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TikTok’s second-largest user base, Indonesia, bans social commerce

TikTok Shop has launched in a few smaller regions across the globe recently, but this one may be its biggest yet.
TikTok Shop has launched in a few smaller regions across the globe recently, but this one may be its biggest yet.

Indonesia has taken a bold step to ban commercial sales on social media platforms. The move aims to safeguard small businesses from the fierce competition of e-commerce giants. 

The government’s decision, which took effect on Tuesday last week, marks a significant milestone in the global battle between social media and e-commerce. 

A big move

Offline sellers in the country have been voicing their concerns about the advent of social commerce and its effect on business. The proliferation of cheaper products on platforms like TikTok Shop threatens these business owners’ livelihoods.

Trade minister Zulkifli Hasan emphasizes the need to maintain equality in business competition. “Now, e-commerce cannot become social media. It is separated,” he says. 

Social commerce platforms are now prohibited from facilitating payment transactions within their electronic systems. While Hasan did not explicitly mention TikTok, the ban directly impacts platforms like TikTok Shop.

Tangible effects

Indonesia boasts 125 million users, making it TikTok’s second-largest global market after the United States. 

Despite this, Indonesia is the first country in the region to take a stand against TikTok’s rising popularity in social media commerce.

TikTok Indonesia expressed deep concern about the policy, acknowledging its potential impact on millions of sellers and creators using TikTok Shop. “We respect local laws and regulations and will be pursuing a constructive path forward,” it says.

Trade analysts predict this ban will dent the profits of social media platforms, especially TikTok, which receives a commission from every sale. 

Companies operating in Indonesia’s digital space have been given a week to comply with the new regulation. Failure to adhere could result in the revocation of business licenses. This regulation also introduces a minimum price of $100 for certain foreign goods purchased from Indonesian sellers on e-commerce platforms.

Regulating social commerce

The fusion of e-commerce and social media platforms has blurred the lines between online retail and social media. 

This has sparked a call for regulation to balance technological advancements with consumer protection and fair competition. Several nations have taken definitive steps in this direction. And we anticipate more countries will follow suit.

Also read: Australia’s social commerce will reach $2.65 billion this year

The United States government has initiated antitrust investigations and lawsuits against tech giants like Google, Amazon, and Apple. These legal actions allege the abuse of market power, which, in turn, harms both consumers and competitors. 

Additionally, in Europe, legal battles have forced Amazon to cease using private data from merchants it competes with, marking a significant victory for fair business practices.

As the digital landscape continues to evolve, regulatory bodies are expected to play a pivotal role in shaping the future of social commerce. The collective effort to ensure ethical practices, data privacy, and healthy competition will define the trajectory of this dynamic industry.

About the author

Marce has contributed tech to various prominent publications since 2018, offering a transparent perspective into the tech industry and its effects on its users. She now spends her time developing insightful content for industry players. You know, when she's not gaming or geeking out about the latest fad.

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