Indonesia Implements TikTok Shop Ban to help Local Business

Indonesia has enacted a ban on social media platforms facilitating goods transactions such as TikTok Shop to protect local businesses from e-commerce competition. This regulation comes in response to concerns from offline sellers. They faced threats from cheaper products on platforms like TikTok Shop. The trade minister, Zulkifli Hasan, emphasized the separation of e-commerce and social media, ensuring equality in business competition. The government of Indonesia now prohibits social commerce platforms from facilitating payment transactions. Non-compliant companies risk losing their business licenses in Indonesia.

The government also established a minimum price of $100 for certain foreign goods bought from Indonesian sellers on e-commerce platforms. Platforms like Tokopedia, Shopee, and Lazada primarily dominate Indonesia’s e-commerce market. However, TikTok Shop has gained significant market share since its 2021 launch.

TikTok expresses concerns over new policy in Indonesia

Indonesia’s President Joko Widodo has called for social media regulations to address their impact on local businesses. The move is set to affect TikTok’s e-commerce ambitions in Indonesia. Indonesia is the platform’s second-largest market globally. TikTok expressed concerns about the policy’s impact on millions of sellers and creators using TikTok Shop. Competitor Shopee stands to benefit from these regulations, according to Citi.

The ban on direct sales of goods on social media platforms will impact users like Subairi. He is one of the millions of users who rely on TikTok Shop for affordable daily necessities. While some sellers at physical stores support the ban, others like Iyal Suryadi feel that the prices on TikTok Shop are detrimental to local businesses. They believe authorities should restrict social media sales instead of imposing a complete ban.

TikTok Indonesia has pledged to comply with the new regulations but has also requested clarity from authorities regarding the impact on local sellers and creators. TikTok Shop was initially established to support micro, small, and medium enterprises (MSMEs). However, allegations of predatory pricing have arisen. This has led to profit losses for MSMEs struggling to compete with lower-priced imported goods.

Indonesia’s move reflects concerns about the impact of social commerce platforms on local businesses and data misuse, highlighting the government’s commitment to supporting domestic enterprises.