Indonesia proceeds with ban on e-commerce transactions via social media

Indonesia has banned e-commerce transactions on social media platforms, the trade minister said on Wednesday, in a move intended to protect traditional retail and which will mostly impact short video platform TikTok and its shopping platform.

The government says the move is aimed at protecting offline merchants and marketplaces in Southeast Asia’s biggest economy, adding that predatory pricing on social media platforms is threatening small and medium-sized enterprises.

Trade Minister Zulkifli Hasan told reporters the regulation, which takes effect immediately, is intended to ensure “fair and just” business competition, adding it was intended also to ensure data protection of users.

He warned of letting social media become an e-commerce platform, shop, and bank simultaneously.

The regulation also requires e-commerce platforms in Indonesia to set a minimum price of $100 for certain items directly purchased from abroad, according to the regulation document reviewed by Reuters, and all products offered should meet local standards.

Zulfikli did not mention TikTok, although his deputy Jerry Sambuaga named TikTok’s “live” features as an example of people selling goods on social media.

BMI, a unit of Fitch Solutions, said earlier on Wednesday that TikTok will be the only business affected by the transaction ban because its model relies on social e-commerce, although “it will not harm the digital marketplace industry’s growth.”

A TikTok Indonesia spokesperson did not immediately respond to a request for comment on Wednesday. On Monday the spokesperson said the government should consider “the livelihood of more than six million” local sellers active on TikTok Shop.

The company said its app had 325 million Southeast Asian users that were active every month, and 125 million of them were in Indonesia – on a par with its user figures for Europe and not too far behind the US, where it has 150 million.

According to data from consultancy Momentum Works, Indonesia, with a population of more than 270 million, accounted for nearly $52 billion worth of e-commerce transactions last year. Of that, 5 percent took place on TikTok, principally through live-streaming, it said.

Chinese tech company ByteDance owns TikTok.