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Indonesia's ban on commerce in social media

Monday, 2 October, 2023 - 07:11

It's taken a long time but when it happened, it happened fast as Indonesia becomes the first major economy to ban e-commerce sales through social media to curb illicit trade in goods, services and massive fraud.

In the second week of September, reports started to appear in newspapers across South East Asia that Indonesia was planning to move to prevent the sale of goods and services on social media platforms. It had been telegraphed in March and April but hardly anyone noticed except advertising agencies and their clients.

Like many countries, during the CoVid-19 pandemic, Indonesia saw an upsurge in fraudulent activity where goods were not delivered or were not as described. There was also growth in a wide range of grooming conduct including romance scams.

But the news that action had been taken, when it was announced on 27th September was a surprise and has caused uproar from small traders who had found that TikTok, in particular, was a rich seam to be tapped.

TikTok in Indonesia says it will do its best to prevent banned activity but points out that the platform has six million local sellers and around seven million creators and affiliates who earn from the platform.

It appears to be TikTok that is the primary target of the new law with its TikTok Shop which has been subject to considerable criticism because its drop-shipping merchants undercut businesses that source and deliver within the country, undermining their survival, it is alleged.

While TikTok is not the only platform affected, it is taking the brunt of the Government's attention, initially.

There's a week to comply. TikTok says its not enough, despite the six months' lead time during which the number of sellers has risen sharply. Trade Minister Zulkifli Hasan says that there is much more than protection of established merchants at play including the safety of customers. He's got a point: rechargeable battery-powered items produced in China are notorious for battery or recharging failure and no support from sellers.

If TIkTok doesn't close in time, Zulkifli has reportedly said, he's block the service entirely. And he can: Indonesia has done it before alleging immoral content.

But it's going further than social media: the rules refer to e-commerce platforms generally, it is also reported.

All products must meet local standards - something that is next to impossible because to "type approve" everything - all packages must be scanned and if required opened and inspected and checked for compliance - and, one assumes the payment of taxes and duties.

But there is more: a range of goods will be subject to a minimum value of USD100. That's going to eat the market in one bite. But it is, at least on paper, the easiest to achieve provided that the platform takes the orders and payment.

Indonesia has several domestic e-commerce platforms but they are generally not "market places" but rather online retailers. These appear to be outside the scope of the new rules insofar as they have so far been explained.

How far Indonesia thinks it will be able to deal with those who simply promote via their own feeds, videos, etc. remains to be seen.

A D V E R T I S E M E N T

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