TikTok has been embroiled in a whirlwind of regulations around the world, hampering its global ambitions. In the US, the popular social media app owned by ByteDance faces a ban in the US unless its Beijing-based parent company sells its US operations, and in Indonesia, TikTok is being banned from its e-commerce business as a shopping arm. I had to temporarily retreat. I encountered many obstacles.
In September last year, Indonesia banned direct commerce on all social media platforms to ensure “fair and impartial” competition, protect user data and ensure the survival of small and medium-sized mortar and brick sellers. announced that it would be banned. A traditional wholesale market in ASEAN's largest economy. The TikTok shop then had to close in October last year. But following a $1.5 billion investment in Tokopedia, GoTo's e-commerce arm, the social media platform is likely to restart its online shopping operations in Southeast Asia's largest economy.
What do the new rules mean for TikTok SHOP?
The September order was issued as part of the Ministry of Trade Regulation No. 31/2023 on the licensing, advertising, development and supervision of operators in trade through electronic systems (MOT Reg 31/2023). As a result, TikTok Shop, the e-commerce arm of the Chinese-owned video-sharing app, was forced to temporarily close in October.
Naufal Filindi, data protection and TMT partner at Indonesian company GHP, believes the government considers such commercial transactions on social media platforms to be “too disruptive” for small, medium and micro businesses.
He further clarified that although there was no explicit prohibition on TikTok Shop conducting e-commerce activities directly within the platform, the shopping section falls under the newly introduced category of “social commerce” platforms. These platforms include social media organizers that provide features, menus, and/or facilities that allow sellers to offer their products and services. ”
According to this regulation, social commerce platforms are regulated as a form of business model for electronic system trading organizers (PPMSEs). PPMSE is a business entity that provides the electronic communication facilities used for trading transactions. However, this type of business entity is prohibited from facilitating payment transactions on electronic systems.
“TikTok Shop's social commerce functionality includes not only the provision of goods and/or services, but also transactional aspects such as (i) the purchase of such goods and/or services, (ii) payment facilitation, and (iii) ) Delivery of purchased goods and services,” explains Fileindi. “Social commerce PPMSE can only display offers for goods and services, but the transaction must be carried out on another platform (i.e. redirected to the e-commerce platform or the seller's landing page),” he said. added.
Is a merger between TIKTOK and TOKOPEDIA the solution?
To remain compliant with trade regulations, TikTok will need to form a new business entity, obtain an e-commerce license from the Department of Trade, and create a standalone TikTok Shop app independent of the social media platform.
To maintain Indonesia's lucrative e-commerce market, TikTok has chosen to take control of a 75 percent stake in Tokopedia, the e-commerce arm of Jakarta-based technology group GoTo. As part of the deal, Tokopedia will acquire TikTok Shop's Indonesia operations for $340 million to expand its e-commerce platform.
“The acquisition of Tokopedia by TikTok was, macroscopically, primarily undertaken to address concerns related to MOT Reg 31/2023 by facilitating transactions through Tokopedia,” Fileindi said.
But he doesn't think TikTok's acquisition of Tokopedia is an attempt to circumvent Indonesia's regulations. Rather, it should be seen as an effort to comply with relevant regulations in order to continue operating businesses in the country, he said.
Trading through the TikTok Shop resumed last December after the acquisition of Tokopedia, but there were some notable changes to trading after the deal.
“The main difference between Tokopedia pre-acquisition and post-acquisition transactions is the use of Tokopedia’s systems in facilitating these transactions (i.e., transactions through the TikTok Shop have “PT “Managed Services” statement, he explains.
However, the merger appears to have failed to protect TikTok from ministerial scrutiny. In February, Indonesia's Minister of Cooperatives and Small and Medium Enterprises Teten Masduki claimed that TikTok shops continue to violate local regulations by allowing direct transactions on social media. Trade Minister Zulkifli Hasan also said that he would monitor the partnership between TikTok Shop and Tokopedia to ensure that there are no further violations.
“MOT is of the view that this workaround is still not compliant with MOT Reg 31/2023 as the transaction is not redirected to Tokopedia and is still done through the TikTok Shop. MOT's allegation of non-compliance stemming from the fact that transactions are facilitated within the app from a front-end perspective, regardless of the statement that the transactions are managed by PT Tokopedia on the back-end. This may be due to the fact that
How can governments fine-tune their regulatory approaches?
Lawyers say the new regulations do not provide a clear definition of what “facilitation of payment transactions” means, and the lawsuit is aimed at helping the Indonesian government clarify what operators can and cannot do. We believe that this has demonstrated the need to enact and enforce regulations that define this.
“If clearly defined limits and restrictions are not implemented, other companies may see this as an opportunity to seek reasonable workarounds and establish new business activities, which ultimately , which could lead to a one-stop, all-in-one application that is somewhat compliant with the regulations that have been established,” says Fileindi.
“To ensure that the enactment of MOT Reg 31/2023 is not some kind of expedient reaction to other agendas, the government’s efforts in maintaining and enforcing the regulation will be scrutinized by stakeholders, especially business stakeholders. ”he added. .
