Indonesia Bans E-Commerce Transactions On Social Media, Major Blow For TikTok

Jakarta [Indonesia] : Indonesia has imposed a ban on social media platforms from doubling as e-commerce sites in order to prevent misuse of data, Channel NewsAsia (CNA) reported.

The announcement was made on September 25.

Trade Minister Zulkifli Hasan after a closed meeting on electronic commerce issues said, “(Social media can only (be used to) facilitate the promotion of goods or services (but) direct transactions … (and) direct payments are no longer allowed; (social media) can only be used for promotion.”

According to Channel NewsAsia, under the country’s Revised Ministry of Trade Regulation, a minimum import transaction of USD 100 will also be imposed on goods purchased from abroad.

The ban has disappointed buyers, however, the sellers at physical stores in Indonesia have celebrated the move. Moreover, people in Indonesia expressed distress as they lost a cheaper shopping alternative.

Subairi, a factory worker from West java has relied on TikTok Shop for the past two months to buy his daily necessities. But, following the announcement, he is worried over the loss of cheaper alternative, reported Channel NewsAsia.

The 38-year-old Subairi said, “If TikTok Shop is banned, I will find it difficult to find items that are as cheap as (those sold there).”

“On other e-commerce platforms, the service fee is almost 10,000 rupiah (USD0.64) but on TikTok Shop it is totally free, with no conditions,” he added.

Moreover, he emphasized that the flash sales and payday promotions on TikTok Shop, offered at the end of the month make the prices much cheaper, reported Channel NewsAsia.

He has been comparing prices of goods across various e-commerce platforms and found those sold on TikTok Shop to be the cheapest.

“Yesterday, I bought baby formula. Elsewhere, the cheapest price was 320,000 rupiah but on TikTok, with various discounts, I could get (the formula at) around 300,000 rupiah,” said the father of two.

However, another TikTok Shop buyer Nadya Aulia Arma said that although she disagrees with the new rule but will accept the development and switch to using other e-commerce platforms.

“I honestly don’t agree, because I will lose a place to buy things at low prices. But if it’s for the good of the Indonesian people, that’s okay. I will go back to shopping on Shopee,” she said.

A textile seller Iyal Suryadi stressed that the sale of online goods has reduced his income, according to Channel NewsAsia.

“In the local market where we sell our goods, sometimes we only sell one or two pieces of cloth in a week … If it continues like this, don’t even think about growing (the business); just being able to survive is good,” he said.

He added that the prices of items sold on TikTok Shop “do not make sense”.

“They sell goods at factory prices directly to consumers, not to distributors or resellers. It is true that we have entered the free market, but let’s not go too far,” he said.

Suryadi, who owns a shop at Pasar Cipeundeuy located in Subang, West Java said, “The government must act if it does not want the country’s economy to be destroyed. The reason is that the money in this country revolves around the small people like us, not the rich.”

Similarly, Mr Raden, a seller at Tanah Abang market in Jakarta also agreed that his sales have been affected due to TikTok Shop as cheap prices are offered on the social media platform.

He further said that he disagrees with the new ban and suggested that the sale of items through social media be restricted instead, reported Channel NewsAsia.

“(This is) because there are merchants here who also sell through TikTok. They are forced to sell on TikTok because the physical market is starting to be abandoned by buyers,” he said.

“In my opinion, TikTok shops should not be banned but restricted. (Instead), foreign products should be stopped and domestic products should be sold,” he added.

Responding to the ban, TikTok Indonesia said that it will abide by the laws and regulations of the country.

TikTok Indonesia spokesperson said, “However, we also hope that the government will consider the effect (of the ban) toward the livelihood of six million local sellers and around seven million creator affiliates that use TikTok Shop.”

Owned by China’s ByteDance TikTok Shop said that it has received complaints from local sellers and asked for certainity from the authorities regarding the newly issued regulation.

According to the spokesperson, social commerce emerged as a solution to the problems faced by micro, small and medium enterprises (MSMEs).

Moreover, he added that TikTok Shop was established to support local sellers to collaborate and work with local creators to strengthen traffic for their online shops, Channel NewsAsia reported.

Furthermore, TikTok has been hit with allegations that its TikTok Shop service is implementing predatory pricing by selling imported goods at significantly lower prices, thus leading to major profit losses for MSMEs who struggle to compete with such prices.