Indonesia

Zacky Zainal HuseinBy Zacky Zainal Husein of Assegaf Hamzah & Partners

Indonesia’s previous attempt to regulate app-based online taxis, which came into force on October 1, 2016, clearly failed to resolve the tension with conventional taxi providers.
On one hand, conventional taxi providers argued that the rules effectively legalised the operation of online taxis, while on the other hand, the online taxi providers complained that the regulation adversely affected their business model through such things as the requirement that their vehicles have a minimum engine size of 1,300cc and that they provide car-pool facilities. These requirements, they argued, were akin to those applicable to conventional taxi providers. The intense competition to attract customers continued and even led to violence in several areas.
In responding to the deficiencies of Minister of Transportation Regulation No. PM 32 of 2016 on Unscheduled Public Transportation Services (MOTR 32/2016), the Minister has revoked and replaced it with Regulation No. PM 26 of 2017 on Unscheduled Public Transportation Services (MOTR 26/2017), which was issued on March 31, 2017.
The Minister presumably believes that MOTR 26/2017 is more accommodating to the demands of both parties. For example, MOTR 26/2017 introduces a new term, “Special Rental Vehicle (Angkutan Sewa Khusus)”, which is defined as a door-to- door transportation service with driver, operating within an urban area, and reserved using an IT-based application. Through this term, MOTR 26/2017 attempts to accommodate online taxis and distinguish them from other forms of public transportation.

An online taxi is no longer required to use a yellow number plate to indicate that it is a public transportation vehicle, but rather can use the black number plate used by normal private vehicles, subject to its being marked by a special sign indicating that the vehicle is operating as an online taxi. Conversely, despite protests by online taxi providers, the Vehicle Registration Number Certificate / Surat Tanda Nomor Kendaraan of an online taxi must be in the name of a legal entity, and may not be in the name of an individual owner. This provision is in line with Law No. 22/2009, which states that public transportation services may be provided by state enterprises, local government enterprises, and/or other legal entities in accordance with the prevailing laws and regulation. This requirement purports to protect customers in the event of a dispute. The fact that the vehicle must be in the name of a legal entity provides some degree of comfort as to where a complaint or claim should be directed. In addition, this requirement is also aimed at facilitating the collection of taxes from online taxi providers.
It should be noted that MOTR 26/2017, as was the case with MOTR 32/2016, only applies to unscheduled public transportation services using vehicles with four or more wheels. Consequently, motorcycle taxis are not affected. This is somewhat surprising given that there have been a number of signals from the minister that the motorcycle taxis would be regulated as well.
One of the key, and most controversial, aspects of MOTR 26/2017 is the regulation of fares. Local governments have been given the authority to determine maximum and minimum fares for online taxis based on pricing mechanism as determined by the governor in the case of online taxi providers whose operations cover more than one regency (county) or municipality within a single province (outside Jakarta, Bogor, Depok, Tangerang, and Bekasi) or the head of Jakbodetabek Transportation Management Board, in the case of online taxi providers whose operations cover more than one province in the Jakarta, Bogor, Depok, Tangerang, and Bekasi (Jabodetabek) area. This may help discourage alleged predatory pricing among online taxi providers. In practice, the price war between online taxi providers has adversely affected drivers’ earnings. As most of them acquire their vehicles through leasing, a “race to the bottom” in pricing terms could obviously affect their ability to pay their instalments and eventually lead to repossessions.
MOTR 26/2017 also provides authority to the governor or head of the Jabodetabek Transportation Management Board, as the case may be, to determine quotas for online taxis operating in their region for a period of five years. This provision is intended to create a balance between the number of vehicles on the roads and road capacity so that a headlong rush to get online taxis onto the road can be avoided.
While some argue that MOTR 26/2017 tends to favour conventional taxi providers, in reality it also accommodates the interests of online taxi providers by reducing the minimum engine capacity of online taxis from 1,300cc to 1,000cc, replacing the requirement to provide a car-pool facility to only providing a vehicle parking facility, and simplifying the requirement to own a maintenance facility (garage) so that it will now be possible to collaborate with other garages to provide maintenance facilities.
Article 50 of MOTR 26/2017 specifically regulates the role of an app-based transportation provider (ATSP). In this regard, the new regulation is actually quite similar to the provisions of MOTR 32/2016. In order to conduct its business, an ATSP is required to collaborate with a public transportation company that holds a transportation licence.  Given that an ATSP is prohibited from acting as a public transportation company, it is accordingly prohibited from:

  1. Determining and collecting fares from passengers;
  2. Hiring drivers;
  3. Providing access to an app to an individual as a transportation service provider; and
  4. Providing access to an app to a public transportation company that has not obtained a licence from the relevant authorities.

Moreover, an ATSP must be established as an Indonesian legal entity and must fulfil the following criteria:

  1. Enters into contracts, and conducts sales and/or services delivery, and bill collection;
  2. Has a bank account in Indonesia to accommodate the proceeds of sales or services conducted or provided in Indonesia;
  3. Has or controls a server or data centre in Indonesia;
  4. Conducts marketing, promotion and assistance operations; and
  5. Provides a customer complaint service.

The new regulation also requires an ATSP to provide dashboard access to the government for supervision purposes. This access shall at least include the following information:

  1. The name, person in charge and address of the ATSP;
  2. Information on all companies that the ATSP has entered into collaborative arrangements with;
  3. Information on all vehicles and drivers that are registered in the ATSP system;
  4. Access to operations monitoring in form of tracking the movement of vehicles and fares; and
  5. Customer complaint service in the form of a dedicated phone number or email address for customer complaints.

Lastly, while MOTR 32/2016 did not include specific sanctions for errant ATSPs, MOTR 26/2017 provides that an ATSP that does not comply with the regulation may be subject to sanctions, as determined by the Ministry of Communications and Informatics (MOCIT), in form of the temporary blocking of access to the relevant app until such time as the violation has been remedied. This vesting of sanctioning authority in the MOCIT is rather curious, given that it is not responsible for transportation matters.

Conclusion
While the government attempted to create a level playing field for all players involved in public transportation, MOTR 26/2017 will not immediately resolve the conflict between conventional and online taxi providers. The new regulation has elicited a negative response from online taxi providers, especially Indonesia as regards the restrictions on setting fares, which the government clearly believes is necessary to even things up as between conventional taxis and their online competitors.
From the customer’s perspective, MOTR 26/2017 gives the impression that the government is at best lukewarm about the online taxi providers and the technological innovation that has spawned them. While the government appears to have sided with the conventional taxi providers by intervening in the pricing mechanism, what the average customer wants is the freedom to choose the most convenient mode of transportation, taking into account all of the factors involved, including the fare, convenience and accessibility. The fact that online taxi fares will now be regulated is sure to be unpopular.
In light of the above, the government’s task now is to explain why such regulation is necessary so that all of the stakeholders can be persuaded of its wisdom and efficacy. Otherwise, we can look forward to further regulatory twists and turns on online transportation going ahead.

Zacky Zainal Husein

http://www.ahp.co.id/

[sharethis]
Tags: Compliance, Indonesia, Technology
Related Articles by Firm
Statutory Registration of Standard Terms and Conditions in Tanzania
All companies doing business in Tanzania should know the salient points of the Standard Form (Consumer Contracts) Regulations 2014 which takes effect on 29 December 2015.
Tanzania Bill Establishing the Petroleum Act 2015
Tanzania's proposed Petroleum Act 2015 introduces key changes to the Petroleum Exploration and Production Act 1980 and the Petroleum Act 2008.
Clasis Law (India) Newsletter August 2015
Analysis of the revocation of a company's drug patent and other key court rulings and updates on corporate and commercial matters
Ship arrest in China - Increased clarity from the Supreme People's Court
The Supreme People's Court of the PRC published the Regulations for Certain Issues Concerning the Application of Law Relating to Arrest and Auction of Ships which took effect on March 1, 2015.
The new CIETAC Arbitration Rules 2015
The New Rules adopt both best practices and the latest developments in international commercial arbitration and accommodate the increasing needs of the parties arbitrating at CIETAC.
Related Articles
A roadmap for response and remediation
Cybersecurity professionals are no doubt familiar with the oft-repeated adage that there are only two kinds of companies — ‘those that have been breached’ and ‘those who do not know it yet’ ...
Cybersecurity a boardroom priority
“Nothing is certain but death, taxes and cyber-attack” - By Rory Macfarlane, Partner, Ince & Co Hong Kong ...
How the challenges of cybersecurity reflect those in the legal profession
From a non-technical, user or customer perspective, most people are happy that the IT folks “just make it work” ...
Related Articles by Jurisdiction
Corporate liability for corruption
Anti-corruption compliance is rightly a focus of companies operating in Indonesia. One of the more interesting questions for such companies, particularly foreign investment companies, is whether the company …
Franchising rules and regulations
With a population of over 250 million, Indonesia is an attractive country for investors, particularly those interested in the distribution, retail and franchise sectors. …
Indonesia revisits online taxi issue
Indonesia’s previous attempt to regulate app-based online taxis, which came into force on October 1, 2016, clearly failed to resolve the tension with conventional taxi providers ...
Latest Articles
Thailand: New Amendment to the Labor Law
The Labor Protection Act B.E. 2541 (“LPA”) was first enacted in February 1998; the LPA has been amended several times ...
New Ministerial Decision brings clarity to Private Joint Stock Companies
The private joint stock company is one of the forms of company contemplated by UAE Federal Law No. 2 of 2015 concerning commercial companies ...
Former Myanmar deputy finance minister joins Zico
Maung Maung Thein joins as executive chairman of local subsidiary Zico Law Myanmar.