As Indonesia bans transactions on social media platforms, TikTok rises against this decision arguing it helps small and medium companies selling products online.
In Indonesia, TikTok is the only social media platform allowing users to directly merchandise their products on the app. The transactions are made during live streams where people promote their goods, mainly clothes and cosmetics.
TikTok Shop rapidly became an alternative for Indonesian people to sell their goods more easily online, so much so that Indonesia is now TikTok’s largest international audience market.
However, the Indonesian finance Minister, Zulkifli Hasan revealed Tuesday that he had signed the revision regarding new rules on the development of commercial actors on social media (known as social commerce) during a visit to the city of Semarang, located in the North coast of Java Island.
He clearly stated that “commerce on social media could not lead to direct transactions but only to promotion of goods and services,” making the use of TikTok Shop completely illegal.
Indonesian Trade Minister Jerry Sabuanga further justified that decision by saying that Indonesia “must differentiate between e‑commerce, social media and social commerce.”
Moreover, Mr. Hasan mentioned that “if TikTok becomes a social commerce, it must have its own business permit. Social commerce is like TV, it can advertise but not sell anything.”
Without business permits, the transactions made on TikTok Shop were not regulated by the Indonesian authorities, meaning they could not impose taxes on any purchases. Therefore this decision has been enacted due to a lack of legislation and regulation on TikTok Shop.
The minister of finance also mentioned issues regarding data safety. Zulkifli Hasan was worried about the algorithm of TikTok to control the data of Indonesian citizens.
TikTok will comply with the regulation
TikTok officials instantly reacted to this decision. A spokesperson from TikTok Indonesia interviewed by Tempo argues that commerce on social media was born as a solution to real problems faced by small and medium-size businesses to help them collaborate with local creators to increase traffic to their online shops.
Small and medium businesses account for most of Indonesia’s economy, generating almost 61% of their gross domestic product.
TikTok added that it will follow the government’s decision on the regulations of social commerce despite the impact on the lives of six million sellers and about seven million potential buyers on the app.
For instance, Andre Oktavianus, an Indonesian entrepreneur interviewed by The Straits Times said that TikTok was a springboard for his business. Since he started selling on TikTok, his turnover increased by almost 40%.
Many Indonesian people who use TikTok as a way to promote their business complained directly to TikTok Indonesia, according to the social media giant, and are asking for more clarity on the regulations.