TikTok has said it will comply with a rule change in Indonesia, dealing a major setback to the short form video-sharing platform.

Reuters reported that TikTok, which is owned by China’s ByteDance, said it will halt e-commerce transactions on its platform in Indonesia from Wednesday.

It comes after the Indonesian trade minister confirmed last week that e-commerce transactions on social media platforms has been banned with immediate effect.

TikTok owner ByteDance. Image credit: ByteDance

Indonesian ban

That ban is big setback for TikTok, after ByteDance in June had said that it would invest billions of dollars in Southeast Asia over the next few years to build its e-commerce platform TikTok Shop.

The reason ByteDance had sought to ramp up its e-commerce transactions in the region, could be explained by the intensifying scrutiny over TikTok’s data security practices by the United States and other countries.

Southeast Asia is a region with a collective population of 630 million – half of them under the age of 30. This makes it one of TikTok’s biggest markets in terms of user numbers, with 125 million active monthly TikTok users in Indonesia for example.

Monetising this large user base into a major e-commerce revenue stream would have helped TikTok counter its growing shutout from Western markets, while at the same time thrust TikTok into greater competition from larger rivals such as Sea’s Shopee, Alibaba’s Lazada and GoTo’s Tokopedia.

The expansion in South east Asia would have also helped TikTok diversify beyond advertising into e-commerce, by allowing consumers to purchase goods through links on the app during livestreaming for example.

TikTok is thought to have 8,000 staff in Southeast Asia, and 2 million small vendors selling their wares on its platform in Indonesia, the region’s biggest economy.

E-commerce transactions across the region reached nearly $100 billion last year, with Indonesia accounting for $52 billion, Reuters has previously reported, citing data from consultancy Momentum Works.

TikTok facilitated $4.4 billion of transactions across Southeast Asia last year, up from $600 million in 2021, but it still trailed far behind Shopee’s $48 billion of regional merchandise sales in 2022, Momentum Works said previously.

Ban compliance

Now Reuters reported ByteDance as saying in a statement on Tuesday that it would co-ordinate with Indonesia’s government regarding its future plans.

“Our priority is to remain compliant with local laws and regulations. As such, we will no longer facilitate e-commerce transactions in TikTok Shop Indonesia,” the company reportedly said.

The Indonesian government has said the ban, imposed last week, is aimed at protecting offline merchants and marketplaces, adding that predatory pricing on social media platforms is threatening small and medium-sized enterprises.

It was unclear from the statement whether TikTok will create a new e-commerce app, separate from its social media app.

According to Reuters, TikTok’s decision is in line with the Indonesian government’s grace period to comply with the new rule of one week, to avoid the threat of closure.

Tom Jowitt

Tom Jowitt is a leading British tech freelancer and long standing contributor to Silicon UK. He is also a bit of a Lord of the Rings nut...

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