TikTok says it regrets Indonesia’s decision to ban e-commerce sales on social media platforms

JAKARTA, Indonesia (AP) — Chinese-owned app TikTok on Thursday said it regretted the Indonesian government’s decision to ban e-commerce transactions on social media platforms and particularly the impact it would have on the millions of sellers who use TikTok Shop.

But TikTok Indonesia said in a statement it will respect the regulations and laws that apply in Indonesia and “will take a constructive path forward.”

“We deeply regret the government’s announcement, especially how it will impact the livelihoods of the six million sellers and nearly seven million affiliate creators who use TikTok Shop,” said the statement sent to The Associated Press on Thursday.

Indonesia banned goods transactions on social media platforms such as TikTok in a bid to protect small businesses from e-commerce competition, accusing them of predatory pricing.

Indonesia’s Trade Minister Zulkifli Hasan on Monday announced the decision after a meeting with President Joko Widodo. The ban ”is to prevent the domination of the algorithm and prevent the use of personal data in business interests,” Hasan told a news conference.

Hasan said the ban, which takes effect immediately, aims to “create a fair, healthy and beneficial electronic commerce ecosystem by prohibiting marketplaces and social media sellers from acting as producers and facilitating payment transactions on its electronic systems,” according to a statement released by the Trade Ministry on Wednesday. Marketplaces and sellers can only offer or promote goods and services, he added.

During an inspection to Southeast Asia’s largest wholesale market Tanah Abang in Jakarta last week, Minister of Cooperatives and Small and Medium Enterprises Teten Masduki said he found that sellers were experiencing a more than 50% loss of profits because they could not compete with imported products sold online at much lower prices.

Masduki said the China-based platform has been involved in “predatory pricing,” which caused damages to local small- and medium-sized businesses. He said the new regulation “will justly regulate fair trade online and offline.”

Minister of Communication and Informatics Budi Arie emphasized that the regulation is intended for all social commerce platforms, not just TikTok Shop. It may also affect established, homegrown e-commerce companies like Tokopedia, Lazada and BliBli.

The move came after TikTok CEO Shou Zi Chew pledged at a forum it organized in Jakarta in June that it would invest billions of dollars in Indonesia and Southeast Asia over the next few years. He did not provide a detailed breakdown of the spending plan, but said it would invest in training, advertising and supporting small vendors looking to join its e-commerce platform TikTok Shop.

The plan comes as TikTok, owned by China’s ByteDance, faces scrutiny from some governments and regulators because of concerns that Beijing could use the app to harvest user data or advance its interests.

Countries including the United States, Britain and New Zealand have banned the app on government phones, despite TikTok repeatedly denying that it has ever shared data with the Chinese government and would not do so if asked.

Southeast Asia, a region home to more than 675 million people, is one of TikTok’s biggest markets in terms of user numbers, generating more than 325 million visitors to the app every month.

TikTok had 8,000 employees to facilitate $4.4 billion of transactions across the region last year, up from $600 million in 2021. But it still trailed far behind Shopee’s $48 billion in regional merchandise sales in 2022, according to Singapore-based Momentum Works, a business development service.

In Indonesia, Southeast Asia’s largest economy, TikTok has 2 million small vendors selling their wares on its platform.

Muhammad Zidan, a merchant who uses TikTok Shop to sell bicycles and accessories, urged the government not to leave behind millions of vendors who depend on income from e-commerce transactions.

“We have high exposure for our products by using TikTok Shop,” Zidan said. “The government should find a win-win solution because we will also experience a lot of losses. ... The ban will have a huge impact on us.”

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Associated Press journalists Andi Jatmiko and Tatan Syuflana in Jakarta, Indonesia, contributed to this report.