Photo: DEDI SUPRIADI, S.H.,M.M. (International Trade Lawyer)
The global digital economy has evolved into a sophisticated ecosystem where traditional trade barriers are frequently bypassed through innovative yet often disruptive business models. In the Indonesian context, the rapid proliferation of global marketplace platforms has introduced a critical economic challenge: predatory pricing facilitated by cross-border digital trade. As the nation moves toward 2026, the existing legal framework—primarily anchored in Law No. 17 of 2006 concerning Customs—faces an unprecedented test. The current statutory architecture was designed for a world of physical borders and tangible goods, whereas today’s “social commerce” and algorithmic trade environments operate with a fluidity that traditional customs enforcement struggles to capture. This analysis examines the systemic vulnerabilities within Indonesia’s customs and competition laws, the profound socio-economic impact on the domestic manufacturing sector, and the strategic urgency for legislative reform as reflected in the 2026 National Legislation Program.
The Conceptual Evolution of Predatory Pricing in the Digital Era
Predatory pricing is traditionally defined as a strategy where a dominant market actor sets prices below the average cost of production to eliminate competitors, subsequently raising prices once a monopoly is achieved to recoup initial losses. While this definition remains the legal baseline, digital platforms have fundamentally altered the mechanism of its execution. In the contemporary marketplace, predatory pricing is often a component of “blitzscaling,” where massive capital reserves allow platforms to sustain losses indefinitely to capture market share.
The digital variant of predatory pricing is particularly insidious because it is often obscured by cross-subsidization. A global platform may offer products at “unfairly low prices” in the Indonesian market while offsetting those losses with revenue from other jurisdictions or high-margin digital services. This creates a “price floor” that domestic Micro, Small, and Medium Enterprises (MSMEs) cannot meet, as they lack the diversified revenue streams and venture capital backing of global tech giants.
Also read this page: The Global Realignment of Trade Barriers: A Comprehensive Analysis of Tariff Competition and the Sustenance of the WTO Multilateral Framework
Historical and Contemporary Regulatory Paradigms
Indonesia’s regulatory response to business competition has historically been reactive rather than preventive. Law No. 5 of 1999 concerning the Prohibition of Monopolistic Practices and Unfair Business Competition serves as the primary deterrent, yet its application to the e-commerce sector has been fraught with evidentiary challenges. The Business Competition Supervisory Commission (KPPU) must prove both the intent to eliminate competition and the actual harm to the market, a process that can take years, during which time domestic competitors may already have collapsed.
| Regulatory Era | Key Legislation | Focus Area | Enforcement Style |
| Pre-Digital (1995-1999) | Law No. 10 of 1995 | Physical Customs & Revenue | Reactive |
| Early Digital (2006-2015) | Law No. 17 of 2006 | IP Protection & Border Control | Compliance-based |
| Platform Era (2019-2024) | PMK 199/2019 | De Minimis & Import Tariffs | Fiscal/Restrictive |
| 2026 Transition | Proposed Revisions | Algorithmic Fairness & Digital Dumping | Ex-ante/Adaptive |
The Socio-Economic Crisis in Domestic Manufacturing Hubs
The most acute symptoms of predatory pricing are visible in the traditional industrial clusters of West Java, particularly in the textile sectors of Majalaya and Bandung. These regions, which have served as the backbone of Indonesia’s textile production for decades, are currently facing a period of rapid deindustrialization.
The Collapse of the Textile Cluster in Majalaya
The influx of imported finished goods, often sold through “social commerce” live-streaming features at prices below the cost of raw materials, has created a massive imbalance in the domestic market. Reports indicate that at least 70 percent of small and medium textile producers in these areas have either halted operations or are on the verge of bankruptcy. The price disparity is stark; imported garments are frequently listed at retail prices that do not reflect the logical sum of fabric, labor, and logistics costs, suggesting either digital dumping or the systematic avoidance of customs duties.
The human impact of this displacement is represented by mass layoffs, or Pemutusan Hubungan Kerja (PHK), affecting thousands of workers in the West Java region. In Majalaya alone, the inventory of unsold domestic cloth has reached an estimated 1.5 million meters, as consumers shift toward cheaper, platform-promoted imports. This shift is not merely a matter of consumer preference but is driven by the dynamic pricing algorithms of platforms that prioritize low-cost imports over domestic listings.
Also read this page: Reconstructing Dumping Evidence in Cross-Border E-Commerce Transactions: Law Enforcement Challenges in the Era of Market Algorithms in Indonesia
Consumer Behavior vs. Industrial Sustainability
There is a fundamental tension between short-term consumer benefits and long-term economic stability. While Indonesian consumers initially benefit from the extreme discounts and cashback offers characteristic of predatory pricing, the long-term consequence is the erosion of domestic industrial capacity. Once the domestic supply chain is hollowed out, the market becomes entirely dependent on foreign imports, at which point platforms may adjust prices upward.3 Research indicates that the convenience and competitive pricing of online shopping have accelerated the digital transformation, but without adequate safeguards, this transformation may come at the cost of national industrial sovereignty.
Analytical Gaps in the 2006 Customs Law
The 2006 Customs Law (Law No. 17 of 2006) was an amendment to the 1995 Law, primarily intended to modernize port procedures and enhance the enforcement of intellectual property rights. However, it lacks the specificities required to handle the complexities of “digital dumping.”
The Challenge of Undervaluation and “Jastip”
A significant loophole in current customs enforcement is the undervaluation of goods entering through e-commerce channels. While the government lowered the de minimis threshold for import duty exemption to $3 under PMK 199/PMK.04/2019, many importers have pivoted to non-e-commerce channels, such as sea freight or “jastip” (buying services), to bring in bulk goods that are subsequently sold on digital platforms.10 These goods often avoid the rigorous tax and duty scrutiny applied to official cross-border e-commerce transactions, allowing them to be sold at prices that mimic the effects of predatory pricing.
| Import Channel | Tax Scrutiny | Logistics Complexity | Predatory Pricing Risk |
| Official E-Commerce | High (Integrated) | High ($8 floor) | Lower due to costs |
| Bulk Sea Freight | Medium | Low (Economy of Scale) | High (Undervaluation) |
| Informal “Jastip” | Low | Low | High (Tax Avoidance) |
| Direct Cross-Border | High (Automated) | High | Regulated by PMK 199/2019 |
The inability of the 2006 law to dynamically track the “Fair Market Value” of digital trade items means that predatory pricing can be disguised as legitimate low-cost competition. Furthermore, the existing law focuses on the physical entry of goods rather than the algorithmic promotion of those goods on digital platforms.
Fiscal Strategy and the 2025-2026 Economic Outlook
The Ministry of Finance, under Minister Purbaya Yudhi Sadewa, has adopted a nuanced fiscal strategy for the 2025-2026 period. The government is attempting to balance the need for revenue and market protection with the necessity of maintaining consumer purchasing power during a period of economic recovery.
PMK 37/2025 and the Shift to Withholding Tax
A cornerstone of the 2025 fiscal policy is PMK 37/2025, which appoints e-commerce platforms as collectors of Article 22 Income Tax (PPh Pasal 22). Starting July 14, 2025, platforms must withhold 0.5% of the gross turnover from domestic sellers. This regulation is significant because it shifts the burden of tax compliance from the individual seller to the platform, providing the Directorate General of Taxes (DGT) with unprecedented data on the volume and pricing of digital transactions.
This data-driven approach is a prerequisite for countering predatory pricing. By monitoring the gross turnover and pricing patterns across platforms like Shopee, Lazada, and Tokopedia, the government can identify anomalies that suggest dumping or below-cost selling. However, Minister Purbaya has emphasized that further aggressive taxation of online merchants will be contingent on the economy achieving a 6% growth rate, signaling a cautious approach to avoid stifling the digital economy’s contribution to GDP.
Presidential Regulation No. 68 of 2025: VAT on Digital Transactions
To further level the playing field, Presidential Regulation No. 68 of 2025 introduced the Tax Collection System on Cross-Border Digital Transactions (SPP-TDLN). This system, operated by PT Jalin Pembayaran Nusantara, aims to ensure that foreign digital services—which often compete with domestic physical goods—are subject to the same Value-Added Tax (VAT) requirements. The objective is to eliminate the “tax advantage” that foreign digital providers previously enjoyed due to the difficulty of taxing cross-border digital information and service exchanges.
Legislative Urgency: The 2026 National Legislation Program (Prolegnas)
The Indonesian House of Representatives (DPR RI) has signaled a clear intent to address these regulatory gaps. The 2026 Prolegnas includes several priority bills specifically designed to modernize the nation’s trade and competition laws.
The Revision of Law No. 5 of 1999
The most critical legislative effort is the third amendment to Law No. 5 of 1999 regarding the Prohibition of Monopolistic Practices and Unfair Business Competition. Legislators have emphasized the need to explicitly include “digital dumping” and “predatory pricing” in the revised statutes. Proposed amendments include:
- Article 45A/Article 20 Addition: Proposals to strictly regulate foreign business actors who sell products from abroad at extremely low prices through massive promotions and cross-subsidies.
- Algorithmic Regulation: A new focus on the role of digital algorithms and Artificial Intelligence (AI) in distorting market competition.
- Strengthening the KPPU: Enhancing the commission’s ability to conduct ex-ante monitoring rather than just post-facto investigations.
Relevant Priority Bills in the 2026 Cycle
The DPR has approved a list of 64 priority bills for 2026, many of which intersect with the digital economy and trade protection.
| Bill Title | Relevance to Predatory Pricing | Proposing Entity |
| RUU on Textile | Protection of domestic manufacturing | Baleg DPR |
| RUU on Strategic Commodities | Regulation of high-impact imports | Baleg DPR |
| RUU on Industrial Areas | Support for domestic industrial clusters | Komisi VII |
| RUU on Consumer Protection | Long-term market sustainability | Komisi VI |
| RUU on Online Transportation | Regulating the broader gig economy | Baleg DPR |
| RUU on Digital Personal Data | Data sovereignty in trade | Baleg DPR |
The inclusion of the “Textile Bill” and the “Strategic Commodities Bill” underscores the legislative branch’s recognition that specific sectors are more vulnerable to predatory pricing than others and require tailor-made protections that go beyond general customs law.
Comparative Regional Responses to Digital Market Dominance
Indonesia’s challenges are not unique. Across the Asia-Pacific region, competition authorities are moving toward more stringent oversight of digital platforms. In 2026, the enforcement landscape is expected to become significantly more demanding.
The Move Toward Ex-Ante Regulation
Several APAC nations are adopting “ex-ante” regulations—rules that set behavioral standards for platforms before a violation occurs. Japan’s Smartphone Act, effective at the end of 2025, and similar moves in Australia and Thailand, indicate a shift toward proactive digital governance. These guidelines often cover price parity clauses, self-preferencing, and predatory pricing, providing competition authorities with the tools to intervene before domestic industries are destroyed.
In contrast, Indonesia’s reliance on “Rule of Reason” approaches for UMKM (MSME) disputes has been criticized for being too slow. Some experts suggest that predatory pricing disputes between MSMEs, such as those occurring on TikTok Shop, should be resolved through specialized out-of-court settlements involving UMKM organizations and the KPPU.
ASEAN Coordination and Digital Sovereignty
The government’s restrictive trade policies, such as Ministry of Trade Regulation No. 31/2023 which prohibited the sale of imported goods under $100 on e-commerce platforms, have had mixed results. While intended to protect MSMEs, these policies have also hindered the ability of some local businesses to access foreign raw materials and may complicate Indonesia’s negotiations for the ASEAN Digital Economy Framework Agreement (DEFA) scheduled for 2025. This highlights the need for a more sophisticated Customs Law that uses data and tariffs rather than blunt import bans to control predatory behavior.
Technical Implementation and the Future of Customs Enforcement
The urgency of revising the Customs Law is also a matter of technical necessity. In 2026, customs enforcement must evolve from a manual, port-centric activity to a data-driven, integrated system.
Integrated Data and Price Monitoring
The implementation of SPP-TDLN and PMK 37/2025 provides a foundation for what could be termed “Smart Customs”. By integrating platform transaction data with customs entry logs, the government can identify instances where the retail price of a product on a platform is significantly lower than the declared value at the time of import. This “price gap” analysis is the most effective way to prove predatory pricing in a digital context.
Algorithmic Fairness as a Trade Standard
The revision of Law No. 5 of 1999 and the Customs Law should ideally introduce the concept of “Algorithmic Fairness.” This would require global marketplace platforms to disclose or audit their recommendation algorithms to ensure that they are not systematically favoring “predatory” imports over local products through artificial price drops or visibility suppression.
Synthesis of Second and Third-Order Implications
The data suggests that the urgency of revising the 2026 Customs Law extends beyond immediate trade statistics. The “ripple effects” of predatory pricing impact national security, fiscal stability, and social cohesion.
- Deindustrialization and Middle-Income Trap: If the textile and manufacturing sectors in hubs like Majalaya continue to collapse, Indonesia risks a permanent loss of industrial expertise. This could trap the country in a “middle-income” state where it becomes a consumer of foreign high-tech and low-cost goods without developing its own manufacturing base.
- Fiscal Vulnerability: A reliance on platform-collected taxes (PPh 22) creates a fiscal dependency on the very entities that are being regulated. If platforms reduce their operations in Indonesia in response to stricter customs laws—as Ali Express did—the government may face a temporary revenue shortfall.
- Social Stability: The displacement of thousands of textile workers is a potential source of social unrest. The 2026 legislative focus on “GIG workers” and “platform workers” reflects a broader concern about the precarity of labor in the digital economy.
Strategic Recommendations for the 2026 Revision
Based on the analysis of current legislative trajectories and market realities, the following recommendations are central to the urgency of the 2026 Customs Law revision:
- Implement a “Digital Safeguard” Clause: The revised law should include a mechanism for temporary duties or platform restrictions when a sudden surge of low-priced imports is detected in a specific industrial category, similar to traditional anti-dumping safeguards but tailored for the speed of e-commerce.
- Mandate Real-Time Price Transparency: Global platforms operating in Indonesia must be required to provide the DGT and KPPU with real-time access to pricing data for imported versus domestic goods, allowing for the immediate detection of predatory price drops.
- Formalize the “Digital Dumping” Definition: Legislative language must be updated to define predatory pricing not just by “price below cost” but by “algorithmic market distortion” and “cross-border subsidy advantage”.
- Empower MSME Collective Action: The law should facilitate the ability of UMKM organizations to file “class-action” predatory pricing complaints that can be expedited through a specialized tribunal within the KPPU.
- Harmonize Tax and Customs Enforcement: The data collected under 37/2025 and Presidential Regulation 68/2025 must be utilized as an enforcement tool for customs audits to identify undervalued shipments that enable predatory retail prices.
The revision of the 2026 Customs Law is a defining moment for Indonesia’s digital sovereignty. By moving away from reactive, physical-border-centric policies and toward an integrated, data-driven framework, Indonesia can ensure that its digital transformation supports domestic industry rather than hollowing it out. The lessons from Majalaya and the proactive stance of the 2026 Prolegnas provide a clear roadmap: the protection of the domestic market in the digital age requires a legal architecture that is as sophisticated and dynamic as the platforms it seeks to regulate.