Distinction Between Goods and Services in the Consumer Protection Draft Bill

The Ministry of Trade (Kemendag) has proposed a draft bill (“Draft Bill”) amending Law No. 8 of 1999 on Consumer Protection (“Law 8/1999”) to regulate the separation of provisions between goods and services. Minister of Trade Budi Santoso stated that such separation is necessary to align with the respective characteristics of goods and services. 

“A Consumer Protection Law that does not distinguish between goods and services has resulted in issues in its implementation,” Budi said.

He further noted that this input has been accommodated in the draft Bill by separating definitions and subject classifications, distinguishing between production and trading activities, as well as differentiating liability and compensation regimes. 

The Draft Bill classifies business actors dealing in goods as parties that produce, import, or trade tangible and intangible items. Meanwhile, service providers are defined as parties that render commercial or professional services, which are further divided into Commercial Service Providers and Professional Service Providers.

With respect to the separation of liability and compensation, the applicable principles are determined based on such classifications. For goods, the principle of strict liability applies, particularly for defective products, whereby consumers are not required to prove fault on the part of the business actor. In contrast, for services, service providers are subject to specific exemptions from liability where losses arise due to the consumer’s negligence in utilizing the service or where the statutory limitation period for filing a claim has elapsed.