Officials in Indonesia announced a new regulation on Wednesday (September 27) about banning goods transactions on social media platforms to rein in direct sales by major tech firms. Officials said it harmed millions of small businesses, especially in the retail industry.
The new regulation was a blow to Chinese short video app TikTok, which was doubling down on Southeast Asia's biggest economy to boost its e-commerce business, Reuters reported.
According to Indonesian trade minister Zulkifli Hasan, the move, which was to take effect immediately, aimed at protecting offline merchants and marketplaces. The official also said that predatory pricing on social media platforms was threatening small- and medium-sized enterprises.
The new regulation required e-commerce platforms in the country to set a minimum price of $100 for certain items that were directly purchased from abroad and that all products offered should meet local standards.
Earlier this week, Indonesian officials stated their intention to ban social media goods transactions to consider the livelihood of more than six million local sellers active on TikTok.
Jakarta Backpedals from TikTok's Investment Pledge
The ban came just three months after TikTok pledged to invest billions of dollars in Southeast Asia, especially in Indonesia, over the next few years in a major endeavor to build its e-commerce platform, TikTok Shop.
China's ByteDance owns the app and has 125 million active monthly users in Indonesia alone. It has been looking to translate the large user base into a major e-commerce revenue source.
Zulkifli told reporters Wednesday that the regulation was implemented to ensure "fair and just" business competition, adding it was also intended to ensure data protection of users. He additionally warned of making social media a one-stop shop for financial and business matters, such as being an e-commerce platform, store, and bank all at the same time.
The minister also gave TikTok one week to comply with the regulation or face the threat of closure.
ByteDance did not immediately respond to reporters' requests for comment.
Public Reaction and Reception
Research firm BMI said earlier on Wednesday that TikTok would be the only business affected by the transaction ban, and Jakarta's move was unlikely to harm the digital marketplace industry's growth.
On the other hand, retailers have a mixed reception to the news. Some view TikTok as a way for stores to recover from the blow dealt by the COVID-19 pandemic, while others see the regulation as a necessary way to limit the items being sold online.
Meanwhile, traditional e-commerce players in Indonesia, such as Sea Ltd.'s Shopee, are expected to receive the news positively, global investment bank Citi told CNBC.
