The Indonesian government announced the new regulation, which prohibits social media companies from facilitating sales of products on their platforms, in a bid to protect small businesses from e-commerce competition, accusing the popular apps and websites of predatory pricing.
Announcing the measures, Indonesia’s trade minister Zulkifli Hasan said, “Now, e-commerce cannot become social media. It is separated.”
He further told social media platforms, they had a week to comply with the new rules or risk losing their licence to operate in the country.
The announcement came after Indonesia’s President Joko Widodo said last month, “We need to be careful with e-commerce. It can be very good if there are regulations but can turn bad if there aren’t any regulations.”
TikTok Reacts
Responding to the same, TikTok said it will halt its online retail operation in Indonesia on Wednesday to comply with the country’s decision to ban e-commerce transactions on social media platforms.
“Our priority is to remain compliant with local laws and regulations. As such, we will no longer facilitate e-commerce transactions in TikTok Shop Indonesia by 17:00 GMT+7, October 4, and will continue to cooperate with the relevant authorities on the path forward,” the Social Media player noted in an official statement.
In an unexpected announcement from the government that came into force last week, TikTok, and all other social media platforms, are compelled to split payments from shopping or risk having their licenses revoked. The Indonesian government only allows social media to facilitate promotions, not transactions. Till now, TikTok is said to be the only social media company allowing for direct transactions and product promotions on its platforms.
Impact in Digits
As per available sources, it is estimated that approximately 125 million people in Indonesia use the platform regularly. Apparently, it is also to be noted that there are around 6 million sellers and millions more creators who earn money using TikTok Shop to promote goods. Moreover, by the end of 2022, TikTok Shop had become the fifth-largest e-commerce platform in Indonesia, according to data from Singapore-based venture, Momentum Works.
On the other hand, the recently released statistical reports has stated that Indonesian e-commerce business is expected to produce $95 billion online retail sales by 2025, up from $25 billion in 2019. On this ground, TikTok nearly had a dominance over most of the country’s e-commerce sites.
Concurrently, TikTok has also been struggling with the US, Europe, and India over national security concerns.
