Thursday, October 10, 2024

Indonesian Government bans TikTok from selling products and facilitating payments

Reading Time: 2 minutes
Julian Isaac

Journalist

Editor

Interview

The Indonesian Ministry of Trade has officially prohibited social commerce platforms, such as TikTok Shop, from acting as producers and facilitating payment transactions on their platforms. 

This restriction is outlined in Trade Ministerial Regulation No. 31 of 2023 (Regulation 31/2023). Article 21, paragraph 2 of this regulation states that companies with a local marketplace or social commerce business model are prohibited from acting as producers in accordance with the provisions of laws and regulations in the field of distribution of goods. 

Additionally, Article 21, paragraph 3 of Regulation 31/2023 stipulates that companies with a social commerce business model are prohibited from facilitating payment transactions on their electronic systems.

Isy Karim, the Director-General of Domestic Trade at the Ministry of Trade, explained that social commerce platforms that wish to conduct transactions within their applications must establish a new legal entity in the for of a limited liability company (Perseroan Terbatas) or other form of legal entities that comply with applicable regulations.

In other words, social commerce platforms are not allowed to sell products and services directly through their applications.

Under these regulations, the Ministry of Trade (Kemendag) also threatens to impose sanctions on social commerce platforms that continue to engage in sales. 

Administrative sanctions that may be imposed include written warnings, inclusion in the list of priority supervision, inclusion in the blacklist, temporary blocking, and even revocation of business permits.

Isy Karim revealed that Kemendag will grant a grace period to TikTok Shop until the beginning of the following week to halt payment transactions, with a deadline until October 2, 2023.

After the deadline, TikTok Shop can only be used for promotional purposes and may not process payment transactions.

Isy emphasized that they will not immediately impose sanctions but will instead focus on guidance and education initially. The implementation of this policy will take some time.

Furthermore, Isy plans to hold meetings with the Ministry of Communication and Information, the Ministry of Investment, and the Ministry of Cooperatives and Small and Medium Enterprises. 

These meetings are considered essential for further discussions on regulations related to the three business models in social media: social media, social commerce, and local marketplaces.

Despite these regulatory challenges, TikTok Shop has experienced significant growth since its introduction in Indonesia. Its revenue has increased substantially, especially during the COVID-19 pandemic. TikTok Shop’s initial revenue from China was US$ 63 million in 2017, and it continued to grow, reaching US$ 4.69 billion in revenue in 2021.

The government’s decision to prohibit social commerce platforms like TikTok Shop from acting as producers and facilitating payment transactions is a significant step in regulating the e-commerce industry in Indonesia.

Julian Isaac

Journalist

 

Editor

 

Interview

SUBSCRIBE NOW
We will provide you with an invoice for your reimbursable expenses.

Free

New to Indonesian market? Read our free articles before subscribing to the premium plan. If you already run your business in Indonesia, make sure to subscribe to the premium subscription so you won’t miss any intelligence & business opportunities.

Premium

$550 USD/Year

or

$45 USD/Month

Cancelation: you can cancel your subscription at any time, by sending us an email inquiry@ibp-media.com

Add keywords to your market watch and receive notification:
Schedule a free consultation with us:

We’ll contact you for confirmation.

FURTHER READING

President-elect Prabowo Subianto has put the emphasis on the vital lessons learned from the COVID-19 pandemic, stressing the necessity of Indonesia to secure its future by reducing dependence on imports, especially in sectors as critical as food and energy.
The free nutritious meal program introduced by president-elect Prabowo Subianto is facing significant hurdles in its implementation, from institutional readiness to the selection of appropriate target regions. Amich Alhumami, Deputy for Human Development, Society, and Culture at the National Development Planning Ministry (Bappenas), acknowledged the program’s complexity.
President Joko “Jokowi” Widodo has officially designated parts of Batam and several regions in Banten as Special Economic Zones (KEKs). Sekupang and Nongsa in Batam, which cover a total area of 47.17 hectares, are now KEKs focused on international tourism and healthcare.
President-elect, Prabowo Subianto, has expressed his confidence that his “Free Nutritious Meal Program” will be one of the important pillars in realizing Indonesia’s economic growth target of 8 percent.
The Coordinating Ministry for Maritime and Investment Affairs has announced that Indonesia’s ongoing nickel dispute with the European Union (EU) at the World Trade Organization (WTO) is nearing to an end, largely due to Indonesia’s dominant position in the global nickel market, which accounts for 60 percent of supply.
Energy and Mineral Resources (ESDM) Minister Bahlil Lahadalia and Investment Minister Rosan Roeslani, accompanied by a group of prominent business leaders, met with President Joko “Jokowi” Widodo at the Presidential Palace in Jakarta on Wednesday, October 9, 2024 discussing investments in the new capital, Nusantara, in East Kalimantan.