TikTok Halts E-Commerce Service in Indonesia Amid New Regulations

Social media giant TikTok is suspending its online shopping service in Indonesia to comply with new regulations in Southeast Asia’s largest economy. This move came into effect at 17:00 Jakarta time (10:00 GMT). The Indonesian government’s aim with these regulations is to protect local physical and online retailers.

Indonesia had the distinction of being the first country to pilot TikTok’s e-commerce service in 2021, and it quickly became one of the most significant markets for TikTok Shop. However, last week, Indonesia introduced regulations that required TikTok to separate its shopping feature from the popular video-sharing service within the country.

Indonesia’s Trade Minister, Zulkifli Hasan, explained the measures, stating, “Now, e-commerce cannot become social media. It is separated.” He also issued a warning to social media platforms, giving them a week to comply with the new rules or face the risk of losing their operating licenses in the country. These measures came after Indonesia’s President Joko Widodo expressed the need for caution in the e-commerce sector, emphasizing the importance of regulations to ensure its responsible growth.

TikTok, in a statement on Tuesday, affirmed its commitment to complying with local laws and regulations. As a result, the company stated, “we will no longer facilitate e-commerce transactions in TikTok Shop Indonesia.”

The e-commerce sector in Indonesia has experienced rapid growth in recent years. The value of e-commerce sales is projected to increase by over sixfold between 2018 and next year, reaching 689 trillion Indonesian rupiah ($44 billion; £36.5 billion), according to the country’s central bank. TikTok Shop had been expanding its market share in Indonesia’s online shopping market, which is currently dominated by platforms like Tokopedia, Shopee, and Lazada.

Indonesia, with a population of over 278 million, boasts 125 million TikTok users, including six million sellers and numerous creators who use TikTok Shop to promote their products. In June, TikTok’s CEO, Shou Zi Chew, pledged to invest billions of dollars in the region over the next three to five years during a visit to Indonesia.

The growth of online retailers has had a substantial impact on traditional businesses, like small physical shops. Many small business owners have experienced decreased sales as consumers increasingly shift to online shopping, particularly in regions across Indonesia.

The new regulations represent another challenge for TikTok, which has faced scrutiny in the US, European Union, and the UK, where the app has been banned from government networks due to security concerns.

These developments underscore the dynamic and ever-changing landscape of technology and e-commerce regulations, impacting both global platforms and local businesses.