Indonesia has prohibited social commerce players like TikTok Shop from making direct transactions on social media platforms, as reported by local media Katadata.
Speaking to local reporters at the Merdeka Palace, trade minister Zulkifli Hasan said the regulation is outlined in the revised Minister of Trade Regulation No. 50 of 2020, which was signed on Monday.
The new regulation, Minister of Trade Regulation of 2023, is a major step by the government to regulate online commerce mechanisms through social media platforms, also known as social commerce.
The rules demand a separation between the functions of e-commerce and social media. It will also regulate sanction mechanisms for e-commerce platforms that are still integrated with social media services.
Earlier on Monday, President Joko Widodo said the government will issue regulations on social media e-commerce this week, a move intended to quell threats to offline markets and local small and medium enterprises (SMEs).
While the president did not mention any specific companies, TikTok Shop, the e-commerce arm of Bytedance’s social media giant TikTok, has been catching regulators’ attention over the past weeks.
In early September, Indonesia’s minister of cooperatives and SMEs Teten Masduki had expressed intentions to ban TikTok Shop, calling it a potential monopoly that could harm local MSMEs.
In addition to its short-video app, TikTok allows users to sell and buy goods on its platform. It is also reportedly trying to have its own payment system, financing, and logistics.
“India was brave to ban TikTok, why are we not? The US also banned TikTok, allowing the company to do sales but not to merge with its social media,” Masduki said.
DealStreetAsia has reached out TikTok Indonesia for comment.
Indonesia is TikTok’s second-largest market globally after the US, with an estimated 119 million users in 2022. It was also the first country in SE Asia where it launched its e-commerce business, TikTok Shop, in April 2021. Today, TikTok Seller is among the top 10 shopping apps in Indonesia based on time rank, according to Data.ai.
TikTok Pte Ltd, the Singapore-registered entity of TikTok, reported a total comprehensive loss of $2.65 billion for the financial year ended December 31, 2022, due to increased spending in some areas, according to the company’s regulatory filings.
However, this aggressive spending also helped the company boost its revenues by 172% to $5.39 billion in 2022. E-commerce was the fastest-growing segment as revenues multiplied about 95 times from $1.88 million in 2021 to nearly $180 million in 2022.
TikTok Pte Ltd includes subsidiaries in Southeast Asia, New Zealand, Korea, Turkey, Israel, Russia, India, and more recently, Kazakhstan.