On October 4, 2023, Indonesia enacted a rule that stops social media platforms from handling e‑commerce transactions directly inside their apps. The measure, announced by Trade Minister Zulkifli Hasan, forces companies such as TikTok to split their shopping features from their social networking functions or risk penalties. The regulation, formally Trade Minister Regulation No. 31 of 2023, states that social media and e‑commerce must operate as separate entities.
It was introduced after officials raised worries about predatory pricing, possible misuse of personal data, and the pressure placed on the country’s estimated 64 million micro, small and medium enterprises. TikTok Shop, which began operating in Indonesia in 2021 and quickly became one of the nation’s largest online marketplaces, was the primary focus.
The service allowed users to buy products without leaving the TikTok app, a model the government said undermined fair competition. At a press conference on October 3, Zulkifli Hasan explained, “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 rule aims to shield local sellers from being undercut by heavily subsidized foreign platforms. TikTok responded on October 4 with a statement saying, “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 how it would restructure its operations but noted it had invested billions of dollars across Southeast Asia and intends to stay in the market. Local merchants and trade groups had long complained that TikTok Shop’s aggressive pricing—backed by substantial subsidies from its parent ByteDance—made it impossible for small businesses to compete.
The Indonesian E‑Commerce Association reported that more than 30 % of its members had seen revenue drops since the service expanded. Data privacy also featured in the justification. Minister of Communication and Informatics Budi Arie Setiadi said 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 new rule requires that any e‑commerce transaction be processed through a licensed platform that must comply with Indonesia’s data‑protection laws. The decision has prompted a regional reassessment of social commerce.
Vietnam and Malaysia have announced reviews of their own rules, while the Philippines is drafting legislation to curb foreign‑owned e‑commerce platforms that undercut local sellers. Analysts from the Singapore‑based firm Momentum Works estimated that TikTok Shop generated $4.4 billion in gross merchandise value across Southeast Asia in 2022, with Indonesia contributing roughly 60 % of that total.
TikTok has previously argued that its platform helps small businesses reach new customers, citing a September 2023 blog post that claimed over two million Indonesian sellers used TikTok Shop, 70 % of whom were micro‑enterprises, and that the company had trained thousands of local merchants in digital marketing. To comply, TikTok is considering options such as launching a standalone e‑commerce app—similar to the Douyin and Douyin Mall split in China—or partnering with an existing Indonesian marketplace 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 for non‑compliance include fines of up to one billion rupiah (about $64,000) and possible suspension of business licenses. Small‑business owners have expressed cautious optimism.
Rina Wulandari, a Jakarta‑based clothing seller who used TikTok Shop, said, “The ban hurts in the short term. But in the long run, it might help us compete on a level playing field.
We just need time to adjust.” Overall, the rule marks a shift in Indonesia’s digital‑economy policy, prioritising the protection of local enterprises and data privacy over the convenience of integrated social commerce. Whether other nations will follow a similar approach remains uncertain, but the debate over the role of social media in online shopping is now firmly on the agenda across Southeast Asia.
