Artificial Intelligence Legal Setting Model in MSME (UMKM) Business Activities in Indonesia

Abstract

The development of Artificial Intelligence (AI) has driven the transformation of Micro, Small, and Medium Enterprises (MSMEs) business activities in Indonesia through increased operational efficiency, data-driven decision-making, digital marketing, and expanded market access. However, the use of AI also raises various legal problems, including the lack of comprehensive regulations regarding the use of AI in business activities, the unclear division of legal responsibilities between business actors, AI technology providers, and digital platform operators, the risk of personal data protection violations, unfair business competition practices, and weak protection for MSME actors and consumers. This condition shows that there is a legal gap in the Indonesian business legal system that has the potential to cause legal uncertainty. This study aims to analyze the implementation of business law regulations on the use of AI in MSME business activities, examine the legal responsibility of the parties for losses arising from the use of AI, and formulate a business law regulatory model that is able to accommodate the use of AI in a safe, fair, and accountable manner. The research uses normative legal research methods with a statute approach, a conceptual approach, and a comparative approach. The legal materials used consist of primary, secondary, and tertiary legal materials that are analyzed qualitatively using prescriptive methods. The results of the study show that the legal regulation regarding AI in MSME business activities in Indonesia is still sectoral and has not provided adequate legal certainty related to AI governance, division of legal responsibilities, algorithm transparency, AI system audits, and data and consumer protection. This condition results in not optimal legal protection for MSME actors in utilizing AI. This research offers  a risk-based regulatory  model of business law that integrates the principles of legal certainty, fairness, accountability, transparency, data security, consumer protection, healthy business competition, and technological innovation. The proposed model consists of six main pillars, namely risk-based regulation, the implementation of good AI governance, proportional division of legal responsibilities, the obligation of AI Impact Assessment and algorithm audits, strengthening personal data protection and cybersecurity, and proportionate regulation for MSMEs. The model is expected to be able to be the basis for the formation of AI regulations in Indonesia that support the creation of a safe, fair, and sustainable digital business ecosystem.