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New Social Trading Restriction Rules for TikTok Indonesia

    People selling merchandise through a TikTok livestream in Jakarta, April 4, 2023.Bay Ismoyo—AFP/Getty Images /
    People selling merchandise through a TikTok livestream in Jakarta, April 4, 2023.Bay Ismoyo—AFP/Getty Images /

    Indonesia has imposed restrictions on social media-based trading for local traders. The new regulations may affect over 6 million TikTok Shop sellers. Offline traders have seen a decrease in income within the trade sector due to their inability to compete with imported products, which are cheaper and offer online sales access. In addition, the government is implementing transactions through the TikTok Shop platform with the aim of safeguarding and supporting micro, small, and medium enterprises (MSMEs).

    The government issued regulations concerning Business Licensing, Advertising, Development, and Supervision of Business Actors in the Electronic Trading Sector through the Ministry of Trade Regulation (Permendag) No. 31 of 2023, released on September 26, 2023. These rules require the separation of social commerce platforms from e-commerce. They define social commerce as social media operators offering features enabling traders to post goods and services. Notably, these regulations also prohibit social media operators from facilitating electronic payment transactions.

    The Minister of Trade of the Republic of Indonesia, Zulkifli Hasan, is of the opinion that social commerce is allowed to advertise but not allowed to carry out transactions. In this government regulation, e-commerce platforms must establish a $100 minimum price for specific foreign purchases. Traders and platforms need to prove adherence to product standards, including SNI certification, safety, health, environmental registration, and halal certification. Marketplaces and social trading companies are strictly prohibited from being producers of goods. 

    All these stipulations aim to create a fair, healthy e-commerce ecosystem, preventing predatory pricing, often seen on social media platforms with unrealistically low prices.

    The Minister of Cooperatives and Small and Medium Enterprises of the Republic of Indonesia, Teten Masduki, noted a substantial income drop — over 50% — among offline traders in Tanah Abang, Southeast Asia’s largest textile market in Jakarta. This decline was caused by traders being unable to compete with imported products which were sold at very low prices. Transaction prohibitions can also prevent algorithm domination and prevent the use of personal data for business interests.

    Government Bans Social E-Commerce from Transacting on Social Media (Image courtesy of Yotube /
    Government Bans Social E-Commerce from Transacting on Social Media (Image courtesy of Yotube /

    Social Commerce Boom

    The government declared these regulations to be universal for all e-commerce. Despite this, many people perceive the ban as targeting TikTok. TikTok is the sole social media platform permitting e-commerce transactions directly on its platform. In a press conference, however, the Minister stated that TikTok does not yet have a permit to operate as an e-commerce platform. The absence of such a permit goes against the results of a survey conducted by Populix in September 2022, where it was found that 46% of 1,020 respondents frequently used TikTok Shop for shopping.


    The Indonesian Small and Medium Enterprises Association (Akumindo) stated that the recently enacted government regulations provide fresh opportunities for offline MSMEs to market their products. Akumindo highlighted the challenges faced by MSME operators in competing on pricing with social trading platforms that frequently provide substantial discounts, coupled with the availability of cheaper imported products.

    A spokesperson for TikTok Indonesia, in a statement received by Retail Asia on September 27, expressed concerns from sellers seeking clarification on the new rules. TikTok Indonesia views social commerce as a solution to issues encountered by traditional small traders worldwide. While promising compliance with local laws, they mentioned the regulations would affect over 6 million sellers and nearly 7 million affiliate creators who use TikTok Shop.

    The Impact on e-Commerce

    DBS Research Group, in its report dated September 28, highlighted that the restrictions might pose challenges to the potential success of TikTok Shop in Indonesia. TikTok must apply for permission separately to remain operational. The idea is for TikTok Shop to demonstrate its e-commerce operations as distinct from its social media aspect, not sharing backend data, and perhaps requiring a clear funding source for e-commerce losses, previously covered by advertising revenue from its social media apps.

    While TikTok Shop can seek permission for a separate application, it is still a challenge. Since most purchases are made on impulse, the need to open separate apps can result in high churn rates. Regulations that set a minimum purchase price of $100 for certain goods purchased from outside Indonesia on e-commerce platforms could also impact TikTok Shop as they rely more on imported goods than their competitors. If these probabilities take place, TikTok Shop’s market share estimated at 12-15% could be distributed to existing players, including Shopee.

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