. (Kees) Stuurman

Table of Contents Chapter 1 – Introduction ...... 4 1.1. Background ...... 4 1.2. Research Question ...... 6 1.3. Significance...... 7 1.4. Methodology ...... 7 1.5. Overview ...... 8 Chapter 2 – Definition and Limitation ...... 9 2.1. Definitions of online marketplaces and its difference with online retail stores, online stores, and online shops...... 9 2.2. The online marketplaces as an intermediary service providers and their exemption of liability...... 11 Chapter 3 – The exemption from intermediary service providers under articles 12 to 15 of Directive 2000/31/EC ...... 13 3.1. The exemption from intermediary service providers under articles 12 to 15 of Directive 2000/31/EC ...... 13 3.1.1. Directive 2000/31/EC ...... 13 3.1.2. Characteristics of the liability regime...... 22 3.1.3. Case Law ...... 30 3.2. The reason or benefit of having exemption from intermediary service provider liability . 35 3.3. The disadvantage of having exemption from intermediary service provider liability ...... 37 Chapter 4 – Indonesian Current Liability Regime for intermediary service provider ...... 39 4.1. The exemption from intermediary service provider liability under article 15 paragraph 2 of Indonesian Law No. 11 of 2008 on Information and Electronic Transactions...... 39 4.1.1. Indonesian E-Commerce Development...... 39 4.1.2. Current regulation on liability of intermediary service providers in Indonesia ...... 42 4.2. The benefit of adopting exemption from intermediary service provider liability for online marketplaces in Indonesia...... 62 4.3. The disadvantage of exemption from intermediary service provider liability for online marketplaces in Indonesia...... 64 Chapter 5 - Conclusion ...... 67 5.1. Conclusion ...... 67 5.2 Recommendations ...... 68 Bibliography ...... 74

Legislations ...... 74 Books ...... 75 Journals ...... 75 Websites ...... 77

Chapter 1 – Introduction

1.1. Background Online trading or e-commerce has become a new trend in Indonesia in recent years.

There are several forms of online trading, i.e. business to business (B2B), business to

consumer (B2C), and consumer to consumer (C2C)1. TokoBagus, Berniaga, and Markplaats

are examples of C2C online marketplaces that bring sellers and buyers together. Online

marketplaces are intermediary service provider that provide services for people to advertise

their goods2. Users can take a position as a seller and set up the price to be open-for-auction

or a fixed price. They can also take a position as a buyer and bid for an item being offered.

In this scenario, the online marketplaces merely act as a service provider that brings sellers

and buyers together. It is different with regards to an online retail store (e.g. plaza.com),

online store (e.g. apple store), or online shop (private and personal online sellers).

In Indonesia, the increasing number of online marketplaces have been followed by

an increase in the number of cases of fraud.3 A recent survey by Asosiasi Penyelenggara

Jasa Internet Indonesia (APJII), an Indonesian Internet Service Providers Association,

shows that out of 77, 2% of people who do not shop online, 34, 6% of them are afraid of

fraud, 21, 5% of people reason that they cannot see the item by themselves, 13, 8% of

people reason that the price is expensive, while the remainder say that they are not

interested4. In general, fraud is a tort arising from a knowing misrepresentation, a

concealment of material fact, or reckless misrepresentation made to induce another to act to

1 David D. VanHoose, E-Commerce Economics, South-western:2013, p.9 2 Ibid., p.10 3 Denny Mahardy, Penipuan Online Masih Marak Di Indonesia, Liputan 6, 12th December 2012, from http://tekno.liputan6.com/read/475855/penipuan-online-masih-marak-di-indonesia accessed 11th December 2013 4 Asosiasi Penyelenggara Jasa Internet Indonesia, Orang Indonesia Belum Hobi Belanja Online, APJII Media, 12 December 2012, from http://www.apjii.or.id/v2/index.php/read/article/apjii-at-media/131/orang-indonesia-belum- hobi-belanja-online.html accessed 11th December 2013

his or her detriment5. Due to the characteristics of the internet, such as a high degree of

anonymity, incomplete legal constraints, and lower barriers to entry and exit, it is more

difficult to handle fraud in the online marketplaces6. Therefore, e-commerce law in

Indonesia creates a strict liability regime to protect the consumer.

However, Indonesian law does not clearly define the position of online marketplaces

as intermediary between buyer and seller in the trade and to what extent online marketplaces

can be held liable if a fraud is committed by one or more users. It only states that every

online company has to be responsible and can be held liable for everything that happens on

their website7. Furthermore, user’s lack of understanding and knowledge regarding the

regulation of online marketplaces cause them to blame online marketplaces when fraud

occurs while using online marketplaces’ services.

The current regulations that exist for electronic commercial activities are the

Indonesian Law No. 11 of 2008 on Information and Electronic Transaction and the

Indonesian Government Regulation No. 82 of 2012 on Operation of Electronic System and

Transaction. In the hierarchical terms, the Indonesian Law No. 11 of 2008 on Information

and Electronic Transaction has a higher position compared to the Indonesian Government

Regulation No. 82 of 2012 on Operation of Electronic System and Transaction. According

to these regulations, there is no article that clearly defines the position of the online

marketplaces in the trade between users and to what extent the online marketplaces can be

held liable if a fraud is committed by one or more users. This condition leads to an increased

burden of responsibility on the online marketplaces. Without an explicit exemption of

5 Bryan A. Garner (ed), Black’s Law Dictionary, Eighth Edition 6 Fei Dong, Sol M. Shatz, Haiping Xu, and Dibyen Majumdar, Price Comparison: A Reliable Approach To Identifying Shill Bidding In Online Auctions?, Electronic Commerce Research and Application 11, 2012, p. 171-179. 7 Article 15 paragraph 1 Indonesian Law No. 11 of 2008 on Information and Electronic Transaction

liability, online marketplaces become more vulnerable to be held liable by its users because

in principle they are liable for every crime that is committed by its users. This may constrain

the development of business and creative industries because people are afraid to expose

themselves to the risks of operating online marketplaces.

Meanwhile in the European Union, a regulatory framework for intermediary service

providers is based on section four articles 12 to 15 of Directive 2000/31/EC of the European

Parliament and of the Council of 8 June 2000 on Certain Legal Aspects of Information

Society Services, in Particular Electronic Commerce, in the Internal Market (E-commerce

Directive). This Directive is implemented in the laws of the Member States. The E-

commerce Directive has been proven to be effective in regulating the exemption from

intermediary service provider liability, like online marketplaces, due to its rapid

development through case law. Therefore, it can be a reason for Indonesia to adopt the

principle of exemption from intermediary service provider liability for online marketplaces

in the interest of legal development.

1.2. Research Question The research question of this thesis is: What are the benefits of adopting the rules on

the exemption from intermediary service providers liability for online marketplaces in

Indonesia? In order to accurately answer the research question, I will break it down into

several sub questions:

1. What are online marketplaces and their exemption of liability?

2. How does EU law regulate the exemption from intermediary service provider liability?

3. How does the Indonesian law regulate the liability of the online marketplaces and what is

the benefit of adopting an exemption of liability for Indonesian online marketplaces

similar to the system of the EU E-commerce Directive?

1.3. Significance The E-commerce Directive has relatively more developed compared to Indonesian

legislation about E-commerce. One of the factors that support the effectiveness of the above

approach is its rapid development through case law. The exemption of liability provides

legal certainty and protection for online marketplaces that motivates people to create online

marketplaces. The development of Indonesian national law and economy can be a

motivation for the Indonesian government to adopt the exemption from intermediary service

provider liability for online marketplaces. Having regard to the above, this thesis will

explore the benefits of adopting the rules on the exemption from intermediary service

providers for the online marketplaces in Indonesia.

1.4. Methodology The methodology to be used for this thesis is a comparative legal study. This thesis

is going to compare Indonesian Law No. 11 of 2008 on Information and Electronic

Transaction, and Indonesian Government Regulation No. 82 of 2012 on Operation of

Electronic System and Transaction with the E-commerce Directive 2000/31/EC. There are

some similarities between these regulations, since the Indonesian Regulation is based on

several international provisions, including the E-commerce Directive 2000/31/EC. Despite

these similarities however, there are also some differences. One of the main differences,

which will be the main focus of this thesis, is the exemption from intermediary service

provider liability. For this reason, the E-commerce Directive 2000/31/EC can be a good role

model for the development of the Indonesian regulation, especially regarding the exemption

of liability for intermediary service providers.

1.5. Overview After the introduction in this first chapter, the second chapter will discuss the

definition of online marketplaces, what makes it different from online auction houses, online

shops, and online stores in Indonesia. This chapter will also discuss why online

marketplaces are merely an intermediary service and thus should have exemption of

liability. The third chapter will mainly consider the exemption from intermediary service

providers under EU law. It will also discuss the reason or benefit of having an exemption for

liability of intermediary service providers and the disadvantage, if any, of having such

exemption. The fourth chapter will examine how Indonesian law regulates the liability of

online marketplaces. In addition, it covers what benefits the adoption of an exemption of

liability for online marketplaces in Indonesia may accrue. Lastly, in the fifth chapter, all of

the outcomes from the previous chapters are analyzed in order to answer the primary

question of this thesis, and, on the basis of the analysis provides recommendations for the

Indonesian legislative body.

Chapter 2 – Definition and Limitation

2.1. Definitions of online marketplaces and its difference with online retail stores, online stores, and online shops. Indonesian law does not distinguish between the different forms of services or

businesses on the internet. It only differentiates the online website from the website owner.

In Indonesian Law No. 11 of 2008 on Information and Electronic Transaction, an online

website is called an Electronic System. An Electronic System is a series of electronic

devices and procedures that functions to prepare, collect, process, analyze, store, display,

announce, transmit, and / or disseminate electronic information8. Meanwhile, an Electronic

System Organizer refers to the owner of the Electronic System9.

From the definition given above, we may conclude that every website in Indonesia

falls under the category of an Electronic System, including the online marketplaces. Online

marketplaces are websites where users can advertise their goods and other users can

purchase them. Buyers can pay for the goods either through the system given by the website

or by personally contacting the advertiser. On the other hand, sellers may choose to set up

the price to be an open-for-auction bidding system or a fixed price. When the seller puts

item open-for-auction, it means that at the same time the online marketplaces also functions

as an online auction house.

Online marketplaces are different from an online retail stores, online stores, and

online shops. Online retail stores are a website that sells several types of products and

brands. They are usually owned by a company who is a reseller of another producer. The

products that are offered are mostly produced by different companies. In some cases, the

online retail stores also sell some products that are produced by them. The companies

8 Article 1 paragraph 5 of Indonesian Law No. 11 of 2008 on Information and Electronic Transaction 9 Article 1 paragraph 6 of Indonesian Law No. 11 of 2008 on Information and Electronic Transaction

9 owning the online retail stores are the only seller on this website. Due to the condition whereby there is only one seller in the online retail store, the payment method is usually processed by ordering through the system that is provided on the website. The user can only be a buyer on this website and usually the price is a fixed price. The situation is slightly different with online stores.

Online stores exclusively sell their own products. As with the previous scenario, there is only one seller and the purchasing method is usually through a system that has already been provided on the website and usually the price is fixed. Meanwhile, online shops are the simplest form of online sales. Online shops usually do not have their own website. They normally use another social media outlet, such as Facebook, to advertise their product and communicate with the buyer. As online shops do not have their own website and use other websites that do not intend solely to vend, they does not have their own integrated payment method. The buyer of online shops has to contact the seller and discuss the payment method personally. The owner of the online shops is the only seller in its shop.

The products that are offered in an online shop can be either its own product or the product of another producer.

By virtue of the differences mentioned above, the position of online marketplaces is different from other online vendors. Online retail stores, online stores, or online shops play a role as the seller in their businesses. They play an active role as sellers to sell their product and gain profit mainly through their selling. Online marketplaces however, are merely intermediary service provider. They only provide a media platform that brings sellers and buyers together. Their main income are derived not from the selling of the advertised product, but from the advertisement itself.

2.2. The online marketplaces as an intermediary service providers and their exemption of liability. In general, an intermediary is a person or service that is involved as a third party

between two parties in a communication or transaction10. Next, a service provider is any

natural or legal person providing any service normally provided for remuneration, at a

distance, by means of electronic equipment for the processing (including digital

compression) and storage of data, and at the individual request of a recipient of a service11.

Online marketplaces fit these definitions mentioned in their role merely as a matchmaker in

a transaction. They provide services that bring the sellers and buyers together.

In determining when an Intermediary Service Provider can be held liable, it can be

held as such by a strict liability system or a with-fault liability system12. In a strict liability

system, an Intermediary Service Provider can be stated as being responsible and

consequently liable regardless of its knowledge and control over the offending material13.

This system is usually established by imposing an obligation to monitor all the material that

is posted on the respective website14. Meanwhile in a with-fault liability system, an

Intermediary Service Provider would be held responsible if it intentionally violates the

rights of others15. This means that the Intermediary Service Provider has a certain level of

information or knowledge about the violation. There are two levels of knowledge in this

system: actual knowledge and constructive knowledge16. Under actual knowledge, the

Intermediary Service Provider can be held liable if they know that there is some material on

10Margaret Rouse, Intermediary definition, 26th January 2014, from http://searchcio.techtarget.com/definition/intermediary 11 Pablo Baistrocchi, Liability of Intermediary Service Providers in the EU Directive on Electronic Commerce, 19 Santa Clara Computer &High Tech. L.J. 111 (2003). Available at: http://digitalcommons.law.scu.edu/chtlj/vol19/iss1/3, p.113 12 Ibid., p. 114 13 Ibid. 14 Ibid. 15 Ibid. 16 Ibid.

the Internet that violates someone's rights17. Secondly, in constructive knowledge, the

Intermediary Service Provider can be held liable if they have certain clues, or should have

reasonably presumed that certain material was infringing someone's rights18.

Indonesia has currently implemented a strict liability system. In Indonesian Law No.

11 of 2008 on Information and Electronic Transaction, it is stated that the Electronic System

organizer is responsible for the implementation of an Electronic System19. It means that

every website can be held liable for everything that happens on their website, with an

exception if there is a force majeure, fault, or negligence from users20. Up until this point,

there is no further explanation or regulation regarding the elements of fault and negligence

on that article.

Meanwhile In Europe, there is an exemption of liability for intermediary service

providers. The e-commerce directive in articles 12 to 14 does not give a general liability

regime applicable to intermediary service providers. Instead, the e-commerce directive gives

exemptions for several forms of services. The intermediary service providers will not be

held liable if they provide a service that falls under the category of mere conduit, caching,

and/or hosting. If they do not comply with the requirements and also do not fall under the

category mentioned above, their liability will be determined by the national laws that apply

to them.

17 Ibid. 18 Ibid. 19 Article 15 paragraph 2 of Indonesian Law No. 11 of 2008 on Information and Electronic Transaction 20 Article 15 paragraph 1 of Indonesian Law No. 11 of 2008 on Information and Electronic Transaction

Chapter 3 – The exemption from intermediary service providers under articles 12 to 15 of

Directive 2000/31/EC

3.1. The exemption from intermediary service providers under articles 12 to 15 of Directive 2000/31/EC

3.1.1. Directive 2000/31/EC The level of knowledge about the data transmitted or stored that can be

attained by online marketplaces is considerably limited.21 It is nearly impossible for

online marketplaces to constantly monitor every the activity on their site all the time.

Therefore, one could envisage a problem in the distribution of liability between the

online marketplaces and the person who provided the content originally22. Online

marketplaces are vulnerable target for legal action because they are more visible,

traceable, well known, and in most cases have more money compared to their users,

even though the legal action are caused predominantly by their users23. The problem

is that online marketplaces have to respect the user’s anonymity and privacy24. As a

result, some Member States have started to respond the issues by regulating this

liability. However, the legislation was varied from one Member State to the next.

This varied regulation among Member States potentially inhibits the

development of the Internet. The varying regulation creates legal uncertainty for

internet service providers in the EU whose services are border crossing. It is possible

that online marketplaces are treated differently in one Member State when compared

21 EU Study on the Legal Analysis of a Single Market for the Internet Society; New Rules for a New Age.- Liability of Online Intermediaries, p. 3 22 Ibid. 23 Ibid. 24 Arnold Roosendaal, Elimination of Anonymity in Regard to Liability for Unlawful Acts on the Internet, p. 2

to another Member State. This development became a concern of the European

Commission.

The European Commission was of the opinion that the diverse approach that

was set up by the various national regimes is not suitable in order to establish a

flourishing online market place. The same approach should be applied in all Member

States in order to provide protection for all citizens25. Therefore, the E-Commerce

directive 2000/31 was introduced to harmonize the legal regime among Member

States26. By enacting this directive, online marketplaces are expected to have the

same obligations in all Member States. This directive creates incentives for the

development of online business by establishing several protections for Providers of

online intermediary services. The directive focuses on the form of services instead of

the crime or infringement27. By complying with several characteristic of services,

online marketplaces will be exempted from being liable28. Those special liability

regimes are described as follows:

a. “Mere Conduit”

There are two types of “Mere Conduit” services under Article 12 of the E-

Commerce Directive, which are “transmission in a communication network of

information provided by a recipient of the service” and “provision of access to a

communication network”29. There are several requirements in order to be

25 Amended proposal for a European Parliament and Council Directive on certain legal aspects of electronic commerce in the Internal Market, p.12 26 Maurice Schellekens, Liability of Internet Intermediaries: A Slippery Slope, Vol. 8, Issue 2, 2011, p. 157 27 Lilian Edwards and Charlotte Waelde, Online Intermediaries and Liability for Copyright Infringement, keynote paper at WIPO Workshop on Online Intermediaries and Liability for Copyright, Geneva, April 2005 p.23 28 Pablo Baistrocchi, Loc. Cit., p.113 29 Article 12(1) of E-Commerce Directive 2000/31

protected under this provision. The first requirement is that the service providers

must be passively involved by not initiating the transmission of data30. The

second requirement is that the service provider is not allowed to decide to whom

the information is sent31. Lastly, the service provider is not allowed to interfere

with the information by selecting or modifying it32. An exception for

manipulation is allowed for the technical nature which takes place in the course of

the transmission as it does not alter the integrity of the information contained in

the transmission33. Hence, the provider has neither knowledge of nor control over

the information which is transmitted or stored34.

Article 12 (2) gives the scope of transmission and access that are intended

in paragraph 1. The information that is transmitted in a network that goes from

computer to computer is stored for a temporal time35. The duration of the

temporary storage functionality should only be as long as is necessary for the

transmission36. This functionality must be automatically performed by a computer

system during the transmission process37. Despite these previous requirements, a

court or administration authority is still allowed to ask for an injunction requiring

the service provider to terminate or prevent an infringement38.

30 Article 12(1)(a) of E-Commerce Directive 2000/31 31 Article 12(1)(b) of E-Commerce Directive 2000/31 32 Article 12(1)(c) of E-Commerce Directive 2000/31 33 Recital 43 of E-Commerce Directive 2000/31 34 Arno R. Lodder, Loc. Cit., p.87 35 Ibid. 36 Article 12(2) of E-Commerce Directive 2000/31 37 Arno R. Lodder, Loc. Cit., p.87 38 Article 12(3) of E-Commerce Directive 2000/31

Aside from all these protections for “Mere Conduit” services, the directive

still contains several ambiguities. First, it is regarding the scope of a

communication network. Due to the lack of a definition of a communication

network, many parties, such as operators of chat networks, instant messaging

networks, or peer-to-peer networks, may argue that they provide access to a

communication networks which may not be the aim of this provision39. Second, it

is unclear to what extend the Intermediary Service Providers have to remain

passive and not select or modify the information. The growth of the number of

internet users is directly proportionate with the number of the inappropriate or

unlawful users. Intermediary Service Providers may need to react, at least to a

certain extent, when inappropriate or unlawful information is disseminated by

their users. The previously mentioned exemption of manipulation does not have a

clear borderline of which information is considered to be inappropriate or

unlawful and thus it is unclear which information needs to be selected or modified

to ensure that the intermediary service provider can still protected under article

1240.

b. “Caching”

“Caching” services are provided in order to increase efficiency by

providing temporary and automatic data storage by making copies of materials

39 EU Study on the Legal Analysis of a Single Market for the Internet Society; New Rules for a New Age.- Liability of Online Intermediaries, p. 14 40 Ibid.

stored remote servers into a local server41. In this manner, the delivery of data will

be received faster by the user because it will travel less distance42.

In cases of caching, there are five conditions that need to be fulfilled in

order to be exempted from being liable. First, the provider must not alter or

change the information43. Second, the provider has to comply with the conditions

on access of information given from the original source44. Third, the provider has

to update the information regularly to make sure that the material stored

corresponds to the latest update in the original server45. Fourth, the provider is not

allowed to interfere with applications that measure the use of information, such as

visitor counting46. Fifth, the provider has to remove the information as soon as he

knows that the initial source of the information is removed, no longer accessible,

blocked, or a competent authority has ordered such removal or disablement47.

However, even if the “caching” providers comply with the requirements

mentioned above, there is still room for an injunction. A court or administration

authority is still permitted to ask for an injunction requiring the service provider

to terminate or prevent an infringement48.

Article 13 is supposed to protect traditional "proxy-servers", especially by

conditions (c) and (d) of article 13, which require the provider to comply with

41 Pablo Bistrochi, Loc. Cit., p.120 42 Ibid. 43 Article 13(1)(a) of E-Commerce Directive 2000/31 44 Article 13(1)(b) of E-Commerce Directive 2000/31 45 Article 13(1)(c) of E-Commerce Directive 2000/31 46 Article 13(1)(d) of E-Commerce Directive 2000/31 47 Article 13(1)(e) of E-Commerce Directive 2000/31 48 Article 13(2) of E-Commerce Directive 2000/31

updating rules and hit counting rules "widely recognized and used by industry"49.

However, it may also cover other technology, which was not originally envisaged

by the legislator.

For example, “Usenet”, a newsgroups where users post messages to a

newsgroup, which are then automatically broadcasted to, and mirrored on, other

servers using a wide variety of networks for a temporal time50. There is a disparity

between the German Regional Court of Munich which qualified “Usenet” service

as a caching provider and other courts which considered it as a hosting service51.

Another example can be found in Domain Name System Providers. “The

Domain Name System (DNS) uses a hierarchy of servers to distribute information

across the globe regarding the mapping of each internet domain name to specific

IP-addresses52”. Under the given definition, DNS Providers must meet the entire

requirement to be considered as caching providers. However, The Highest Court

of the Republic of Hungary considers that exemption of liability does not apply

for DNS Providers. Hungary defines liability within the domain name system as a

matter of contractual liability, where the “Council of Hungarian Internet

providers as the central registry for all domains under the top level domain “.hu”

by exercising the possibilities for self-regulation provided in Act CVIII of 2001

section 15/A, the Scientific Association of Hungarian Internet Service Providers

council establish the Domain Registration Rules and Procedures in order to

ensure the uniform order, registration, and maintenance of public domain

49 EU Study on the Legal Analysis of a Single Market for the Internet Society; New Rules for a New Age.- Liability of Online Intermediaries, p. 14 50 Ibid., p.15 51 Ibid. 52 Ibid.

under .hu and to safeguard the rights of registrants and others53”. Under this

regulation, only commercial registrars are allowed to apply for a domain name54.

c. “Hosting”

Article 14 establishes a limitation of liability for “hosting” providers.

“Hosting” service is a form of service where the provider offers space for data on

the internet to the user. There are two requirements for “hosting” service

providers to comply with under this exemption regime. First, the provider must

not have actual knowledge of illegal activity or information and, as regards claims

for damages, must not be aware of the facts or circumstances from which the

illegal activity or information is apparent55. This paragraph contains two

important elements, which are the type of the illegal content, and the type of

knowledge required to be exempted for certain liability.

With respect to the type of the illegal content, there are two types of illegal

content mentioned in this paragraph. The first illegal content mentioned is illegal

activity. Illegal activity refers to the activity of the user on the website which may

be illegal, e.g.: exchange of information about how to commit certain crimes. The

second illegal content mentioned is illegal information. Illegal information refers

to the material stored by the user which may be illegal, e.g.: child pornography or

The type of knowledge refers to the actual and constructive knowledge. If

the Intermediary Service Provider has actual knowledge, it can be held liable for

53 T. Verbiest, G. Spindler, G.M. Riccio, A. Van Der Perre, Study on liability of Internet intermediaries, November 2007, p.105 54 Ibid. 55 Article 14(1)(a) of E-Commerce Directive 2000/31

both civil and criminal liability56. On the other hand, if the Intermediary Service

Provider has constructive knowledge, it can only be held liable for civil

liability57 .

However, the Internet Service Provider can be exempted from being held

liable even if it has either actual or constructive knowledge when they

immediately remove or disable access to the infringing information58. Moreover,

there are two exclusions concerned with paragraph 1. First, it does not apply if the

recipient of the service is acting under the authority or the control of the provider

itself59. Second, it does not affect the possibility for a court or administration

authority to order an injunction to terminate or prevent an infringement to the

Internet Service Provider60. It also does not affect the Member State’s authority to

create a procedure for removal or disabling of access to information61.

As in the previous regime, there are several ambiguities in a “hosting”

regime. One of the ambiguities is in the phrase “consist of” in paragraph 1.

Nowadays, the difference between hosting providers who are not involved in the

creation of the content from content providers who are involved in creating the

content is becoming vaguer62. Cloud computing services and other Web 2.0

services are also providing storage systems as a part of their entire service63. The

criterion does not have a definite framework to what extent a service should relate

56 Arno R. Lodder, Loc. Cit., p.88 57 Ibid., p.89 58 Article 14(1)(b) of E-Commerce Directive 2000/31 59 Article 14(2) of E-Commerce Directive 2000/31 60 Article 14(3) of E-Commerce Directive 2000/31 61 Ibid. 62 EU Study on the Legal Analysis of a Single Market for the Internet Society; New Rules for a New Age.- Liability of Online Intermediaries, p. 16 63 Ibid.

to hosting service in order to fall under the hosting regime. Various interpretations

come in order to deal with the situation. The Commercial Court of Paris in Louis

Vuitton Malletier v. eBay interprets that in order to be included under articles 14,

hosting related aspects of a service have to be the most important aspects of the

service64.

Different interpretations have also been given with regard to video sharing

websites, even though the interpretations are given by the same court. The Court

of Paris considered MySpace not to be a hosting provider in Lafesse v. Myspace

case of 2007. The judgment reasoned that by offering a presentation structure via

frames to its users, and by displaying banners during each visit from which it

clearly draws profits, MySpace is considered as an editor65. Meanwhile,

YouTube66 and DailyMotion67 are recognized as a hosting provider. Both

considered that their presentation structure does not influence their qualification

as hosting provider, as the content comes from their users.

Still in France, eBay is not considered as a hosting provider in Hermès

International v. eBay68 because eBay provides various other facilities, such as

rating systems, payment facilities, etc. Meanwhile some German and Italian case

law and doctrine focus on the source of the content where the service providers do

not qualify as hosting providers if the third party content appears to be their own

content69.

64 Ibid. 65 T.G.I. Paris., 22 June 2007, Lafesse v. Myspace 66 T.G.I. Paris., 10 July 2009, Bayard Presse v. YouTube 67 T.G.I. Paris., 13 July 2007, Nord-Ouest Production v. Dailymotion 68 T.G.I. Troyes., 4 June 2008, Hermès International v. eBay 69 EU Study on the Legal Analysis of a Single Market for the Internet Society; New Rules for a New Age.- Liability of Online Intermediaries, p. 16

Moreover in Greece, “the company that hosts the blog cannot be

considered as the owner, the publisher, the director of editing and/or the

editor of the blog posts themselves. The blog operator only provides space

for the blogs, and does not initiate the transmission of information, does

not choose the receiver of the transmission, and does not choose or alter

the transmitted information70”

The next ambiguity is in the phrase “under the control” in paragraph 2.

This ambiguity is because the level of control owned by the service providers to

alter the information in order to prevent lawsuits, such as misleading information

or defamation comment. Some websites are monitored by an administrator to

maintain accuracy of certain information. But it does not give the service

providers an ability to prevent such information being posted first hand. The

element of illegal information can also be multi-interpreted; it depends on what

law governs the website.

The most critical ambiguity comes from the required level of knowledge

or awareness. The E-Commerce Directive does not give the limitation or

prerequisite level on "actual knowledge" or "awareness". In the end, the courts

have the power to determine the prerequisite level needed.

3.1.2. Characteristics of the liability regime. a. No general obligation to monitor.

Unlike the previous articles, article 15 does not give the criteria for

Intermediary Service Providers to fulfill in order to be exempted under a certain

70 Ibid., p.17.

liability regime. Article 15 (1) states that Intermediary Service Providers who

provide services as mentioned in article 12, 13, and 14 do not have a general

obligation to monitor the information which they transmit or store71. They also do

not have to seek facts or circumstances indicating illegal activity72. However,

national authorities may order the Intermediary Service Provider to monitor in a

specific case73. Member States may also specify in their national law requesting

Intermediary Service Providers to provide a certain level of duty of care for the

sake of early detection and prevention74. Unfortunately, it is not further defined

the level of duty of care that is required to be performed by Intermediaries Service

Providers.

Moreover, article 15 (2) specifies that Member States necessitate a certain

obligation for the service providers if they received or obtain certain information

of illegal activity. Intermediary Service Providers need to inform the authorities if

there are indications of illegal activities or illegal information provided by users

as soon as the provider becomes aware of it75. Member States still may oblige

Intermediary Service Providers to disclose the identity of the user with whom they

have storage agreements76.

Furthermore, the reason behind no general obligation to monitor is not

only because Intermediary Service Providers cannot possibly monitor all the

content passing on their network, but also to guarantee the freedom of

71 Article 15(1) of E-Commerce Directive 2000/31 72 Ibid. 73 Recital 47 of E-Commerce Directive 2000/31 74 Recital 48 of E-Commerce Directive 2000/31 75 Article 15(2) of E-Commerce Directive 2000/31 76 Ibid.

communication and expression77. As in the Promusicae Case, the Member States

is required to create a balance between the various fundamental rights protected

by the Community legal order78. An obligation to monitor may breach user’s

fundamental rights. However, article 15 paragraphs 2 of E-Commerce Directive

2000/31 still gives room for Member States to give an obligation for Intermediary

Service Providers to inform the authorities of alleged illegal activities undertaken

or information provided by the recipient of services. Intermediary Service

Providers may also be asked by the authority to provide information that enabling

to identify the users.

In recent developments, there are several methods that have been proposed

in order to stop infringement by third party. However, those proposed methods are

considered to be general obligation to monitor, such as “graduated response

model” (GRM) or “three strikes approach”79.

“The general commitment within a GRM begins with the gathering of evidence through the harvesting of alleged infringers’ internet protocol (IP) addresses, the notification of alleged infringement by their respective ISPs and internet traffic management to include internet suspension or disconnection for repeat infringers” Such approach has been adopted in several countries in many different names,

notably HADOPI in France and Digital Economy Act DEA in UK80. Both

legislations are adopted mainly for the protection of copyright. Even if both

legislations are not designed for online marketplaces, it may create a slippery

77 Fanny Coudert and Evi Werkers, In The Aftermath of the Promusicae Case: How to Strike the Balance?, International Journal of Law and Information Technology Vol. 18 No. 1, Oxford University Press 2008, p.52 78 Paragraph 70, Case C-275/06, Productores de Música de España (Promusicae) v. Telefónica de España SAU 79 Ebenezer Duah, Internet Service Providers Monitoring Obligations: Recent Developments, Aberystwyth University, UK, p. 215

80 Ibid., P.217

slope. As shown on the implementation of HADOPI, enforcement by set an

obligation to monitor may infringe other rights. In addition, it does not show as an

efficient solution to stop infringement.

b. Notice and take down procedure

As mentioned above, the directive set a duty for hosting providers to

immediately remove or disable access to the illegal information as soon as they

have actual knowledge or are aware of facts or circumstances. However, the

directive does not define the required knowledge and awareness, a clear time limit

to be considered “expeditiously”, nor the procedure of removal. As a result, each

Member States may develop different procedure.

Notice and takedown procedure are usually applied to the content that

relates to intellectual property infringement, defamation, terrorism, illegal online

gambling, child abuse, misleading advertisement, incitement to hatred or violence

on the basis of race, origin, religion, gender, sexual orientation, etc.81. The

common procedure that is usually adopted requires several steps. First, the

hosting providers wait for the notification about the existence of illegal

information. After the notification is received, the providers will take down the

material temporarily and send a notification to the information owner. This

notification to the owner is for confirmation. If the owner does not respond to this

notification, the information stays down. On the other hand, if the owner responds

to the notification, the result may vary depending on the reaction.

81 Dr Faye Fangfei Wang, Response to Public Consulatation on Procedures for Notifying and Acting on Illegal Content Hosted by Online Intermediaries, 2012. Issue 91 Intellectual Property forum, p. 93

In application, most noticeably impact is on hosting services. Hosting

services require “actual knowledge” and “awareness” of illegal activity or

information on the illegal content. In L’Oreal v. eBay, the court required the

information on notification of allegedly illegal activities or information to be

precise or adequately substantiated in order for hosting services to be able to

identify the illegality and take actions expeditiously to remove or disable access82.

To do so, in practice, some hosting service providers have voluntarily created a

technical system for notice and takedown, such as “VeRO”. “VeRO” is a filter

program that is intended to provide intellectual property owners with assistance in

removing infringing listings from the eBay platform83.

In terms of requirement to be considered “sufficiently precise or

adequately substantiated”, a notice should be allowed to be submitted by

electronic means and contain details of the sender without disclosing the sender’s

personal details to other parties without informed consent, except to the crime

investigation authorities. It should also specify the precise location and details of

the alleged illegal content, such as a URL, item number, and the description of the

alleged illegal nature of the content. Such notification must be accepted by the

hosting service providers regardless of whether the user can provide proof or

evidence that the content provider could not be contacted or there is not any

reaction after such notification from the content provider.

On the element of takedown process, it has to be done expeditiously. The

hosting service providers will take down the alleged content and send a

82 Paragraph 122, C-324/09, L'Oréal v. eBay 83 Dr Faye Fangfei Wang, Loc Cit.

notification to the content owner about their action. However, there is not any

clear limitation about how fast the takedown has to be done. Taken into account

the Proposal of General Data Protection Regulation 2012, it is ideally to be done

within 24 hours84. Also in order to provide clear information about the process,

the hosting service providers need to provide a confirmation of receipt to the

notice parties when they received the notice send, along with the content provider

about the alleged content. A counter notice system also need to be provided in

order to create a balance for the content provider to plea against the allegation.

The time it takes to take down the alleged content on the notice and

takedown process vary85. It depends on the content86. Several content that are

considered to be illegal widely usually are taken down faster, outweighing the

nature of the material or the legal framework for removal87. It shows that where

complainants are highly motivated, and hence persistent, content is promptly

removed88. Meanwhile, in the context where the incentives are weak, or third

parties become involved with far less of an incentive to act, then removal is slow

or almost non-existent89. These conditions suggest that notice and takedown

procedures do not create relieve on the burden of the obligation of the right

holders, because it still requires the active monitoring by the right holders.

c. Passive and neutral.

84 Recital 67 of the Proposal of General Data Protection Regulation 2012 85 Tyler Moore and Richard Clayton, The Impact of Incentives on Notice and Take-down, Seventh Workshop on the Economics of Information Security (WEIS 2008), June 25–28 2008., p. 2 86 Ibid. 87 Ibid. 88 Ibid. 89 Ibid.

The service providers have to act as intermediaries and must maintain a

passive role in order to benefit from the liability exemption, but the level and

form of passiveness differs depending on the types of services. Being neutral

means that the service of the host provider as such is independent from the

contents of the hosted or carried information and does not involve any direct

interest of the provider as regards the speciﬁc contents of the carried or hosted

information90. “Mere conduit” providers have the strictest passiveness. They are

not allowed to initiate the transmission, interfere with the information, or select

the recipient91. Meanwhile, “caching” providers are allowed to filter the data or

the recipient, even though they may not allow changing the local copy of the

data92. Lastly, “hosting” providers are still allowed to select and modify the data

stored, and are also allowed to select the recipient of the data93.

The European Court of Justice further explained in the case between

Google France, Google Inc. v Louis Vuitton Malletier,

“Accordingly, in order to establish whether the liability of a referencing service provider may be limited under Article 14 of Directive 2000/31, it is necessary to examine whether the role played by that service provider is neutral, in the sense that its conduct is merely technical, automatic and passive, pointing to a lack of knowledge or control of the data which it stores.94” In regards to the payment that may be received by the service providers, The European Court of Justice then explained that: “It must be pointed out that the mere facts that the referencing service is subject to payment, that Google sets the payment terms or that it provides general information to its clients cannot have the effect of depriving

90 Matthias Leistner, Structural aspects of secondary (provider) liability in Europe, Journal of Intellectual Property Law & Practice, 2014, Vol. 9, No. 1 p. 77 91 EU Study on the Legal Analysis of a Single Market for the Internet Society; New Rules for a New Age.- Liability of Online Intermediaries, p. 8 92 Ibid. 93 Ibid. 94 Paragraph 114, C-236/08,Google France, Google Inc. v Louis Vuitton Malletier

Google of the exemptions from liability provided for in Directive 2000/31.95” However, in the development to create effective protection, passive and

neutral characteristic become debatable. At one hand, the court suggested the

requirement of the platform operator to suspend certain users or to take measures

to make it easier to identify commercial infringers in order to prevent future

infringement96. In relation to passive and neutral characteristic, that suggestion

may make the Intermediary Service Provider to be no longer neutral97. The

method to take those measures requires Intermediary Service Providers to actively

search or monitor the traffic, and then prevent the possible infringing material by

blocking98. However, that method does not prove to be effective in preventing

future infringement99, and also it contradicts with the prohibition of general

obligation to monitor. Therefore, without a clear guideline when the monitoring

process may be imposed, Intermediary Service Providers will prefer to stay safe

by remaining passive and neutral. It is because the terminology of “alleged”

creates a very vague and broad limitation

d. Competence of the National Court

Even the E-Commerce directive is meant to give a harmonization among

member states, The European Court of Justice still gives some space for the

national court to determine whether an Intermediary Service Provider is exempted

95 Paragraph 116, C-236/08,Google France, Google Inc. v Louis Vuitton Malletier 96 Paragraph 141-142, C-324/09, L'Oréal v. eBay 97 Danny Friedmann, Sinking The Safe Harbour With The Legal Certainty Of Strict Liability In Sight, Journal of Intellectual Property Law & Practice, 2014, Vol. 9, No. 2, p.149 98 Katalin Parti and Luisa Mari, Ensuring Freedoms and Protecting Rights in the Governance of the Internet: A Comparative Analysis on Blocking Measures and Internet Providers’ Removal of Illegal Internet Content, Journal of Contemporary European Research Volume 9, Issue 1 (2013), p.145 99 Ibid.

from liability or not100. As in Google France, Google Inc. v Louis Vuitton

Malletier, The European Court of Justice leaves the decision to the national court

whether Google is guilty or not in that case101.

The European Court of Justice leaves the competence to determine the

guilt of an Intermediary Service Provider to the national court because the

national court is expected to better understand the actual conditions and services

given by the Intermediary Service Provider. The E-Commerce directive 2000/31

provides the criteria the Intermediary Service Provider needs to comply with if it

wants to be exempted from liability. However, the definition from the E-

Commerce Directive 2000/31is very broad and need further interpretation. While

the competency of interpreting the directive is laid on the European Court of

Justice, it does not create efficacious and efficient harmonization among the

Member States.

3.1.3. Case Law a. L'Oréal v. eBay (C-324/09)

L’Oreal, an international manufacturer and distributor of beauty care

products, sued eBay, an online marketplaces service provider, on several bases.

L’Oreal has a closed distribution network, in which authorized distributors are not

allowed to re-distribute products to other distributors. Meanwhile, eBay has terms

of use that includes a prohibition on selling counterfeit items and on infringing

trademarks. L’Oreal claimed that some of their items that were listed on eBay

100 JF Bretonniere Baker & McKenzie, Europe Liability for internet host providers in the European Union: time for a reform?, Building and Enforcing Intellectual Property Value 2011, p.2 101 Ibid.

30 were infringing their intellectual property rights. Furthermore, some of the items that were offered in the European region were actually meant to be offered in the

USA region. Some of the products that were listed were offered without its original packaging, which L’Oreal claimed to damage their reputation. The last matter was the use of “Ad Words” by eBay on Google search engine which directed users to the infringing products offered on eBay.

The ruling of the European Court of Justice pointed out those online marketplaces such as eBay is responsible not only to end existing infringements, but also to prevent further infringements. Regarding the selling of the original package, the trademark owner has the right to object the sale of those products, when the removal of the original packaging, identification of the manufacturer, or other essential information is missing and has damaged the image of the product.

Furthermore, the court stated that the trademark holder has the right to prohibit offers to EU consumers as long as the offers of products have not yet been marketed in the EU. In addition for the use of “Ad Words”, the court decided that the trade mark holder may prevent online marketplaces from advertising goods offered by their user on the platform which bear that trademark.

The reason is because the advertising does not enable the user to determine with any certainty that the goods come from a lawful source or not.

In this judgment, the court admitted the anonymity problem in the online world. As a result, the court decided that service providers might be ordered by national courts to take measures to make it easier to identify the users to provide effective remedies against infringements. The court emphasized that an online

marketplaces can be held liable for infringements if they had an active role,

knowledge at certain level, or control over data relating to the offers for sale even

when it merely provides assistance of promotion. To ensure mutual

harmonization, the court affirmed that all national courts of Member States with

jurisdiction in the field of intellectual property had to order the online

marketplaces to take necessary measure to prevent further infringements. b. Scarlet v. Sabam (C-70/10)

SABAM is a management company which represents authors, composers

and editors of musical works in authorizing the use of their copyright-protected

works by third parties. Meanwhile, Scarlet is an internet service provider (‘ISP’)

which provides its customers with access to the internet. In 2004, SABAM found

that Scarlet’s users were illegally downloading SABAM works from the internet.

Scarlet’s users were not authorized to download and were not paying royalties to

SABAM. Besides, they used peer-to-peer networks, which constitute a transparent

method of file sharing which is independent, decentralized and features advanced

search and download functions.

SABAM brought interlocutory proceedings before the President of the

Court of First Instance of Brussels against Scarlet. SABAM was claiming that

Scarlet had to take measures to stop the infringement committed by blocking, or

making it impossible for its customers to send or receive in any way, files

containing a musical work using peer-to-peer software without the permission of

the right holders, on pain of a periodic penalty. SABAM also requested Scarlet to

provide details of the measures that it would be applying in order to comply with

32 the judgment to be given. However, even if the President of the Court of First

Instance of Brussels agreed that SABAM’s copyright was infringed, the court was not sure whether the technical solutions proposed by SABAM to filter out only unlawful file sharing, to monitor the use of peer-to-peer software, and to determine the cost of the measures envisaged were technically feasible. The court then appointed an expert to investigate, whose later in his report conclude that filtering and blocking the unlawful sharing of electronic files were possible. The court later than ruled accordingly to the report by ordering scarlet to bring to an end the copyright infringements established in the judgment of 26 November

2004 by making it impossible for its customers to send or receive in any way files containing a musical work in SABAM’s repertoire by means of peer-to-peer software, on pain of a periodic penalty.

However, Scarlet appealed against that decision to the referring court, claiming that it was impossible for it to comply with that injunction since the effectiveness and permanence of filtering and blocking systems had not been proved and that the installation of the equipment would cause problems with the network capacity and the impact on the network. Furthermore, several peer-to- peer software products made it impossible for third parties to check their content which prevented any attempt to block the files. Scarlet also claimed that the injunction would impose a general obligation to monitor communications on its network, because any system for blocking or filtering peer-to-peer traffic would necessarily require general surveillance of all the communications passing through its network. Such obligation contradicts with Article 15(1) of the E-

33 commerce Directive 2000/31 and provisions of European Union law on the protection of personal data and the secrecy of communications, inasmuch as such filtering involves the processing of IP addresses, which are personal data. In those circumstances, the Brussels Court of Appeal decided to ask the ECJ for a preliminary ruling.

The ECJ ruled that national law may apply for injunctions to Intermediary

Service Providers ordering to bring an end to the existing infringement by third parties and prevent further infringement. However, the injunctions have to comply with the limitation set on other directive, including E-commerce Directive

2000/31. The implementation of the filtering system proposed would require the

ISP to actively monitor all the data of each of its customers in order to prevent any future infringement of intellectual-property rights which contradicts Article

15(1) of E-commerce Directive 2000/31, where it is stated that there are no general obligations to monitor for Intermediary Service Providers. Such injunction would not be respecting the requirement to create a fair balance between fundamental rights.

In fact, the implementation of the filtering system proposed would be a complicated, costly, permanent computer system entirely at its own expense.

Those characteristics contradict Article 3(1) of Directive 2004/48, which requires that measures to ensure the respect of intellectual-property rights should not be unnecessarily complicated or costly. Also, in respect to user’s right to protection of their personal data and their freedom to receive or impart information, the

injunction is contradictory to Articles 8 and 11 of the Charter of Fundamental

Rights of the European Union.

3.2.The reason or benefit of having exemption from intermediary service provider liability The main reason for the adoption of E-Commerce Directive 2000/31 is to

harmonize the law among Member States. Before the implementation of the E-Commerce

Directive 2000/31, each Member State addressed the issue of Intermediary Service

Provider Liability differently. Several Member States addressed this problem by

introducing new regulation specifically aimed at ISP liability, mostly based on the law for

news publishers102. Meanwhile, Member States which did not have specific legislation

relied on case law or general tort law.

The United Kingdom is an example of a Member State that adopted legislation for

a specific act of crime, which is defamation. The Defamation Act of 1996 exempted the

internet service provider from liability for third party materials if the service provider

could prove to have taken reasonable care with respect to the publication, and did not

have any reason to believe that it contributed to the publication of a defamatory

statement103. Meanwhile Austria adopted an Austria’s Federal Telecommunications

Statute in 1997 that stated that owners of "broadcasting installations and terminals" (such

as computer servers) were liable, unless they would have taken appropriate and

reasonable steps to prevent wrongful use of their equipment104. In the same year,

Germany adopted the Teleservices Act and Multimedia Law, which established criteria

for the liability of online intermediaries. It also exempted transmission providers and

102 EU Study on the Legal Analysis of a Single Market for the Internet Society; New Rules for a New Age.- Liability of Online Intermediaries, p. 5 103 Ibid., p.5 104 Ibid., p.3

short-term storage providers from liability, unless they had initiated, selected or modified

the information105. Meanwhile, long-term storage providers were not liable when they did

not have actual knowledge of illegal information. Long-term storage providers would act

expeditiously to remove or disable access to the content after they had such

knowledge106. The divergences in national legislation and case law gave legal uncertainty

towards the service providers because their services covered more than one Member

State107. E-Commerce Directive 2000/31 was adopted in order to provide a guideline to

harmonize the legislation concerning Intermediary Service Provider liability.

The E-commerce Directive 2000/31 is more like a guideline as it still leaves room

for national legislation. It tries to find the balance between harmonization among

Member States. It is shown by the possibility of Member States to require Intermediary

Service Providers to apply a certain duty of care in accordance with national

legislation108. Nonetheless, it is only in minor detail, while the main safe harbor is already

uniformed through this directive.

Other than legal certainty, the benefit of having exemption from intermediary

service provider liability is for the development of the internet society. If there is no clear

limitation of liability, people will be afraid to develop their services. The borderless

character of the internet makes internet services accessible from different areas and

nationalities. Without uniformed legislation, it will hinder the development of the internet

services. It will also be inconvenient for people to develop and expand their business

because they have to know the foreign law as well. It is also discriminative if the service

105 Ibid., p. 5. 106 Ibid. 107 Ibid. 108 Recital 48 of E-Commerce Directive 2000/31

provider provides different services for different Member States. All those hindrances

will hamper the development of internet, especially with respect to the creative industry.

The creative industry can be seen from the perspective of the service providers,

the form of services they have to give must be different in order to stand out. By giving a

certain protection, people will not hold back and will be motivated to share their idea and

develop their creativity in offering their services. A lot of different forms of services are

developed for that reason. For example, there are various big names out there on the

internet that are offering one simple similar services, such as Youtube, Netflix,

Dailymotion, Vimeo, etc. The creators of these websites are not afraid to provide their

services because they know clearly to what extent the line is drawn between them and

their users.

3.3.The disadvantage of having exemption from intermediary service provider liability There are still a lot of loopholes and problems in the E-commerce directive

2000/31. One of the most noticeable ones is the choice for a directive. Member States

may adopt it stricter than what is set in the directive. In this case, harmonization cannot

be created. Some countries will have stricter rules compared to others. Another reason is

due to several ambiguities mentioned above; it gives room for inconsistency in court

judgments.

Another disadvantage of having exemption from intermediary service providers is

that service providers are using this liability regime to avoid preventing infringement. As

mentioned above, the service provider does not want to be held liable for not removing

the material after receiving a notification about the illegal activity or information. At the

other hand, the service provider does not want to be held liable for removing material

37 from the internet because it may infringe the freedom of expression. As a result, the service providers do not make any significant effort to prevent the infringement. It is because the more they do, they are more likely to be held liable because they tend to have more sufficient knowledge to know that there is an infringement there. Therefore, the service providers prefer to be reactive rather than preventive. This preference does not give a good incentive to decrease the volume of infringement.

Furthermore, the lack of comprehensive harmonization creates a further problem.

The E-Commerce Directive 2000/31 is created at the European Union level, even if it subsequently is adopted into national legislation. However, it is only one part of law.

There are still many other parts of law that fall within the competence of Member States.

Meanwhile, a case is usually related to more than one field of law. While interpreting and determining the elements to be considered as Intermediary Service Provider on the competence of the European Union, the other elements may still lie with the competence of member states. Different competences may result in disparity in determining the result of a case in different member states. In addition, some elements and terminology in the

E-Commerce Directive 2000/31 is not clearly defined on the directive. They require further interpretation and clarification by ECJ.

Chapter 4 – Indonesian Current Liability Regime for intermediary service provider

4.1. The exemption from intermediary service provider liability under article 15 paragraph 2 of Indonesian Law No. 11 of 2008 on Information and Electronic Transactions.

4.1.1. Indonesian E-Commerce Development. The history of e-commerce in Indonesia started in 1995 when D-NET began

their business as Internet Service Provider after receiving operational licenses from

The Ministry of Post & Telecommunications109. Even though D-Net was not the first

Internet Service Provider in Indonesia, it was the first company to offer online

transaction business through D-Mall110. After almost two decades, there were many

service providers established in Indonesia, especially in the online marketplaces

platform.

Despite recent development, online marketplaces are still facing several

problems in Indonesia. First and foremost of these problems arise with the availability

of adequate quality internet services. Until recently, reports in 2013 showed that the

Indonesian average internet speed is only 1,5Mbps, or rank 104 in the world111. In

fact, it is only the large urban areas, such as Jakarta, Bandung, or Surabaya where

adequate internet access is readily available. Many other cities do not even have

internet access, or are limited only to government offices. This demonstrates that the

Internet still is a luxury service for Indonesians. The development of online

109 D-NET Company Profile, A Brief History, http://www.dnet.net.id/eng_company_briefHistory.php, accesed 22 April 2014 110 Ibid. 111 Deliusno, “Kecepatan Internet Indonesia Peringkat Ke-104 Dunia”, 26th July 2013, http://tekno.kompas.com/read/2013/07/26/1204507/Kecepatan.Internet.Indonesia.Peringkat.Ke-104.Dunia, accessed on 22th April 2014

marketplaces, either in the number of the users or the quality of the services, is

directly affected by the availability of internet to users112.

Unfortunately, due to Indonesia’s geographic location and decades of

unbalanced development, not many companies are incentivized to invest in the

infrastructure that will modernize internet availability. As a result, this creates a

domino effect on the development of online marketplaces in general. People are not

aware, or are aware to a very limited degree, about what an online marketplaces is,

how the system works, how to behave in an online marketplaces, and other ‘laws of

the jungle’.

This domino effect leads to the second reason; too few people in Indonesia

know how to optimize or gain the advantage and benefit from online marketplaces, as

well as avoiding the disadvantages and threats of online marketplaces. This arises as a

result of a lack of education, governmental outreach, and information availability.

Therefore Indonesian Law No. 11 of 2008 on Information and Electronic

Transactions was created in order to protect the user, especially the early internet user

from the factors mentioned above. Article 15 paragraph 2 of Indonesian Law No. 11

of 2008 on Information and Electronic Transaction creates a very strict liability

regime for intermediary service providers. One of the main arguments is for the sake

of consumer protection113. However, it is not fair to solely protect the user without

bearing in mind the concerns of internet service providers, which will be covered in

the next section.

112 Fardiansyhah, ‘E-Commerce dan Perkembangannya di Indonesia’ http://fardiansyah7fold.wordpress.com/e- commerce-dan-perkembangannya-di-indonesia/, accessed August 10 2013, accessed on 22th April 2014 113 Teguh Afriyadi, “Perlindungan Konsumen E-Commerce Dalam Transaksi Perdagangan Internasional; Hukum Mana yang Berlaku?”, 6th August 2009, http://teguharifiyadi.blogspot.nl/2009/08/perlindungan-konsumen-e- commerce-dalam.html, accessed on 22th April 2014

This is not to say however, that people who have internet access fully

understand how to take advantage and benefit from online marketplaces. Economic

development in Indonesia has led to increased numbers of well-paid employment

opportunities, which lead to increasing consumerism, resulting in the growth of the

number of people who can afford internet access. The term middle-class and affluent

consumer (MAC) would be the corresponding category in socioeconomic

language114. The number of MACs represented in 2013 is about 74 million and is

predicted to grow to approximately 141 million people by 2020, which means around

8 to 9 million people will enter this socioeconomic category in less than 6 years115.

Indonesia’s MACs tendency to start online shopping is influenced by the amount of

free time available for them compared to the wealth they have, especially due to the

regularity of traffic jams that occur in most large urban areas in developing countries,

including Indonesia116. The MAC’s behavior is supported by marginal propensity to

consume theory, which basically demonstrates that the raising of income levels lead

to a rise in the consumption of goods, as opposed to a tendency towards saving117.

The availability of goods sometimes is limited in an area. Through online

shopping, the possibility to gain access to goods that are not available nearby will be

increased. Thereby, the popularity of online marketplaces between C2C is gaining.

Online marketplaces create a new route for supply chains to different areas. In some

114 Vaishali Rastogi and others, ‘Indonesia’s Rising Middle-Class and Affluent Consumers’ (The Boston Consulting Group, March 05 2013) https://www.bcgperspectives.com/content/articles/center_consumer_customer_insight_consumer_products_indonesi as_rising_middle_class_affluent_consumers/ accessed 22th April2013. 115 Ibid 116 ‘Indonesia, Japan: Daily Shopping E-Commerce Site Sukamart.com Launches in Indonesia - Sukamart Helps customers save time through delivery of household products to their home or office’ (Albawaba 2012) http://www.thefreelibrary.com/Indonesia,Japan+%3A+Daily+Shopping+E-commerce+Site+Sukamart.com...- a0314691690 accessed August 19 2013 117 http://www.investopedia.com/terms/m/marginalpropensitytoconsume.asp, accessed 24th April 2014

parts of Indonesia, even though it is still a relatively big city, the price of goods could

easily be inflated to five times the original supplier’s price. Through online

marketplaces, the supplier can cut some expenses, especially establishment costs.

However, it cannot be denied that the existing legislations do not sufficiently cover all

elements related to online marketplaces.

There are insufficiencies in almost every aspect of regulation regarding online

marketplaces, such as the liability regime, legal position, etc. These insufficiencies

increase the urgency to adopt an improvement to the legal system in Indonesia. The

urgency is demanded by the growth of the online marketplaces; both from the user

perspective and the provider perspective. By adopting exemption from intermediary

service provider liability for online marketplaces, it will be expected to create a better

legal regime without having to face a strenuous trial and error process, as would be

the case if creating a new law from scratch.

4.1.2. Current regulation on liability of intermediary service providers in Indonesia Before discussing the specific Indonesian Law that governs E-Commerce

Law, it is important to know several general Indonesian Law characteristics. It is

because Indonesian Law has its own characteristics118 that may be different with EU

Law. However, not all characteristics will be discussed in this section, as it is not the

scope of this thesis. This chapter will be written in accordance with Indonesian Law

characteristics. For complete guidance about Indonesian Law characteristics, please

refer to Indonesian Law Number 12 of 2011 on Formulation of Legislation.

118 S.S.T. Wisnu Sasangka, Bahasa Indonesia Dalam Perundang-undangan, Pusat Bahasa, Depdiknas, p.1.

The most important characteristic is that Indonesian Law has to be written in

Bahasa Indonesia119. Ministry of Law and Human Rights, through Ministerial Latter,

confirm that any translation of Indonesian Law has to be written in accordance with

the guidance provided120. That guidance prevails against any grammar rules121.

As for the structure of the provision, it is divided into two parts, the

content/action and the sanction122. Both of those provisions are separated into

different articles and connected with the referring principle123. However, criminal

sanctions may only be regulated in National Law Regulation, Province Regulation,

and District/City Regulation124.

In terms of language formulation, provisions in Indonesian Law have to be

formulated in short sentences, clear, and straightforward125. The content/action has to

be in the form of an obligation, right, or prohibition in the positive manner126.

Positive manner means it is not in the form of exemption, or negative sentence.

Terminology that is used in the legislation is listed in the General Provision

section127, started with capital letter for each word128. It is function as limitation of

definition129 and also to make referring in other legislation130. For this reason, some

119 Article 26 of Undang Indonesian Law Number 24 of 2009 on Flag, Language, and State Symbol, also National Anthem 120 Chandra Kurniawan, Catatan tentang Kewajiban Penggunaan Bahasa Indonesia dalam Kontrak, 24th Febuary 2010, http://www.hukumonline.com/berita/baca/lt4b84cb774f63b/catatan-tentang-kewajiban-penggunaan-bahasa- indonesia-dalam-kontrak-broleh-chandra-kurniawan-, accessed 8th July 2014 121 Ibid. 122 Provision number 62 of Appendix 2 of Indonesian Law Number 12 of 2011 on Formulation of Legislation 123 Johny Koynja, Penggunaan Bahasa Hukum Dalam Penyusunan Peraturan Perundang-undangan, p. 8. 124 Article 15 paragraph 1 of Indonesian Law Number 12 of 2011 on Formulation of Legislation 125 Provision number 77 of Appendix 2 of Indonesian Law Number 12 of 2011 on Formulation of Legislation 126 Johny Koynja, Loc Cit., Ibid., p.18 127 Provision number 98 of Appendix 2 of Indonesian Law Number 12 of 2011 on Formulation of Legislation 128 Provision number 108 of Appendix 2 of Indonesian Law Number 12 of 2011 on Formulation of Legislation 129 Provision number 98 of Appendix 2 of Indonesian Law Number 12 of 2011 on Formulation of Legislation 130 Provision number 106 of Appendix 2 of Indonesian Law Number 12 of 2011 on Formulation of Legislation

43 words in this section are started with capital letter, which means that those words are defined in the legislation.

Nowadays, liability of intermediary service providers in Indonesia are scattered in many regulations. The relation among those regulations can be as reference, further explanation, or specification. Regulations that are related to liability of intermediary service providers in Indonesia are:

A. Indonesian Law Number 11 of 2008 on Electronic Information and Transaction

Indonesian Law Number 11 of 2008 on Electronic Information and

Transaction is the latest regulation that is governing internet regime in Indonesia,

including liability of intermediary service providers in Indonesia. However, it

does not replace any pre-existing regulation. It means that all pre-existing

regulations still apply as long as those pre-existing regulations do not contradict

with Indonesian Law Number 11 of 2008 on Electronic Information and

Transaction.

Indonesian Law Number 11 of 2008 on Electronic Information and

Transactions goal is to embrace national development in the global information

era, in order to keep up with the necessity of new regulations regarding

information technology, and in order to give Indonesian citizens a sense of

security in conducting electronic transactions. This law covers e-commerce

activities, electronic evidences, privacy, jurisdiction, intellectual property and

includes criminal offenses related to these materials, including liability of service

providers where Electronic System Organizers are responsible for the

implementation of an Electronic System, with an exception if there is a force

majeure, fault, or negligence from users. Electronic System Operators refer to the

service providers on the internet in any form of services, including intermediary

service providers such as online marketplaces.

Under the current regime, there is not any differentiation between any

service providers in Indonesia. All of them fall under the classification as Internet

Service Providers. However, Indonesian Law Number 11 of 2008 on Electronic

Information and Transactions does not give any definition about what an Internet

Service Provider is. In order to do so, we have to refer to Indonesian Law Number

36 of 1999 on Telecommunication, which will be elaborated on the next section.

In performing its services, Electronic System Operators have to be able to

redisplay the Electronic Information and / or Electronic Documents131. Electronic

System Operators have to store every data on their system within the retention

period. However, Indonesian Law Number 11 of 2008 on Electronic Information

and Transactions does not specify the duration of the retention period because the

duration of the retention period depends on the content of the Electronic

Information and / or Electronic Documents. In storing the Electronic Information

and / or Electronic Documents, it has to be available and accessible for the

authorized parties, while confidentially remains protected from the unauthorized

parties132. In general, the authorized parties are, including the users themselves,

government investigation authorities or the aggrieved party. Other than the users

themselves, the other parties that want to gain the Electronic Information and / or

Electronic Documents usually need a court injunction.

131 Article 16 Paragraph 1(a) of Indonesian Law Number 11 of 2008 on Electronic Information and Transactions 132 Article 16 Paragraph 1(b) of Indonesian Law Number 11 of 2008 on Electronic Information and Transactions

The Electronic Information and / or Electronic Document also have to

remain as a whole packed from the initial sources. The unity of Electronic

Information and / or Electronic Documents means that every piece of information

is treated the same. For example, if a part of the information is a secret because of

privacy, then the whole information in the Electronic Information and / or

Electronic Documents is a secret as well. There is no distinction between sensitive

data and non-sensitive data, as in the European Union.

In addition, an Electronic System operator has to operate in accordance

with the procedures or instructions in the Implementation of the Electronic

Systems133. Procedures or instructions in the Implementation of the Electronic

Systems refer to any other legislation that regulates Electronic System Operators.

This article came into existence to stress that in performing its services, Electronic

System Operator has to comply with many other legislation.

Furthermore, the procedures or instructions manual has to be available by

the language, information, or symbols that can be understood by the parties

concerned with the Implementation of the Electronic System134. In the

implementation, this article is interpreted that the procedures or instructions

manual has to be available at least in Bahasa Indonesia due to article 8 paragraph

1(j) of Indonesian Law Number 8 of 1999 on Consumer Protection. Electronic

System Operators also need to adopt a mechanism to keep the Electronic System

updated to ensure its novelty, clarity, and accountability135.

133 Article 16 Paragraph 1(c) of Indonesian Law Number 11 of 2008 on Electronic Information and Transactions 134 Article 16 Paragraph 1(d) of Indonesian Law Number 11 of 2008 on Electronic Information and Transactions 135 Article 16 Paragraph 1(e) of Indonesian Law Number 11 of 2008 on Electronic Information and Transactions

Indonesian Law Number 11 of 2008 on Electronic Information and

Transactions sets forward two types of liability. First, it is the civil liability136

where civil action is done in accordance with the provisions of legislation. It

means this article gives the possibility to make a reference to other legislation,

such as the General Civil Code, Intellectual Property Legislation, Consumer

Protection Legislation, etc. Second, criminal liability, which is (1) including

providing illegal content that violates morality, gambling, humiliation and / or

defamation, extortion and / or threats137, (2) hoax and / or misleading information

that caused consumers loss in Electronic Transactions138, (3) information intended

to create a feeling of hatred or hostility to an individual and / or a particular group

of people based on ethnicity, religion, race, and intergroup139, (4) personal

threat140, (5) illegal access141, (6) illegal interception142, (7) data interference143,

(8) illegal data transfer144, (9) system interference145, and (10) misuse of

devices146.

In addition to the list of the prohibited actions, any person who

intentionally and without rights caused damages due to their action, which action

as listed above147, shall be punished with a maximum imprisonment of twelve

136 Article 38 of Indonesian Law Number 11 of 2008 on Electronic Information and Transactions 137 Article 27 of Indonesian Law Number 11 of 2008 on Electronic Information and Transactions 138 Article 28 of Indonesian Law Number 11 of 2008 on Electronic Information and Transactions 139 Ibid 140 Article 29 of Indonesian Law Number 11 of 2008 on Electronic Information and Transactions 141 Article 30 of Indonesian Law Number 11 of 2008 on Electronic Information and Transactions 142 Article 31 of Indonesian Law Number 11 of 2008 on Electronic Information and Transactions 143 Article 32 of Indonesian Law Number 11 of 2008 on Electronic Information and Transactions 144 Article 32 (2) of Indonesian Law Number 11 of 2008 on Electronic Information and Transactions 145 Article 33 of Indonesian Law Number 11 of 2008 on Electronic Information and Transactions 146 Article 34 (1) of Indonesian Law Number 11 of 2008 on Electronic Information and Transactions 147 Article36 of Indonesian Law Number 11 of 2008 on Electronic Information and Transactions

years and / or a maximum fine of twelve billion rupiah148. This article is to

synchronize between criminal and civil liability. However in the implementation,

criminal and civil liability does not always come with the parallel result. In the

defamation case between Prita Mulyasari v. RS Omni Internasional Serpong, Prita

Mulyasari is found guilty on the basis of criminal liability, while she is found not

guilty on the basis of civil liability149.

The very broad possibility given by this legislation, especially article 34

and 36, has put intermediary service providers in a vulnerable position. If both of

these articles are interpreted broadly, intermediary service providers are

threatened by the possibility to be involved in liability suits related to their users’

behavior. Reference can also be made to the Indonesian General Criminal Code,

where it is stated that any person who is involved in criminal acts shall be

punished as a participant150. In addition, any person who intentionally gives the

opportunity means or information to commit a crime shall be punished as

accomplice151. Those provisions about accomplice and participant are the main

threat to intermediary service providers, especially online marketplaces, because

they become vulnerable to be held liable as accomplice and participant to crimes

committed by their users.

There is another form of regulation that functions as the further

specification and explanation of the Indonesian Law Number 11 of 2008 on

148 Article 51 (2) of Indonesian Law Number 11 of 2008 on Electronic Information and Transactions 149 Heru Margianto, Kenapa Putusan Perdata dan Pidana Prita Berbeda?, 12th July 2011, http://nasional.kompas.com/read/2011/07/12/11445681/Kenapa.Putusan.Perdata.dan.Pidana.Prita.Berbeda, accessed 7th June 2014 150 Article 55 of Indonesian General Criminal Code 151 Article 56 of Indonesian General Criminal Code

Electronic Information and Transaction, named Indonesian Government

Regulation Number 82 of 2012 on Electronic System and Transaction Operation.

Indonesian Government Regulation Number 82 of 2012 on Electronic System and

Transaction Operation gives administration liability that relates in the

performance of services to the users. Administration sanction can be in a form of

written warning, administration fines, temporary or permanent suspension.

However, administration sanction does not repeal civil or criminal liability.

Forms of failures that are punishable by administration sanctions

include152:

a. Failure to provide available service level agreements, information security in

using information technology services agreement, information security and

internal communication tools organized, and to make sure that all components

and integrity of all Electronic Systems works as it should be153.

b. Failure to implementing risk management for damage or loss154. What is

meant by "implementing risk management" is to conduct a risk analysis and

formulate mitigation measures and countermeasures to deal with the threats,

nuisance, and obstacles to Electronic Systems management155.

152 Article 84 of Indonesian Government Regulation Number 82 of 2012 on Electronic System and Transaction Operation 153 Article 12 of Indonesian Government Regulation Number 82 of 2012 on Electronic System and Transaction Operation 154 Article 13 of Indonesian Government Regulation Number 82 of 2012 on Electronic System and Transaction Operation 155 Explanatory Appendix of Article 13 of Indonesian Government Regulation Number 82 of 2012 on Electronic System and Transaction Operation

c. Failure to have governance policies, work procedures of operation, and

periodic audit mechanism to Electronic Systems156. Governance policies

include policies regarding activities on forming organization structures,

business process, performance management, and providing operating system

support personnel to ensure the Electronic System operates properly157.

d. Failure to ensure secrecy, integrity, and availability of Personal Data under its

management, including the usage and collection of personal data in

accordance with the previous consent given158. Indonesia does not have a

general legislation on privacy and data protection. Therefore, all provisions

about privacy and data protection have to be regulated separately in every

piece of legislation, as in relation to E-Commerce. Integrity means that, in

relation to secrecy and availability that any piece of personal data has to be

treated the same. If a part of the personal data is available for a party, then that

party is authorized to have the whole complete data. It works vice versa for

secrecy. There is no distinction to sensitive and non-sensitive data.

e. Failure to implement good and accountable Electronic System governance,

including at least availability of procedures or instructions in operation of the

Electronic Systems that are documented and / or published by language,

information, or a symbol understandable by parties associated with the

Operation System, sustainable mechanism to maintain novelty and clarity of

156 Article 14 (1) of Indonesian Government Regulation Number 82 of 2012 on Electronic System and Transaction Operation 157 Explanatory Appendix of Article 14 (1) of Indonesian Government Regulation Number 82 of 2012 on Electronic System and Transaction Operation 158 Article 15 (1) of Indonesian Government Regulation Number 82 of 2012 on Electronic System and Transaction Operation

procedures guidelines implementation, existence and completeness

institutional support personnel for the operation of Electronic Systems as it

should be, the implementation of performance management in the Electronic

System, and the plan of maintaining continuity of the Electronic Systems

implemented159.

f. Failure to redisplay Electronic Information and / or Electronic Document as

the initial format and in the specified retention period160. There are two

elements in this provision, the format and the time. The retention period

depends on the content of the Electronic Information and / or Electronic

Documents. Meanwhile, the initial format is considered to be ambiguous. it

does not have any further explanation or guideline. The initial format means

in this regulation can be very broad, for example image resize can possibly be

considered changing its format, or processing the given information from

users.

g. Failure to protect its users and community from losses that are caused by its

Electronic Systems161. This provision is very vague and broad because it can

contain any form of losses. There are two subjects of protection in this

provision. First, it is protection of users, where it refers to Indonesian

Consumer Protection Legislation. Meanwhile, protection to community may

refer to public interest, morality, and etc. With a very broad range of

159 Article 16 of Indonesian Government Regulation Number 82 of 2012 on Electronic System and Transaction Operation 160 Article 21 of Indonesian Government Regulation Number 82 of 2012 on Electronic System and Transaction Operation 161 Article 27 of Indonesian Government Regulation Number 82 of 2012 on Electronic System and Transaction Operation

interpretation, this provision is definitely in need of further clarification or

guidelines.

B. Indonesian Law Number 36 of 1999 on Telecommunication

Under the current regime, there is not much differentiation between any

service providers in Indonesia. All of them fall under the classification as Internet

Service Providers. However, Indonesian Law Number 11 of 2008 on Electronic

Information and Transactions does not give any definition about what internet

service providers are. In order to do so, we have to refer to Indonesian Law

Number 36 of 1999 on Telecommunication. Under the definition given,

Telecommunication is any transmission, delivery, or acceptance of any

information in the form of signs, signals, writing, images, sounds, and sound

through wire systems, optical, radio, electromagnetic systems, etc.162. Meanwhile,

Telecommunication Operators are individual, cooperative, county owned

enterprise, state owned enterprise, private business entity, government agency,

and institution of defense of national security that performs telecommunication

services163. Telecommunication Operators are further divided into three groups:

Telecommunication Networks Operators, Telecommunication Services Operators,

and Special Telecommunication Operators164.

Indonesian Law Number 36 of 1999 on Telecommunication does not give

any further explanation regarding a Telecommunication Services Operators.

Telecommunication Services Operators are explained one year later in Indonesian

Government Regulation Number 52 of 2000 on Telecommunication Operator.

162 Article 1 (1) of Indonesian Law Number 36 of 1999 on Telecommunication 163 Article 1 (8) of Indonesian Law Number 36 of 1999 on Telecommunication 164 Article 7 of Indonesian Law Number 36 of 1999 on Telecommunication

Article 14 of Indonesian Government Regulation Number 52 of 2000 on

Telecommunication Operator divided Telecommunication Services Operators into

Basic Telephony Service Operators, Value-added Telephony Services Operators,

and Multimedia Services Operators. On the explanatory appendix of Article 14 of

Indonesian Government Regulation Number 52 of 2000 on Telecommunication

Operator, Multimedia Services Operator is defined as Telecommunications

Services Operators that offer information technology-based services including the

implementation of voice over internet protocol (VoIP) services, Internet and

intranet, data communication, video conference and video services entertainment.

Based on above definition, internet service provider is confirmed to be part of

Multimedia Service Operator as in Article 46 (1b) of Minister of Communication

Number 21 of 2001 on Operation of Telecommunication Services.

As part of Telecommunication Operators, internet service providers have

to comply with several provisions set in the Indonesian Law Number 36 of 1999

on Telecommunication when providing their services. There are two liability

regimes set under Indonesian Law Number 36 of 1999 on Telecommunication,

which are administration liability and criminal liability. Action that falls under

administration liability is punishable by revocation of license165.

There are some actions that fall under administration liability166. In

performing its services, a Telecommunication operator is required to contribute in

Universal Service Obligation167. The Universal Service Obligation is the

obligatory provision of telecommunications networks by Telecommunications

165 Article 46 (1) of of Indonesian Law Number 36 of 1999 on Telecommunication 166 Article 45 of Indonesian Law Number 36 of 1999 on Telecommunication 167 Article 16 of Indonesian Law Number 36 of 1999 on Telecommunication

Network Operators so that the necessities of people, especially in remote or

undeveloped areas, will be met168. In determining the universal service obligation,

the government has to pay attention to the principle of availability of

Telecommunications Services that reach populated areas with good quality and

appropriate tariffs. The obligation to establish universal service of

telecommunications facilities is charged to fixed telecommunications network

operators who have obtained permission from the government services. While a

Telecommunication Network Operators are obligated to perform Universal

Service Obligation in the form of building network availability, other

Telecommunications Operators may implement the obligation in the form of

contribution169.

In running its services, Telecommunication Services Operators are

required to record in detail the use of services used by users170 in the form of

billing, which is used to rove the usage of services171. Telecommunication

Services Operators have to provide the record when the user requests the record

of telecommunications usage172. However, this obligation is not limited to the

user, but a record should be provided to any other party who has interest in the

records and is authorized by law. These include government investigation

authorities and aggrieved parties if there is a civil case among them. Other than

the users themselves, the other parties that want to gain the Electronic Information

and / or Electronic Documents usually need a court injunction.

168 Explanatory Appendix of Article 16 (1) of Indonesian Law Number 36 of 1999 on Telecommunication 169 Explanatory Appendix of Article 16 (2) of Indonesian Law Number 36 of 1999 on Telecommunication 170 Article 18 (1) of Indonesian Law Number 36 of 1999 on Telecommunication 171 Explanatory Appendix of Article 18 (1) of Indonesian Law Number 36 of 1999 on Telecommunication 172 Article 18 (2) of Indonesian Law Number 36 of 1999 on Telecommunication

In practice, there are many services operators in Indonesia. Users have the

freedom to choose whose services are going to be used. That freedom does not

only exist when users choose services operators for the first time, but also to end

subscriptions of services and / or move to another services operator. It also

includes the freedom to use more than one services operator at the same time. The

telecommunication network operator shall ensure user’s freedom of choosing

other telecommunications networks to meet the needs of telecommunications173.

Nonetheless, Telecommunication Services Operators may change the route of

connection to other Telecommunication Services Operators without notice174.

However, changing the route of connection to other Telecommunication Services

Operators without notice does not transfer any pre-existing relation between the

initial Telecommunication Services Operators and their users. In addition to

administration liability, failure to ensure the freedom to choose a service operator

is also punishable as a crime under the criminal liability regime175.

In relation to the form of services, Telecommunications Operators are

prohibited from conducting business in administration telecommunications

contrary to the public interest, morality, security, or public order176. Suspension of

operations of telecommunications can be done by the authority after obtaining

information that should be strongly suspected and believed that the

telecommunication operator violates the public interest, morality, security, or

173 Article 19 of Indonesian Law Number 36 of 1999 on Telecommunication 174 Explanatory Appendix of Article 19 of Indonesian Law Number 36 of 1999 on Telecommunication 175 Article 48 of Indonesian Law Number 36 of 1999 on Telecommunication 176 Article 21 of Indonesian Law Number 36 of 1999 on Telecommunication

public order177. However, this provision is not clear because it uses several broad

terminologies. Public interest, morality, security, and public order are very broad

to define.

Telecommunications Network and/or Services Operators have to pay the

government a certain amount of license fee178. It is counted as non-tax state

revenue (non-tax revenues) and is paid to the State Treasury179. The centralized

characteristic of telecommunications in Indonesia as shown in this provision,

including internet services, has a negative effect on freedom on the internet.

However, it has an advantage to monitor the internet in Indonesia by the

authority. Monitoring is beneficial to keep the society in order.

Furthermore, Indonesian Law Number 36 of 1999 on Telecommunication

also concerns a criminal liability regime. Before running its services, a

Telecommunications Operators are required to obtain a license from the

ministry180. The ministry is not only the Ministry of Communication and

Information, but also other related ministries depending on the field of operation

performed. It is possible that a form of services needs more than one ministry’s

license. This requirement makes that the administration process can be long and

complicated. In recent years, there is some idea to develop a single license

system, as applied in the Department of Foreign Investment, but it has not been

developed yet.

177 Explanatory Appendix of Article 21 of Indonesian Law Number 36 of 1999 on Telecommunication 178 Article 26 (1) of Indonesian Law Number 36 of 1999 on Telecommunication 179 Ibid. 180 Article 11 (1) of Indonesian Law Number 36 of 1999 on Telecommunication

In the case of emergency, government will set a priority list of things to do

by everyone in the country, including for the telecommunications operators.

Telecommunications Operators are required to give priority to the delivery of

critical information concerning state security, safety of human lives and property,

natural disasters, distress, and/or plague181. Meanwhile, in relation to secrecy of

information, Telecommunications Operators must protect the confidentiality of

information sent and or received by users of telecommunications services through

Telecommunications Networks or Telecommunications Services182. However, as

it has been mention in the previous section, it does not limit the accessibility of

information from authorized parties.

In relation to wiretapping, in accordance to cybercrime section on the

Indonesian Law Number 11 of 2008 on Electronic Information and Transactions,

every person is prohibited from conducting wiretaps over the information

transmitted via Telecommunications Network in any form183. However, in order

to authenticate the use of telecommunications facilities at the request of users,

Telecommunications Services Operators are obliged to use the recording of

telecommunications facilities used by the users of Telecommunication Services

and must be able to make recordings of information in accordance with the laws

and regulations that apply184. In addition, for the purposes of the criminal justice

process, Telecommunications Services Operators may record the information sent

and or received by users, and provide the information required to the Attorney

181 Article 20 of Indonesian Law Number 36 of 1999 on Telecommunication 182 Article 42 of Indonesian Law Number 36 of 1999 on Telecommunication 183 Article 40 of Indonesian Law Number 36 of 1999 on Telecommunication 184 Article 41 of Indonesian Law Number 36 of 1999 on Telecommunication

General, the Chief of Police of the Republic of Indonesia, or any other authority

for certain criminal offenses with a written request. Both acts are not considered

as violation to the wiretapping prohibition.

Other than the provisions mentioned above, there are many other actions

that fall under administration liability and criminal liability in Indonesian Law

Number 36 of 1999 on Telecommunication. However, those actions are not

mentioned because they are not related to the telecommunication services in

giving their services to the user, such as supplying tools of telecommunications,

usage of radio frequency and satellite, etc.

Furthermore, a Telecommunication Operator also has an implementing

regulation named Indonesian Government Regulation Number 52 of 2000 on

Telecommunication Operator, which is divided into a compensation regime and

administration liability. Under the compensation regime, the aggrieved parties are

entitled to file for compensation of the telecommunications operator for any errors

and or omissions from the telecommunications operator that caused harm185.

However, the compensation is limited to direct damages suffered caused by any

errors and or omissions from the Telecommunications Operator. The burden of

proof is on the Telecommunications Operator186, which is a form of coordination

with the Indonesian Law Number 8 of 1999 on Consumer Protection.

There are some action that falls under administration liability in

Indonesian Government Regulation Number 52 of 2000 on Telecommunication

185 Article 68 (1) of Indonesian Government Regulation Number 52 of 2000 on Telecommunication Operator 186 Article 68 (2) of Indonesian Government Regulation Number 52 of 2000 on Telecommunication Operator

Operator187. In performing its services, Telecommunications Service Operators

shall provide a telecommunications facility to ensure the quality of

Telecommunications Services188. This provision gives a vague definition of good

services and facility, which puts Telecommunications Service Operators under

undue burden and makes them vulnerable. It is later explained that what is meant

by good service quality is that service standards must be met189. However, it does

not explain what is meant by facility that is needed to be provided. As a result, in

practice almost every internet connection provider gives a modem to it subscriber.

Telecommunications Service Operators are also required to provide the

same services to their users190. Equal services mean that every user has the same

contract for the same services. Unfortunately, the level of equality of services is

not clearly explained to users. In practice, a lot of users complain just because of

slow connection speed compared to other users, even due to technical or traffic

problems, and call it unequal services

On the other hand, Telecommunications Service Operators shall comply

with any request of prospective customers of telecommunications that has

fulfilled the terms of subscription to access telecommunications services

throughout the area where the telecommunications services are available191. The

obligation to fulfill any request from any prospective customer to have access to

telecommunications services throughout the area where telecommunications

187 Article 95 of Indonesian Government Regulation Number 52 of 2000 on Telecommunication Operator 188 Article 15 (1) of Indonesian Government Regulation Number 52 of 2000 on Telecommunication Operator 189 Explanatory Appendix of Article 15 (1) of Indonesian Government Regulation Number 52 of 2000 on Telecommunication Operator 190 Article 15 (2) of Indonesian Government Regulation Number 52 of 2000 on Telecommunication Operator 191 Article 19 of Indonesian Government Regulation Number 52 of 2000 on Telecommunication Operator

services are provided is intended to prevent discrimination against prospective

customers192.

C. Indonesian Law Number 32 of 2002 on Broadcasting

Indonesian Law Number 32 of 2002 on Broadcasting is a regulation that

also applies to internet service providers in Indonesia. Unlike the two previous

regulations, Indonesian Law Number 32 of 2002 on Broadcasting does not

regulate the subject. Instead, it regulates the activity and the object of

broadcasting.

Broadcasts are messages or network messages in voice, picture, or

combination of voice and picture, and the form of photos or graphics, characters,

either interactive or not, receivable through a broadcast receiver device193. In

addition, Broadcasting is a distribution activity by means of transmission facilities

on land, at sea or in outer space using radio frequency spectrum over the air,

cable, and / or other media that can be received simultaneously by society with a

broadcast receiver device194. Based on the definition above, internet service

providers can be qualified and bound by this regulation, depending on the content

of their services. As an example, Budi Rahardjo, an Internet Security Expert,

gives the example that Youtube may have to acquire a license based on this

regulation, as an addition to the license based in the Indonesian Law Number 11

192 Explanatory Appendix of 19 of Indonesian Government Regulation Number 52 of 2000 on Telecommunication Operator 193 Article 1 (1) of Indonesian Law Number 32 of 2002 on Broadcasting 194 Article 1 (2) of Indonesian Law Number 32 of 2002 on Broadcasting

of 2008 on Electronic Information and Transactions and Indonesian Law Number

36 of 1999 on Telecommunication195.

Indonesian Law Number 32 of 2002 on Broadcasting is more focused on

radio and television broadcasting. Therefore, it does not have many provisions for

internet service providers. However, if the services given by internet service

providers fall within the scope of this regulation, those service providers have to

comply with the liability regime given in this regulation. Indonesian Law Number

32 of 2002 on Broadcasting gives two types of liability, administration liability

and criminal liability. Sanctions on the basis of the administration liability regime

can be a written warning, temporary suspension, limitation service period,

administration fine, license renewal limitation, or revocation of license196. The

actions that fall under administration liability include:

a. Failure to publish a financial report that is audited by a public accountant197.

b. Failure to conduct internal sensors of all content that will be broadcasted and /

or distributed198. This only applies to Subscription Broadcasting Services

Operator. Nonetheless, since almost all internet service providers in Indonesia

are providing internet connection based on subscription, this article covers

almost all providers.

c. Providing information that is not in accordance with the regulation. Broadcast

content shall contain the information, education, entertainment, and benefits to

195 Andrian Fauzi, ‘Saatnya Konvergensi UU ITE, Penyiaran dan Telekomunikasi', 23rd December 2009, available at http://inet.detik.com/read/2009/12/23/155633/1265254/399/saatnya-konvergensi-uu-ite-penyiaran-dan- telekomunikasi, accessed 19th May 2014 196 Article 55 (2) of Indonesian Law Number 32 of 2002 on Broadcasting 197 Article 15 (2) of Indonesian Law Number 32 of 2002 on Broadcasting 198 Article 26 (2a) of Indonesian Law Number 32 of 2002 on Broadcasting

formation of intellect, character, morality, progress, national strength, keeping

unity and integrity, as well as practice the Indonesian values of religion and

culture199.

d. Failure to give correction if there is a mistake or rebuttal on the content of

broadcasting200.

4.2. The benefit of adopting exemption from intermediary service provider liability for online marketplaces in Indonesia. Under the current regime, there is no differentiation between any service providers

in Indonesia. The sole benefit of a single and simple classification is the simplification of

law which may create more legal certainty. With the current regulation, in general every

website may be held liable for any event that may occur on their website. However, this

characteristic may create many adverse effects. Below I will highlight some benefits from

adopting exemption of liability of online marketplaces for Indonesia, when contrasted with

the current system.

The current legislations are overlapping and create limitation on the development of

internet society. Different legislations require different licenses from internet service

providers, including online marketplaces. Those requirements create obstacles on the

establishment of online marketplaces. They also induce reluctance among business owners

to establish their business. Nonetheless, it will hamper the development of internet society,

including the variety of services provided for by the service provider.

By giving exemption of liability of online marketplaces for Indonesia, it is also

expected to create one comprehensive and codified regulation applied only for the general

199 Article 36 (1) of Indonesian Law Number 32 of 2002 on Broadcasting 200 Article 44 of Indonesian Law Number 32 of 2002 on Broadcasting

62 internet regime, or possibly only for online marketplaces. The current overlapping creates multiple impositions of rules. Some of the rules are not really suitable for the online world, for example the internal sensors obligation of Article 26 (2a) of Indonesian Law Number 32 of 2002 on Broadcasting. Sensors obligations are meant for radio and television broadcasting. By implementing this obligation for online marketplaces, it will create undue burden. Online marketplaces are meant to only provide a platform or media for users to be able to use the platform. The content is not given by the online marketplaces, but by its users. The multiple sources of content make it unreasonable to ask online marketplaces to sensor all postings.

Another inappropriate application concerns the participant and accomplice of criminal law. In reference also to the cybercrime act on Indonesian Law Number 11 of 2008 on Electronic Information and Transaction, imposing criminal liability on online marketplaces on the basis that they are running a platform or media that are not meant to be used to commit crime is inappropriate. As an analogy, we cannot blame the knife manufacturer to produce a knife that is used to commit a murder. The purpose of an online marketplaces platform is to provide a medium for people to buy and sell items. If there is a misuse of this medium by an individual, then the liability is on the one who misuses the device. This is not the same case with accomplice of traditional crime where someone is intentionally involved in the crime committed by others.

Furthermore, Indonesia does not have a general legislation about privacy and data protection. Indonesian Law Number 11 of 2008 on Electronic Information and Transaction gives the possibility for protection of privacy and data protection, depending on the subject

matter201. Therefore, it is possible and can be beneficial to set up a specific provision about

privacy and data protection in the online world, or specifically for the online marketplaces.

As comparison, there is no general obligation to monitor under E-Commerce Directive

2000/31 because it creates an undue burden for the online marketplaces and may also violate

privacy and data protection legislation. That condition becomes one of the hindrances to

create an effective protection to prevent future infringement. Without general privacy and

data protection legislation in Indonesia, monitoring obligations can be implemented when

necessary. Trust is very important in transactions, especially in online marketplaces. In

order to trust your counterparty, you need to know who you are transacting with. By

providing all the necessary information to identify the user, other users will feel safer to

perform transactions through online marketplaces because they can identify who they are

transacting with. Online marketplaces can also point to the perpetrator if there is crime

committed by one of the users, without having to be liable. Also, the existing marketplaces

in Indonesia already got used to the system where they need to monitor the user. Therefore,

it only needs a guarantee that it will not be held liable if they can show the infringer.

4.3. The disadvantage of exemption from intermediary service provider liability for online marketplaces in Indonesia. Adopting laws always causes problems in all levels of government and society.

Those problems may be caused by several factors, such as difference of culture and trust,

society, technology, law, crime, etc. These problems may also happen regarding the

adoption of an exemption of liability for online marketplaces in Indonesia.

One of the most feasible problems is to create a balance between online marketplaces

rights and user’s rights. There are many other fields of law that may be affected if the online

201 Article 43 paragraph 2 of Indonesian Law Number 11 of 2008 on Electronic Information and Transaction

marketplaces have fewer obligations, for example consumer protection. Consumer

Protection Law is created in consideration that consumers are in the least favorable position.

Consumers are very well protected in the current Indonesian Law, to the detriment of service

providers. The existing e-commerce legislation has unclear level of negligence, fault, and

force major which can be problematic in determining to what extent online marketplaces can

be held liable. It does not make any sense for online marketplaces providers to be required to

monitor and check all the information given by its users.

Another problem arises in relation to the legal structure in Indonesia. The online

world is a very dynamic and developing place, including online marketplaces.

Unfortunately, Indonesian regulations tend to be very rigid and not really up-to-date, such as

the unfinished draft of Books of Criminal Law since 1963202 . Even if there is a new

legislation, its quality tends to be underqualified, as shown by the data that there are 108 acts

at the national level that have been cancelled by the Constitutional Court in the period

between 2003 until 2012203. Meanwhile to depend on court judgments is hindered by inter

court communication. Indonesian court systems have not yet been integrated, especially

courts in the remote areas. Therefore, it is almost impossible to gain access to knowledge of

what happened in different jurisdictions and to know how the court decided in those cases.

Furthermore, the legal structure in Indonesia also creates problem in the making of a

comprehensive legislation. The characteristic of Indonesian legislation that it contains more

than one field of law in a single piece of legislation, but scattered over several pieces of

legislation dealing with similar issues, creates the problem of overlap. Therefore,

202 Muhammad Zulfikar, “Wamenkumham: RUU KUHP dan KUHAP Sudah Ada Sejak 1963”, 2nd April 2013, http://www.tribunnews.com/nasional/2013/04/02/wamenkumham-ruu-kuhp-dan-kuhap-sudah-ada-sejak-1963, accessed 24th April 2014 203 Fetika Andriyani, “Banyak Produk UU Dibatalkan MK”, 31st May 2012, http://www.rrijogja.co.id/nasional/politik/1422-banyak-produk-uu-dibatalkan-mk, accessed 24th April 2013

coordination with other existing legislation has needs to become serious concern in future

legislative initiatives in order to prevent multiple overlap on the online marketplaces in

running or establishing their services.

Meanwhile, due to the characteristic of Indonesian legislation, it is not possible to

include in current legislation an exemption of liability for online marketplaces because it is

not allowed to formulate it in the form of exemption204 as the law needs to be phrased in

short sentences, clear, and straightforward. There are two possible solutions to deal with this

problem. First, the legislator needs to amend any legislation that regulates legal formulation,

such as Indonesian Law Number 12 of 2012 on Formulation of Legislation. Second, the

legislator needs to find a new formulation in adopting the exemption of liability of articles

12 to 14 from E-Commerce Directive 2000/31, while phrasing it not in the form of an

exemption.

The last feasible problem is legal awareness, which is considerably low among

society in Indonesia205 , both from the perspective of consumers and businesses. Business

owner’s legal acumen is quite low, especially for smaller companies. The situation is

aggravated by consumer awareness which is also quite low. One obvious example is the

existence of terms and condition. In the end, socialization is becoming the final obstacle.

Social campaigns to increase legal awareness by the government are still very low. Without

a sufficient level of awareness, any legislation will not have sufficient efficacy and

efficiency within society.

204 S.S.T. Wisnu Sasangka, Bahasa Indonesia Dalam Perundang-undangan, Pusat Bahasa, Depdiknas, p.2. 205 Budi Prasetyo, “Rendahnya Tingkat Kesadaran Hukum Lemahnya Posisi Konsumen”, 25th December 2011, http://www.tribunnews.com/bisnis/2011/12/25/rendahnya-tingkat-kesadaran-hukum-lemahnya-posisi-konsumen, accessed 24th April 2014

Chapter 5 - Conclusion

5.1. Conclusion

As explained in previous Chapters, e-commerce plays a large role in the present

Indonesian society and economic development. Nowadays, many Indonesians are more in

favor to shop through the online marketplaces because of several reasons, including that it is

more practical because they do not have to go anywhere; that it is easier as it offers more

variety; and many other reasons. Unfortunately, they are still having a lot of problems in

terms of legal protection in case an unfortunate event happens in the transaction process.

Therefore, the current legislation gives a solution by making online marketplaces

responsible for everything that happens on their website.

However, that solution given in the current legislation in Indonesia is not in favor to

develop E-Commerce. Nowadays, Indonesian online marketplaces are under a burden to

monitor all the traffic in their site without a guarantee not to be held liable. As a developing

country and with regards to e-commerce, Indonesian E-Commerce legislations are still

underdeveloped, and there are several aspects that need further improvement in order to

create a good regulation. With the proliferation of online marketplaces in Indonesia, and

seeing many cases relating to online marketplaces transactions, the necessity to improve the

legislations has become essential.

The current legislation that governs online marketplaces is still overlapping one

another. Indonesian Law Number 11 of 2008 on Electronic Information and Transaction,

Indonesian Law Number 36 of 1999 on Telecommunication, Indonesian Law Number 32 of

2002 on Broadcasting, along with its implementing regulation, and General Civil and

Criminal Law, govern online marketplaces liability. Some of the provisions are not

appropriate or suitable to apply to online marketplaces. Furthermore, the liability regime set

in all those legislations is very broad and makes online marketplaces vulnerable. In addition,

there is not any guarantee that online marketplaces will be not held liable, even if it can

identify the infringer.

The EU E-Commerce Directive 2000/31 could be a reference for the Indonesian

government to improve its regulations regarding e-commerce, especially in the area of

online marketplaces. Since this Directive has been proven to be effective in regulating the e-

commerce market in the European Union, it stands that there are valuable lessons from the

Directive that Indonesia could adopt in order to strengthen its e-commerce regulation.

However, in order to adopt the E-Commerce Directive 2000/31, especially articles 12 to 14

where the exemption of liability is regulated, it needs some adjustment in order to be

suitable for the Indonesian legal system and culture. The adjustment is also to make the

adopted version better than the original; to avoid the problems that have already arisen in the

European Union. In conclusion, it is beneficial for Indonesian government to adopt the

exemption from intermediary service provider liability for online marketplaces under article

12 to 14 of the E-Commerce Directive 2000/31 with some adjustments.

5.2 Recommendations

There are some recommendations that can be proposed for the Indonesian legislator

to improve e-commerce regulation with regards to the exemption from intermediary service

provider liability for online marketplaces in order to balance the protection for online

marketplaces and their users, and also for the further development and flourishing of online

marketplaces in Indonesia. The exemption from intermediary service provider liability for

online marketplaces should be implemented in the form of a new Government Regulation.

The new Government Regulation’s role will be as implementing regulation of Indonesian

Law Number 11 of 2008 on Electronic Information and Transaction, in accordance with article 7 of Indonesian Law Number 12 of 2011 on Formulation Legislation. In order to prevent contradiction and overlap with the current existing legislation, it must have a provision clearly stating that all other legislation does not apply if the subject matter has been regulated in this new Government Regulation.

Furthermore, some adjustments need to be implemented to the new Government

Regulation to bring it in line with the E-commerce Directive 2000/31. Those adjustments have to be in accordance with the guidance set forth in the Indonesian Law Number 12 of

2011 on Formulation Legislation. First, the new Government Regulation has to be limited to online marketplaces and must include a definition of online marketplaces. The limitation can be specified on the title of the new Government Regulation. In addition, the definition of online marketplaces is defined in the General Provision section.

Secondly, the formulation of the provisions have to be in accordance to the guidance set forth in the Indonesian Law Number 12 of 2011 on Formulation Legislation, including provisions that it be formulated in a positive manner, usage of capital letter, etc. Therefore, it must have provisions about the obligation of online marketplaces. One of the significant differences of the obligation is on the monitoring obligation. Online marketplaces in

Indonesia should be obliged to collect sufficient information regarding its users in order for others to be able to identify the counterparty in their transaction. It also has to guarantee that an online marketplace will not be held liable as accomplice or for being negligent if they can provide sufficient information to identify their users.

Finally, there should be a provision about notice and take down system of which the procedure is clearly set out in a guideline. The notice and take down procedure will function

69 as a source of knowledge required to take down infringing material. By having a definite source of knowledge, online marketplaces are no longer required to actively monitor their website to find any infringement.

Based on the recommendations above, the adopted version of the new Government

Regulation should be as follows. Please bear in mind that the following recommendation is made in accordance with guidelines for the formulation of recommendation as in Appendix I of Indonesian Law Number 12 of 2011 on Formulation Legislation. The new Government

Regulation should have definition of online marketplaces on the General Provisions section.

The definition of online marketplaces on the new Government Regulation should be:

“Online Marketplaces are a form of Electronic System which is run by an Electronic

System Organizer that performs intermediary services by providing a platform for

their users to trade among themselves.”

The new Government Regulation has to regulate online marketplaces’ obligation and prohibition. The formulation of obligation should be:

“In performing their services, Online Marketplaces are obliged to

1. Collect sufficient information regarding its users in order for others to be able to

identify the counterparty in their transaction. The information collected is

published on the platform and accessible to other users.

2. Provide for the operation of a Notice and Take Down system.”

Furthermore, the formulation of prohibition should be:

“In performing their services, Online Marketplaces are prohibited from:

1. Initiating a transmission to users. Online Marketplaces are not restricted from

performing promotional activity as permitted by Indonesian Law

2. Selecting or modifying the information provided by users to the extent permitted

by Indonesian Law. Selections or modifications of information from users are

implemented as form of co-operation between Online Marketplaces and their

users to monitor the platform together.”

The Notice and Take Down in the obligation section will need a clear procedural provision. The provision of the Notice and Take Down should be:

1. “Online Marketplaces have to provide a system for their users to be able to report

alleged illegal Electronic Information and / or Electronic Documents. After

receiving report from their users about alleged illegal Electronic Information and

/ or Documents, Online Marketplaces have to take down the alleged illegal

Electronic Information and / or Electronic Documents while asking for

clarification from users who provide the Electronic Information and / or

Electronic Documents within 24 hours. The users who provide the Electronic

Information and / or Electronic Documents have 24 hours after being asked by

the Online Marketplaces to give clarification about the Electronic Information

and / or Electronic Documents.

2. In such cases where the users who provided the Electronic Information and / or

Electronic Documents give a clarification that is justified, the Electronic

Information and / or Electronic Documents will be reinstated online.

3. In such cases where the users who provide the Electronic Information and / or

Electronic Documents do not give any form of clarification that has been asked

by the Online Marketplaces, the Electronic Information and / or Electronic

Documents are taken down permanently.

4. In cases where it is necessary, depending on the Electronic Information and / or

Electronic Documents, the Online Marketplaces may have to notify the relevant

authorities about the Electronic Information and / or Electronic Documents.”

In the end, a transitional provision is needed as a link to other legislation. The

transitional provision should be:

“As long as it has not been governed by this Government Regulation, all other

legislation that may govern any elements related to Online Marketplaces remains

valid and unaffected”.

However, please bear in mind that the provision drafted above is not in a complete

form as regulated in Indonesian Law Number 12 of 2011 on Formulation Legislation.

Several sections and elements are not included because they need further research and / or

are outside the scope of my research. Some of those sections include the Preamble,

Conclusion, Closing Remarks, Explanatory Note, and Appendix206.

As for further recommendations, the new Government Regulation can set a specific

privacy and data protection legislation only for the matter of online marketplaces as

Indonesia does not have a general privacy and data protection legislative framework. In

addition, online marketplaces must be obliged to provide an internal dispute resolution

mechanism. Even though the Indonesian government allows for the settlement of disputes

inside or outside of court, in practice such settlements are rare because they take a lot of time

and money. The online marketplace should provide for an internal dispute resolution

mechanism to solve the problem among users in a cost and time efficient manner. However,

206 Section H of Appendix II of Indonesian Law Number 12 of 2011 on Formulation Legislation

72 both of these recommendations need further research, as they are outside the scope of this thesis.

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