Indonesia bars e-commerce transactions on social media platforms

Indonesia has banned e-commerce transactions on social media, the ministry of trade announced on Wednesday. The government said that small and medium-sized businesses are at risk from predatory pricing on social media platforms and that the move, which is effective right away, is intended to protect offline retailers and marketplaces.

“One of the things that is regulated is that the government only allows social media to be used to facilitate promotions, not for transactions,” the ministry said. From now on with the new regulation, Facebook and TikTok users are unable to purchase or sell products and services. 

The decision is made only three months after TikTok announced its intention to spend billions of dollars over several years in Southeast Asia, mostly in Indonesia, to develop its TikTok Shop e-commerce platform.

In order to prevent the misuse of public data, the government also announced that it would forbid social media businesses from serving as e-commerce platforms. Indonesia added that it will control which imported goods could be sold and stated these items would be treated similarly as offline domestic goods. 

The new regulation also requires e-commerce platforms in Indonesia to set a minimum price of $100 for certain items that are directly purchased from abroad, according to the regulation document reviewed by Reuters, and that all products offered should meet local standards. The decision was made as foreign items are becoming more readily available through social media platforms in Indonesia.

A spokesperson for TikTok Indonesia stated that the company would take a positive direction moving ahead and expressed that it was “deeply concerned” by the announcement, “particularly how it would impact the livelihoods of the  6 million sellers and close to 7 million affiliate creators that participate in TikTok Shop. With 125 million active monthly users in Indonesia, TikTok has been attempting to turn the sizable user base into a significant e-commerce revenue generator.

Joko Widodo, the president of Indonesia, called for social media laws on Saturday, citing the effects the platforms have on small businesses and the local economy. “Because we know it affects MSMEs, small businesses, micro-enterprises, and also the market. There are markets where sales have started to decline due to the influx,” he said in a statement.