TikTok Shop in Indonesia is officially closed starting Wednesday (4/10/2023) at 5:00 PM WIB. This closure was announced directly by TikTok through the news section on its official page on Tuesday (3/10/2023). TikTok stated that its priority is to respect and comply with the regulations and laws in effect in Indonesia. “Therefore, we will no longer facilitate e-commerce transactions within TikTok Shop Indonesia, effective from October 4 at 5:00 PM WIB,” they wrote.
Earlier, the government had issued a ban on TikTok Shop for conducting direct transactions on its social media. The Director-General of Domestic Trade at the Ministry of Trade, Isy Karim, stated that TikTok had not applied for a local market permit for the TikTok Shop platform. According to him, the local market platform is allowed to sell through live broadcasts as long as they have a permit as an e-commerce platform. This is in line with Trade Minister Regulation (Permendag) Number 31 of 2023, a revision of Permendag Number 50 of 2020 concerning Licensing, Advertising, Guidance, and Supervision of Business Actors in Trade Through Electronic Systems.
Apart from separating social media and e-commerce, the regulations also include a list of foreign-origin goods allowed to enter Indonesia directly through e-commerce platforms. One of the requirements is the establishment of a minimum price of $100 USD per unit for finished goods of foreign origin sold through the platform. Additionally, businesses must provide proof of business legalization from the country of origin, comply with Indonesian standards, and be halal.
The New Rules Restricting TikTok as a Commercial Platform
Trade Minister Regulation Number 31 of 2023 is a revision of Regulation Number 50 of 2020. Signed by Zulhas on Tuesday (26/9/2023), this regulation was issued because the government deemed it necessary to standardize goods on the PMSE platform.
There were also indications of unhealthy trade practices by foreign business actors. Based on these reasons, here are the key points in Trade Minister Regulation Number 31 of 2023:
- Separation of Social Media and E-commerce Functions
The regulation prohibits the integration of businesses between social media and e-commerce, referred to as social commerce. Social commerce is only allowed as a means to provide offers for goods and/or services, not for direct transactions on the platform. - Prohibition on Selling Own Products
The regulation also prohibits PMSE Organizers (PPMSE) from selling their own products unless they are aggregating products from MSMEs. - Merchant Obligations
Merchants are required to meet certain conditions, such as compliance with Indonesian National Standards (SNI) or other technical requirements. Additionally, displayed products must show several pieces of information, including proof of compliance with product standards and/or services in the form of a product registration number. Other information includes SNI or other technical requirements and halal certification numbers. - Minimum Price Limit for Cross border Goods
The regulation sets a minimum price limit for cross-border goods at a minimum of $100 USD or equivalent to IDR 1.5 million (assuming a rate of IDR 15,561). This minimum price can be exempted if the goods fall under the positive list determined by the Minister. This revision is introduced to protect MSMEs in the country, ensuring that domestic products remain competitive. The government aims to establish an equal playing field, promoting fair trade both offline and online. - Determination of Six Business Models
The regulation also determines six business models in online trading. These include online retail, local markets, classified ads, price comparison platforms, daily deals, and social commerce.
Brief History of TikTok in Indonesia
TikTok Shop is part of the short video social media platform TikTok. Originating in China as Douyin in 2016, the app expanded globally under the name TikTok. Entering Indonesia around 2018, TikTok faced a temporary ban by the Ministry of Communication and Informatics in the same year due to perceived negative content. After meeting all security and content quality screening requirements, TikTok relaunched and gained popularity across all age groups.
On another note, TikTok continued to expand its reach by launching TikTok Shop on April 17, 2021. Described as an e-commerce service, TikTok Shop was intended to connect sellers, buyers, and creators to provide a seamless and enjoyable shopping experience. The unique ecosystem supporting TikTok Shop allowed brands and sellers to grow their businesses through short videos and live shopping features. Unlike other social media, TikTok Shop executed the entire transaction process within the app, covering product introduction, selection, transaction processing, communication with the seller, delivery, and product ratings.
According to Angga Anugrah Putra, Head of User and Content Operations at TikTok Indonesia, the TikTok Shop program not only offered a new experience for TikTok users but also provided an opportunity for brands to expand their audience.
What Will Happen After the Shutdown?
Although TikTok Shop’s restrictions have halted commercial activities within the social media platform, other platforms like Facebook and Instagram can still conduct social media commerce activities as long as the transactions are not facilitated by the social media platform. These activities are limited to advertising and discussions before transactions, which will be directed to the seller’s page or e-commerce platform for further trading processes.
The Indonesian Minister of Trade, Zulkifli Hasan, has said that sellers on TikTok Shop have been asked to move their stalls to other e-commerce platforms.
E-commerce platforms such as Shopee also have live broadcast features and are expected to be able to accommodate TikTok Shop sellers in the future.
Previously, TikTok said that there were 6 million micro, small, and medium enterprises (MSMEs) selling on TikTok Shop. In addition, there were almost 7 million affiliate creators who also earned income through TikTok Shop.
The Indonesian Minister of Cooperatives and Small and Medium Enterprises, Teten Masduki, added that he believes the dismissal of TikTok Shop will not have a negative impact on small merchants who have used the platform.
He said that merchants could move to other e-commerce platforms to sell. In Indonesia, there are several e-commerce platforms that are used solely for online transactions. The statement dismissed the news that the closure of TikTok Shop would have negative impacts on online sellers.
