Chinese-owned TikTok to stop sales in Indonesia after social media transaction ban
- While stressing it would respect local laws, TikTok Indonesia also criticised the ban by saying it would harm millions of Indonesian sellers who used the app
- Firms who did not comply with the ban on goods transactions would first be warned and then lose their licence to operate in Indonesia
Indonesia’s potential ban on social media sales could hit TikTok ‘live’ sellers
The government has said the ban, imposed last week, is aimed at protecting offline merchants and marketplaces, adding that predatory pricing on social media platforms is threatening small and medium-sized enterprises.
It was unclear from the statement whether TikTok will create a new e-commerce app, separate from its social media app.
TikTok’s decision is in line with the government’s grace period to comply with the new rule at one week, to avoid the threat of closure.
Indonesia’s ‘TikTok beggars’ spark concerns of exploitation
The new regulation is yet another setback for TikTok, which has faced intense scrutiny in the United States and other nations in recent months over users’ data security and the company’s alleged ties to Beijing.
Indonesia is one of the largest markets for TikTok Shop and was the first to pilot the app’s e-commerce arm.
Calls have grown in recent months for a regulation governing social media and e-commerce, with offline sellers seeing their livelihoods threatened by the sale of cheaper products on TikTok Shop and other platforms.
Indonesia last week announced sweeping regulations which bars social commerce companies from handling direct payments for online purchases – is part of newly tightened trade regulations aimed at ensuring local e-commerce services, such as GoTo’s Tokopedia, won’t be squeezed out.
We need to be careful with e-commerce. It can be very good if there are regulations but can turn bad if there aren’t any regulations
Indonesia also seeks to keep its 64.2 million micro, small and medium enterprises that contribute 61 per cent of its gross domestic product from getting hurt by social commerce companies.
Indonesian Trade Minister Zulkifli Hasan said firms who did not comply with the ban on goods transactions would first be warned and then lose their license to operate in Indonesia.
“E-commerce cannot become social media. It is separated,” he told reporters last week.
Hasan said social media companies could advertise products but not facilitate transactions for them on their platforms, saying the decision was taken to protect small- and medium-sized businesses.
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Outcry among TikTok sellers after Indonesia bans transactions on social media platforms
While stressing it would respect local laws, TikTok Indonesia also criticised the ban by saying it would harm millions of Indonesian sellers who used the app.
Indonesia’s e-commerce market is dominated by platforms such as Tokopedia, Shopee and Lazada but TikTok Shop gained a significant market share since launching in 2021.
Indonesia, with 125 million users, is TikTok’s second-largest global market after the United States, according to company figures.
Indonesia is the first and largest market for TikTok Shop, and online shopping has become the social media app’s fastest-growing feature, with a burgeoning fan base in the country. TikTok started the shopping feature in Indonesia in 2021 and its instant success has encouraged it to expand into online retailing in other markets, including the US.
With the new rule, Indonesia is the first country in Southeast Asia to push back against TikTok. Navigating this conflict with Indonesia will be pivotal for the company as governments across the world assess how Southeast Asia’s largest nation moves to curb the social media giant’s burgeoning e-commerce presence, just months after TikTok’s chief executive Shou Zi Chew visited Jakarta, pledging to pour billions of dollars into Southeast Asia in the years ahead.
