Indonesia has banned e-commerce transactions on social media platforms, in what the government says is a move to protect offline merchants, marketplaces, and small and medium-sized businesses from predatory pricing on social media.
The ban comes as a blow to some major social media platforms, especially Chinese short video app, TikTok, which pledged a billion-dollar investment in Southeast Asia just three months prior, in its bid to use Indonesia’s economy to boost its e-commerce platform, TikTok Shop.
The ByteDance-owned social media platform, has 125 million active monthly users in Indonesia. A TikTok Indonesia spokesperson has since stated that the social media company was “deeply concerned” about the ban, and “how it would impact the livelihoods of the 6 million” local sellers active on TikTok Shop.
Indonesia’s Trade Minister, Zulkifli Hasan informed reporters on Wednesday, 27th September, that the regulation seeks to ensure “fair and just” business competition, adding that data protection of social media users was another goal. He warned against letting social media become an e-commerce platform, shop, and bank simultaneously.
As per the new regulation e-commerce platforms in Indonesia are required to set a minimum price of $100 for certain items that are directly purchased from abroad, and that all products offered should meet local standards. The trade minister has given TikTok one week to comply with the regulation or risk closure.
E-commerce transactions in Indonesia amounted to nearly $52 billion in 2022, five percent of which took place on TikTok, according to data from consultancy, Momentum Works. Indonesia is among the few markets where TikTok has launched TikTok Shop, as it seeks to leverage its large user base in the country.
Reactions from Indonesian retailers about the regulation were lukewarm. Some, who sold their merchandise on TikTok, felt it was unnecessary, especially since the platform gave them a cheaper means to recover their businesses after COVID-19 struck. Offline traders, however were more favourable of it since the online market is considered by many to be an issue.