GR Number 3 of 2026 Tightens Direct Selling Business, Prohibits the Use of Virtual Offices

Introduction

On 15 January 2026, the Government enacted Government Regulation Number 3 of 2026 on the Amendment to Government Regulation Number 29 of 2021 on the Administration of the Trade Sector (“GR 3/2026”), which took effect on the same date. This regulation amends a number of provisions in Government Regulation Number 29 of 2021 on the Administration of the Trade Sector (“GR 29/2021”) in order to adapt to current trade dynamics. These amendments are intended to ensure the effectiveness of export and import control, provide legal certainty in the distribution of goods, and strengthen supervision of trade activities following the issuance of risk-based business licensing regulations.

Contextually, the issuance of GR 3/2026 constitutes a response to the restructuring of ministries within the Merah Putih Cabinet, in particular the separation of coordination between the economic sector and the food sector. The Government considers it necessary to align trade policies with the new ministerial structure in order to address specific challenges in controlling food and non-food commodities.

 

Comparison

The following is a comparison between GR 3/2026 and GR 29/2021:

 

Key Provisions

Separation of Coordination Authority for Food and Non-Food Commodities

Under Article 19A, coordination meetings to determine commodity balances or trade policies are now divided into two categories, namely those led by the Coordinating-Minister for Economic Affairs for non-food commodities and those led by the Coordinating-Minister for Food Affairs for food commodities. Both coordinating ministers are required to coordinate in determining the classification of commodities as food or non-food.

Tightening of Direct Selling Regulations

Article 51 is amended by adding several activities that are prohibited for companies engaged in direct selling. Direct selling companies are now prohibited from selling services, as well as selling and/or marketing goods with exclusive distribution rights that have been declared invalid. In addition, Article 51 letter n prohibits the use of a business address or place of business in the form of a virtual office or co-working space that does not have a permanent physical workspace.

Prohibition of Pyramid Schemes

Companies engaged in Direct Selling are also prohibited from establishing marketing networks using Pyramid Schemes. Pursuant to Article 51A, an activity is categorized as a Pyramid Scheme if it meets the following criteria:

1. Attracting and/or obtaining profits from membership fees or recruitment as Direct Sellers in an unreasonable manner;
2. Accepting membership registrations using the same name and identity more than once;
3. Granting commissions and/or bonuses derived from membership fees or the recruitment of Direct Sellers; and/or
4. Granting commissions and/or bonuses from marketing programs that are not derived from the sale of goods.

These four criteria were previously regulated under Article 51 letters f–i of GR 29/2021 as prohibited activities for companies engaged in Direct Selling, but are now regulated as defining criteria of a Pyramid Scheme.

Warehouse Classification and Administration

Article 60 classifies Closed Warehouses into four categories:

1. Category A: Area of 100 m²–1,000 m² or storage capacity of 360 m³–3,600 m³;
2. Category B: Area of more than 1,000 m²–2,500 m² or storage capacity of more than 3,600 m³–9,000 m³;
3. Category C: Area of more than 2,500 m² or storage capacity of more than 9,000 m³; and
4. Category D: In the form of silos or tanks with a minimum storage capacity of 762 m³ or 400 tons.

Pursuant to Article 64, every owner, manager, or lessee of a Warehouse who stores goods intended for trade is required to maintain administrative records containing the quantity of goods stored, as well as the quantity of goods entering and leaving the warehouse.

Abolition of Limitations on Ownership of Modern Retail Outlets

Modern retail businesses are no longer required to comply with limitations on the ownership of modern retail outlets, as Articles 98 paragraphs (4) and (5) have been revoked.

Revocation Provision

Based on Article 178, GR 3/2026 revokes Government Regulation Number 33 of 2019 on the Imposition of Administrative Sanctions on Warehouse Owners Who Fail to Register Their Warehouses (“GR 33/2019”). Previously, GR 29/2021 only revoked Article 2 of GR 33/2019.

 

Closing

GR 3/2026 strengthens the governance of the Direct Selling sector by prohibiting the use of virtual offices and the sale of services. At the same time, this regulation provides flexibility through the abolition of limitations on the ownership of modern retail outlets, which is balanced by stricter supervision in the form of mandatory monthly administrative reporting and the imposition of sanctions in the form of blocking electronic systems and/or other internet media used for online trading activities against violators.