Indonesia implemented a sweeping ban on October 4, 2023, prohibiting social media platforms from conducting direct e-commerce transactions, which effectively halted operations for TikTok Shop across the country. Trade Minister Zulkifli Hasan announced the regulation, which specifically targets social commerce platforms that merge social networking with online shopping, citing concerns over unfair pricing practices and harm to local small businesses. The new rule, formalized as Trade Minister Regulation No. 31 of 2023, mandates that social media companies cannot function as e-commerce platforms.
Social media and e-commerce functions must now operate as separate entities. TikTok, which boasts over 125 million users in Indonesia, must restructure its e-commerce operations away from its social media app or face penalties.
TikTok Shop launched in Indonesia in 2021 and rapidly became one of the nation’s largest online marketplaces. The platform processed transactions directly within the TikTok app, enabling users to purchase items without leaving the social media environment. This integration was the primary target of the new regulation. Speaking at an October 3 press conference, Trade Minister Zulkifli Hasan stated, “Social commerce platforms must separate their e-commerce features from their social media features.
This is to prevent the misuse of personal data and to ensure fair competition with local businesses.” He added that the regulation aims to protect Indonesia’s approximately 64 million micro, small, and medium enterprises from being undercut by heavily subsidized foreign platforms. TikTok confirmed its compliance with the regulation.
In an October 4 statement, the company said, “We respect the laws and regulations in Indonesia. We will comply with the new regulation and work with the government to find the best path forward.” The company did not detail its restructuring plans but noted it had invested billions of dollars in Southeast Asia and intended to remain in the market. Local merchants and trade associations had long complained about TikTok Shop’s aggressive pricing, supported by heavy subsidies from parent company ByteDance.
The Indonesian E-Commerce Association reported that over 30% of its members experienced revenue declines since TikTok Shop’s expansion. The government also cited data privacy risks, with Minister of Communication and Informatics Budi Arie Setiadi stating on October 2, “We cannot allow a platform to control both social interaction and commerce.
That creates a monopoly on user attention and data.” The regulation requires e-commerce transactions to go through separate licensed platforms subject to Indonesia’s data protection laws. Indonesia’s decision has prompted other Southeast Asian nations to review their social commerce regulations. Vietnam and Malaysia have announced reviews, while the Philippines is drafting legislation to restrict foreign-owned e-commerce platforms from undercutting local sellers.
A report from Singapore-based research firm Momentum Works estimated TikTok Shop generated $4.4 billion in gross merchandise value in Southeast Asia in 2022, with Indonesia accounting for nearly 60% of that total. TikTok previously argued its platform helps small businesses reach new customers.
In a September 2023 blog post, the company claimed over 2 million Indonesian sellers used TikTok Shop, with 70% being micro-enterprises, and that it had trained thousands of local merchants in digital marketing. To comply with the ban, TikTok is exploring options including creating a standalone e-commerce app, similar to ByteDance’s separate Douyin and Douyin Mall operations in China, or partnering with existing Indonesian platforms like GoTo Group’s Tokopedia or Bukalapak. Trade Minister Zulkifli Hasan warned on October 4, “We will not hesitate to impose sanctions on any platform that violates the regulation.
The law is clear.” Penalties include fines up to 1 billion rupiah (approximately $64,000) and suspension of business licenses.
Sources
- Indonesia Moves to Ban China-based E-commerce Platform Temu…
- Temu Faces Ban in Indonesia Over Fears of Impact on Local SMEs
