Indonesia plans to ban e-commerce transactions on social media

A new regulation in Indonesia could ban e-commerce transactions on social media.

For a country with a population of 270 million population and a flourishing e-commerce sector, which recorded nearly $52 billion in e-commerce transactions in 2022, and a significant portion of this realized from social commerce, this could deal a significant blow to the e-commerce industry and social media platforms operating in the country.

The move is said to be driven by concerns over predatory pricing by e-commerce sellers operating on social media, which has been seen as a threat to traditional offline markets in Southeast Asian countries.

According to Jerry Sambuaga, the Deputy Minister of Trade, during a speech to parliament, "social media and social commerce cannot be combined."

In response to these regulatory changes, TikTok, whose growing presence in Indonesia's e-commerce landscape through its TikTok Shop could be impacted, has expressed its concerns, arguing that segregating social media and e-commerce into distinct platforms could hinder innovation.

Notably, TikTok boasts up to 125 million users in Indonesia, with 2 million small businesses operating on its TikTok Shop feature within the country per TikTok's data. Also, approximately 5% of the overall e-commerce transactions in the country are from TikTok, according to data from consultancy firm Momentum Works.

The company hopes that the Indonesian government will ensure a level playing field for all players in the industry as it seeks to balance regulation with the evolving digital landscape.

But it's not just TikTok that would feel the impact, as Meta's Facebook, which also features a marketplace function, would be affected by these new rules.