Indonesia Bans Social Media Transactions. How Will Platforms Such As TikTok Respond?

The Indonesian Trade Ministry said in a statement on September 28 that they are taking steps to regulate the e-commerce market, adding that social media platforms are prohibited from being used for transactions.

The Indonesian Ministry of Trade clarified that social media can only be used for promotion, but no transactions are allowed.

The regulation will ban Indonesian users from buying and selling products and services on social media platforms such as TikTok and Facebook. The Ministry of Trade emphasized that social media is prohibited from also serving as an e-commerce platform to prevent the misuse of public data.

On Monday, Indonesian Trade Minister Zulkifli Hasan said: "Social media and e-commerce must be separated so that algorithms are not fully controlled, thus preventing personal data from being commercially exploited."

Indonesia also said they would regulate overseas goods sold on online platforms and pledged to treat them the same as domestic goods. Currently, Indonesian users are able to purchase an increasing number of foreign goods on social media platforms.

On Saturday, Indonesian President Joko Widodo called for the regulation of social media, arguing that these platforms had a negative impact on local businesses and the economy.

"We know that this has had an impact on small and medium-sized enterprises and related markets. Sales in some markets have begun to decline due to the influx of goods," Joko said in a statement.

This measure will affect TikTok’s plan to launch e-commerce in Indonesia.

According to data from research company DataReportal, Indonesia is TikTok’s second largest market, with 113 million users, second only to the 116.5 million users in the US market.

In June this year, TikTok CEO Zhou Shouzi said that TikTok plans to invest tens of billions of dollars in Indonesia and Southeast Asia markets in the next few years.

In response to the remarks of the Indonesian Ministry of Trade, a TikTok spokesperson said: "The emergence of social e-commerce is to solve the practical problems faced by local traditional small traders. By cooperating with local content creators, we can help them attract online stores." "We respect local laws and regulations, but it is hoped that these regulations will take into account the impact on the livelihoods of the more than 6 million sellers and nearly 7 million related content creators who use TikTok Mall."

Citibank said in a report on Tuesday that Indonesia's measures will be beneficial to Shopee, an e-commerce company owned by Southeast Asian consumer e-commerce company Sea Limited, and other Indonesian domestic companies.

Citibank said in the report: "Given the recent fierce competition between TikTok and Shopee, we believe this is a positive move for Indonesia's traditional e-commerce companies, especially Sea Limited."

Citibank said: “Depending on the timing of implementation and the process of transitioning to alternative applications, we believe that any obstacles TikTok sellers encounter during the transition may be beneficial to Shopee and other traditional e-commerce platforms in the coming months.”