jakarta
Reuters
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Indonesia has banned e-commerce on social media platforms, the trade minister announced Wednesday, a blow to short video app TikTok, which is doubling down on Southeast Asia's largest economy to ramp up its e-commerce business.
The government said the measure, which takes effect immediately, aims to protect offline retailers and markets, adding that predatory pricing on social media platforms threatens small businesses.
The move comes just three months after TikTok made a big push to build out its e-commerce platform TikTok Shop, pledging to invest billions of dollars in Southeast Asia, especially Indonesia, over the next few years.
TikTok, owned by China's ByteDance, has 125 million monthly active users in Indonesia and is looking to turn its large user base into a major source of e-commerce revenue.
A TikTok Indonesia spokesperson said the company is “deeply concerned” about the announcement, especially how it will affect the livelihoods of the 6 million local sellers who operate on TikTok shops, saying it will pursue constructive progress. He said there was.
Indonesia's Trade Minister Zulkifli Hasan told reporters on Wednesday that the regulation aims to ensure “fair and just” business competition, and also to ensure data protection for users. he added.
He warned about social media becoming an e-commerce platform, shopping and banking at the same time.
The new regulation requires Indonesian e-commerce platforms to set a minimum price of $100 for certain products purchased directly from abroad and to ensure that all products offered are locally sourced, according to regulatory documents reviewed by Reuters. They are also required to meet standards.
Zulkifli said TikTok has one week to comply with regulations or face the threat of closure. Earlier this month, Indonesia's Deputy Trade Minister Jerry Sambuaga cited TikTok's live streaming feature as an example of people selling products on social media.
Research firm BMI said the ban only affects TikTok, and the move is unlikely to hurt growth in the digital marketplace industry.
Indonesia's e-commerce market is dominated by companies such as Tokopedia, owned by domestic high-tech company GoTo, C's Shopee, and Lazada, owned by Chinese e-commerce giant Alibaba.
E-commerce in Indonesia reached nearly $52 billion last year, 5% of which was done on TikTok, according to data from consultancy Momentum Works.
Indonesia is one of the few markets where TikTok has launched TikTok Shop, aiming to tap into the country's large user base.
Indonesia's 125 million monthly active users are roughly on par with the number of users in Europe and second only to the more than 150 million users in the United States. TikTok launched its online shopping service in the United States earlier this month.
Retailer reaction was mixed.
Fahami Rido, a vendor who sells clothing on TikTok, said the platform is a way for stores to recover from the damage caused by the coronavirus pandemic.
“Sales don’t necessarily have to be through sales.” [brick and mortar] “You can do it online or anywhere,” he said, adding, “There's still going to be a part of everything.”
But Edli, who goes by only her first name and sells clothing at a major wholesale market in Jakarta, agreed with the regulation and stressed that there should be limits on products sold online.
