What Happens If a Company Violates the PDP Law? Here Are the Sanctions

In their daily operations, companies collect and process data on a large scale: customer data from marketing activities, employee data in HRIS, vendor and business partner data, as well as CCTV footage in offices and factories.

All of these fall within the scope of personal data protection as regulated under Law Number 27 of 2022 on Personal Data Protection, commonly known as the PDP Law (UU PDP).

The problem is that many companies still view this issue as merely an IT matter. In practice, across multiple sectors, legal exposure often stems from weak governance, not just technological shortcomings.

Boards of Directors frequently only realize that violating the PDP Law is not just about data breaches, but about legal, financial, and reputational risks that can attach directly to the management.

So, what really happens if a company violates the PDP Law? Here is the answer.

Types of PDP Law Violations

The most common forms of PDP Law violations in companies include collecting data without a lawful basis, processing without valid consent, failure to protect data from breaches, and failure to fulfill data subject rights.

In practice, these violations are often not intentional, but arise because systems and procedures are not properly documented.

Below are common examples found in practice:

1. Data Collection Without a Lawful Basis

A frequent case occurs when a marketing team purchases a prospect database from a third party and conducts a blast campaign without ever obtaining consent from the data subjects.

Legally, this constitutes processing without a valid legal basis. In fact, the PDP Law requires a clear processing basis, such as valid consent or the fulfillment of contractual obligations.

Legally, this constitutes processing without a valid legal basis. The PDP Law requires a clear lawful basis for processing, such as valid consent or fulfillment of contractual obligations.

Data collected without such basis already constitutes a violation, even before the data is used.

2. Data Breaches Due to Negligence

This is the biggest concern. Not only because of sophisticated cyberattacks, but often due to simple negligence such as employees storing customer data on personal laptops without encryption, or HR departments sending employee data to insurance vendors via unprotected email.

This is the biggest nightmare. Not only because of sophisticated hacking, but often due to trivial matters like employees storing customer data on personal laptops without encryption, or the HR department sending employee data to insurance vendors via regular email without protection.

Negligence like this, if proven to be the cause of a breach, falls into the category of serious violations. In many cases, companies do not have adequate access logs to conduct investigations.

3. Processing Data Beyond the Initial Purpose

Many companies use customer data for purposes that were never disclosed at the time of collection. For example, employee data collected for HR administration is later used for additional analysis without further notification.

This violates the PDP Law, which requires specific and transparent purposes for data collection and processing.

4. Failure to Fulfill Data Subject Rights

The PDP Law grants data owners the right to access, delete, correct, and restrict the processing of their personal data. For instance, a customer or former employee requests their personal data to be deleted because they no longer work at the company.

Ignoring such requests constitutes an administrative violation that may lead to legal disputes.

5. Failure to Implement Adequate Technical and Organizational Safeguards

Companies are required to implement adequate technical and organizational security measures to protect personal data.

Failure may include outdated security systems, lack of encryption for sensitive data, or poor management of employee access to customer databases.

Administrative Sanctions (Primary Risk for Companies)

Administrative sanctions are the fastest and most tangible risk for companies when a PDP Law violation occurs. Unlike criminal sanctions which require a longer evidentiary process, administrative sanctions can be imposed by the supervisory authority in a relatively shorter time after an investigation.

Article 57 paragraph (2) of the PDP Law stipulates the tiered types of these sanctions. Administrative forms can include:

• Written warning. Usually issued if the company starts to make improvements.
• Temporary suspension of personal data processing activities. Usually imposed by the regulator if warnings are ignored or the violation is considered severe.
• Deletion or destruction of personal data. For companies that rely on data as an asset, this order can eliminate significant business value.
• Administrative fines.

Administrative Fines

The highest administrative sanction is an administrative fine, the amount of which is quite substantial, specifically up to 2% of annual revenue. This amount will significantly impact the company’s cash flow and profit.

In many cases, many boards of directors only realize that this figure is far greater than the investment needed to build a PDP Law compliance system from the start.

Not to mention the business disruption due to sudden audits and regulatory pressure that consumes management’s time. The operational impacts can include:

Operational impacts may include:

• Marketing activities can be temporarily halted.
• The process of onboarding new customers is hindered.
• IT systems must be thoroughly audited in a short time.
• The Board of Directors is summoned to provide clarification.

The temporary suspension of data processing causes disruption to customer services for weeks. The costs of remediation, forensic consultants, and crisis communication often even exceed the fine itself.

Criminal Sanctions for Corporations

Under certain conditions, PDP Law violations can lead to criminal sanctions for the corporation and its management. This is the crucial point that often escapes the attention of directors: criminal risk does not only affect “individuals” on the ground, but can also be extended to the leadership ranks.

The criminal threats vary widely, ranging from imprisonment to fines. For example, Article 68 of the PDP Law threatens perpetrators of identity theft with a maximum imprisonment of 6 years and/or a fine of IDR 6 billion.

However, what is more threatening to corporations is Article 70 of the PDP Law. If a criminal act is committed by a corporation, the criminal fine imposed can be up to 10 times the maximum threatened fine.

Furthermore, Article 70 paragraph (1) explicitly states that criminal liability does not stop at the legal entity but can also be imposed on management, controllers, order givers, and beneficial owners.

This means that if there is proven intent or gross negligence in supervision that causes significant loss, the board of directors can be held personally criminally liable.

In the context of governance, this is an extension of the directors’ fiduciary duty to safeguard company assets, including the entrusted personal data.

Non-Legal Impacts (Reputational Damage)

Reputational damage often costs more than administrative fines.

In the dynamics of the Indonesian market, personal data breaches almost always become media news and go viral on social media. Once a company’s name is associated with personal data protection violations, public trust can plummet drastically.

Concrete impacts include:

• Loss of customer trust.
  Customers become hesitant to provide additional data, or even choose to switch to competitors perceived as safer.
• Pressure from investors and shareholders.
  Investors will question internal control systems and risk management. In some cases, company valuations are affected due to increased risk perception.
• Disruption of business relationships.
  Business partners may request additional audits or even delay cooperation until the company demonstrates system improvements.
• Crisis communication costs.
  The company must allocate significant budgets for public relations, notification to data subjects, and reputation recovery.

In practice, a damaged reputation takes years to restore. Fines can be paid in a single transaction, but market trust cannot be recovered that quickly.

Mitigation Tips: How to Avoid PDP Law Sanctions

Companies can avoid sanctions by building a structured and documented data governance system.

Privacy compliance with the PDP Law does not mean eliminating all risks, but ensuring that the company can prove it has carried out its obligations reasonably and proportionally.

Here are steps to comply with the PDP Law:

1. Data Mapping and Classification

First, conduct data mapping and classification. Before protecting data, the company must know what personal data it holds, where it comes from, for what purpose it is used, and with whom the data is shared.

This mapping is the foundation of all compliance policies. Ensure to distinguish between general personal data and specific personal data types as regulated by the PDP Law.

2. Appointment of a Supervisory Function (PDP Officer)

Second, appoint a supervisory function, especially a Personal Data Protection Officer (DPO/PDPO). If your data processing activities are large-scale or for public services, the PDP Law mandates the appointment of a DPO. This function is crucial to ensure compliance is sustainable, not just a one-time project.

3. Clear data processing SOPs

Third, develop and enforce data processing SOPs. These SOPs must cover the entire data lifecycle, from documented consent mechanisms, data update procedures, to data retention and deletion schedules.

Incorrect or weak SOPs can actually be a factor that aggravates the company in the eyes of the law. With documented SOPs, the company will be able to easily demonstrate compliance.

4. Agreements with vendors (Data Processing Agreement).

Fourth, strengthen contracts with vendors. Many breaches occur with third parties. Ensure every vendor processing data on behalf of the company is contractually bound to comply with equivalent security standards, and grant audit rights to verify this. Legal responsibility can still attach to the data controller.

5. Mechanism for fulfilling data subject rights

Fifth, establish official channels for access, correction, or deletion requests. Set internal SLAs to ensure requests are not ignored.

6. Internal cross-functional training

Sixth, conduct training or education for employees as an initial step in building a PDP Law-compliant culture. Ensure every team, including non-IT teams, understands the legal implications of data processing. Regular training for marketing, HR, legal, and procurement is crucial as they are the front line of compliance.

7. Regular audits and monitoring

Conduct periodic compliance tests and penetration tests. Report the results to the board of directors so that data protection risks are included in the company’s risk management agenda. This approach transforms compliance from mere documents into a living internal control system.

Conclusion

Violations of the PDP Law carry three major risks: legal sanctions, financial losses, and long-term reputational damage.

Administrative sanctions can disrupt operations and cash flow. Criminal sanctions may extend to corporate officers. Reputational damage can erode trust among customers, investors, and business partners.

From a strategic risk management perspective, compliance with Undang-Undang Nomor 27 Tahun 2022 tentang Pelindungan Data Pribadi is not merely a regulatory obligation. It is a safeguard for one of the company’s most valuable assets: trust.

Companies that build robust personal data governance systems not only avoid PDP sanctions and fines, but also strengthen the foundation of long-term business sustainability.

FAQ: What Happens If a Company Violates the PDP Law?