Indonesia bans e-commerce transactions on social media

JAKARTA (Reuters) – Indonesia has implemented a ban on e-commerce transactions conducted on social media platforms, according to the country’s trade minister. This move is aimed at protecting traditional retail and is expected to impact primarily the short video platform, TikTok, and its shopping platform.

The Indonesian government states that the purpose of this ban is to safeguard physical merchants and marketplaces in the country’s largest economy. It argues that predatory pricing on social media platforms poses a threat to small and medium-sized enterprises. Trade Minister Zulkifli Hasan emphasized that the regulation, effective immediately, seeks to ensure fair and just competition in the business sector and to protect user data.

Minister Hasan cautioned against allowing social media platforms to become all-in-one e-commerce platforms, shops, and banks simultaneously.

The new regulation also stipulates that e-commerce platforms in Indonesia must establish a minimum price of $100 for certain items purchased directly from abroad. Furthermore, all products offered for sale must comply with local standards, as stated in the reviewed regulation document.

Although TikTok was not specifically mentioned by Hasan, his deputy, Jerry Sambuaga, referred to TikTok’s “live” features as an example of social media commerce.

BMI, a subsidiary of Fitch Solutions, anticipates that this ban on e-commerce transactions will primarily impact TikTok. The analytics firm explains that TikTok relies heavily on social e-commerce, although it believes that the ban will not harm the overall growth of the digital marketplace industry.

A spokesperson for TikTok Indonesia did not immediately respond to a request for comment. However, on Monday, the spokesperson called on the government to consider the livelihoods of the more than six million local sellers who actively use TikTok Shop.

TikTok claims to have 325 million monthly active users in Southeast Asia, with 125 million users in Indonesia alone. These figures are on par with TikTok’s user base in Europe and not far behind its U.S. user figures of 150 million.

In 2022, Indonesia accounted for nearly $52 billion in e-commerce transactions, according to Momentum Works consultancy. Approximately 5% of that total occurred on TikTok, primarily through live-streaming.

TikTok is owned by the Chinese tech company ByteDance.

(Reporting by Dewi Kurniawati, Stefanno Sulaiman, Fransiska Nangoy, Stanley Widianto; Editing by Kanupriya Kapoor, Alexandra Hudson)