TikTok Shop denied monopoly and predatory pricing. However, the government has revised the trade law to prohibit social commerce platforms from operating in Indonesia.
Heaptalk, Jakarta — Indonesian government has decided to ban social commerce that operates social media and e-commerce on the same platform, such as TikTok Shop.
The decision follows the revision of trade law, specifically Minister of Trade Regulation No. 50 of 2020 on Provisions for Business Licensing, Advertising, Guidance and Supervision of Business Actors in Electronic Trading Systems.
The revised regulation appears to be at odds with the government’s response when TikTok CEO Shou Zi Chew conveyed his plan to invest US$10 billion in Indonesia over the next five years when meeting with Trade Minister Zulkifli Hasan (06/14). According to Chew, these funds will be allocated for training, advertising, and supporting small vendors to join its e-commerce platform TikTok Shop.
Preventing misuse of personal data for business interests
In more detail, Zulkifli explained several reasons for banning the platform under the parent company ByteDance in Indonesia, one of which is that social media is used to facilitate promotions, not for transactions.
“Social commerce can only facilitate the promotion of goods or services without direct transactions and direct payments, nothing more. The platform is only allowed for promotions such as TV. Advertising on TV is allowed, but TV cannot accept money. Thus, TV is a kind of digital platform whose job is to promote,” Zulkifli explained after a limited meeting at the Merdeka Palace, Jakarta (09/25).
The government also prohibits social media from operating as e-commerce as these platforms may utilize their users’ personal data through certain algorithms. According to Zulkifli, this measure aims to prevent misuse of personal data for business interests.
In addition, trading of imported products on e-commerce platforms, including TikTok Shop must follow the same rules as domestic offline trading. For example, food products have obtained halal certificates, beauty products are registered with BPOM, and electronic products meet existing standards in Indonesia. Further, the government also plans to limit transactions for imported goods sold on digital platforms to be worth more than US$100.
Impacting 13 million local sellers and affiliate creators
Responding to the ban on social media and e-commerce platforms by the Indonesian Government, a spokesperson for TikTok Indonesia explained that his party had received many complaints from local sellers asking for clarity on the new regulation, as reported by CNBC Indonesia.
TikTok Indonesia will comply with existing laws and regulations. However, the platform asked the government to reconsider the impact of this new rule on the 6 million local sellers and nearly 7 million affiliate creators on TikTok Shop.
“We need to reiterate that social commerce was born as a solution to real issues faced by MSMEs to help them collaborate with local creators to boost traffic to their online stores,” said TikTok Indonesia spokesperson as quoted by CNBC Indonesia.
Denying business monopoly and predatory pricing
Previously, TikTok Indonesia revealed myths and facts related to its e-commerce platform, one of which was about business monopoly. The company denied owning payment and logistics system in the country. For logistics, TikTok Shop partners with service providers such as J&T, NinjaVan, JNE, and SiCepat. Meanwhile, for payment systems, this platform accepts all types of payment methods, including debit/credit cards, digital wallets, bank transfers, and cash.
The news circulating mentioned that this platform does not have an operational permit as an e-commerce in Indonesia. In fact, TikTok Shop has obtained an e-commerce trade business license, known as SIUP3A PMSE, from the Ministry of Trade.
TikTok Shop emphasized that there are no predatory pricing practices on its platform which could harm local MSMEs. “As a platform, TikTok cannot determine product prices. Sellers can sell their products at the price level they determine according to their respective business strategies. The same products that can be found on TikTok Shop and other e-commerce platforms have similar price levels,” concluded TikTok Shop.
