TikTok Indonesia stops e-commerce service after new law, M'sia considers similar move

TikTok said that it "regretted" the Indonesian government's ban.

Tan Min-Wei | October 10, 2023, 11:38 AM


Malaysia's Communications and Digital Minister Fahmi Fadzil has said that Malaysia will look into Indonesia's ban on TikTok's e-commerce platform.

This comes after the social media company announced that it would remove the feature from its platform in Indonesia on Oct. 5, in order to comply with Indonesian law.

TikTok Shop

TikTok launched its Shop feature in 2021, according to Nikkei. The feature is embedded within the social media platform's interface.

While it is possible to search for items in a similar way to a traditional e-commerce app, it also allows TikTok's content producers to include links to items directly from their videos.

The feature allows users to be introduced to products and completing purchases in an easy manner, according to users Nikkei spoke to.

In most Southeast Asian markets, TikTok Shop has yet to overtake traditional leaders like Shopee and Lazada. However, it has managed to overtake Lazada in Vietnam, becoming the country's second largest e-commerce player for the April-June 2023 quarter.

Indonesian ban

TikTok Shop has been active in Indonesia since 2021, and with 125 million users, it is the social media platforms second largest market, after the United States, according to the Jakarta Post.

TikTok said that it would close TikTok Shop in order to comply with Indonesian law, but that it deeply regrets the Indonesian government's ban.

The Associated Press quoted the company as saying that the ban would impact "6 million sellers" and nearly 7 million affiliate creators who used the feature.

TikTok, according to The New York Times, highly values the Indonesian and Southeast Asian markets, where is has about 325 million users, 125 million of which are Indonesian.

TikTok's CEO, Singaporean Chew Shou Zi,  was in Jakarta in June 2023, where he pledged to to invest billions of dollars into the region.

Separation of e-commerce and social media platforms

Indonesia's trade minister Zulkifli Hasan said that the Indonesian government wanted e-commerce platforms to remain separated from social media platforms.

Zulkifli also cited the plight of small and medium sized businesses, who have been calling for more regulation on social media and e-commerce.

Zulkifli characterised TikTok Shop's pricing as "predatory", and said that it threatened millions of Indonesia's SMEs, according to the Diplomat.

"Predatory" pricing

Predatory pricing, according to Investopedia, is the practice of illegally setting unrealistically low prices for a product.

In this case, there is some debate, as illustrated by VO.ID, about whether the subsidies offered via the TikTok Shop counts as predatory pricing, by unrealistically, and temporally, lowering the cost of SMEs doing businesses on the platform.

A digital economy observer that VO.ID spoke to argued that it did not.

But reporting by Reuters and the New York Times highlighted the significant number of SMEs for whom the TikTok Shop represented up to 80 per cent of their revenue, and were now at a loss to replace it.

Basis of action

Meanwhile, Malaysia's Communications and Digital Minister Fahmi Fadzil said that he has instructed his ministry to "look into the basis of action" of the Indonesian government, according to Bernama.

He called on TikTok to "come forward" and explain why TikTok Shop was banned in Indonesia, particularly on the issue of predatory pricing.

Fadzil said that he also wanted to look into aspects of data protection and consumerism, saying that he intended to call on TikTok soon to discuss the issues with them.

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Top image via Unsplash