On October 4, 2023, Indonesia implemented a ban on social media platforms facilitating direct e-commerce transactions, effectively halting operations for TikTok Shop within the country. The regulation, formalized as Trade Minister Regulation No. 31 of 2023, was announced by Trade Minister Zulkifli Hasan.
It prohibits social media companies from functioning as e-commerce platforms, requiring that these two functions remain separate entities. The primary target of the new rule is TikTok Shop, which launched in Indonesia in 2021 and rapidly became one of the nation’s largest online marketplaces. The platform allowed users to complete purchases directly within the TikTok app without leaving the social media environment.
With over 125 million users in Indonesia, TikTok now faces the choice of separating its e-commerce operations from its social media app or incurring penalties. Trade Minister Zulkifli Hasan stated during an October 3 press conference that the regulation is designed to prevent misuse of personal data and ensure fair competition with local businesses.
He emphasized that the measure aims to protect Indonesia’s approximately 64 million micro, small, and medium enterprises from being undercut by heavily subsidized foreign platforms. The government cited concerns over predatory pricing and data privacy as driving factors behind the ban. Local merchants and trade associations had long complained that TikTok Shop’s aggressive pricing, supported by subsidies from parent company ByteDance, made it impossible for small businesses to compete. The Indonesian E-Commerce Association reported that over 30% of its members experienced revenue declines following TikTok Shop’s expansion.
Communication and Informatics Minister Budi Arie Setiadi noted on October 2 that allowing a platform to control both social interaction and commerce creates a monopoly on user attention and data. TikTok confirmed it would comply with the regulation.
In an October 4 statement, the company said it respects Indonesian laws and regulations and will work with the government to find the best path forward. The company did not specify how it would restructure but noted its significant investments in Southeast Asia and intention to remain in the market.
Regional Repercussions and Compliance Options
Indonesia’s decision has prompted broader discussions across Southeast Asia. Vietnam and Malaysia have announced reviews of their social commerce regulations, 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 that 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 has previously argued that its platform helps small businesses reach new customers. In a September 2023 blog post, the company claimed that over 2 million Indonesian sellers used TikTok Shop, with 70% of them being micro-enterprises.
The company also reported training 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 how ByteDance operates Douyin and Douyin Mall separately in China—or partnering with an existing Indonesian e-commerce platform such as GoTo Group’s Tokopedia or Bukalapak.
Trade Minister Zulkifli Hasan warned on October 4 that the government will monitor compliance closely and impose sanctions on violators. Penalties for non-compliance include fines of up to 1 billion rupiah (approximately $64,000) and suspension of business licenses. The regulation marks a significant shift in Indonesia’s approach to the digital economy, prioritizing protection of local businesses and data privacy over integrated social commerce.
