Editor’s letter: Why Indonesia’s ban on TikTok Shop is puzzling

Dear readers,

Pasar Tanah Abang, supposedly Indonesia’s largest wholesale textile market, has been in the limelight lately.

According to traders in the storied venue, the market has become a ghost town after ecommerce platforms began undercutting their business. And how did the merchants vent about this unwelcome development? By taking to TikTok – the irony.

The Indonesian government then moved with shocking speed to ban the platform’s ecommerce arm, TikTok Shop.

Image credit: Timmy Loen

Here’s another irony: After all that free publicly for Tanah Abang, with journalists swarming in and shoving their mics in front of merchants’ faces during interviews, the place still remains deserted.

That’s what my colleague, Jofie Yordan, found out when he visited the market for his story, which asks the pertinent question: Who is the TikTok Shop ban really protecting?

A Tanah Abang merchant’s brutal assessment to Jofie spoke volumes: “Sales were already going down before TikTok Shop launched in 2021, and the market is unlikely to bounce back anytime soon.”

Indonesia’s swift ban is indeed puzzling, and lobbying from TikTok’s rivals may have something to do with it, people familiar with the matter told Bloomberg.

Could TikTok have done a better job of engaging the government? Maybe. But the reasons for the ban seem flimsy.

It’s unclear if the government has thoroughly considered these questions:

1. How do the benefits of ecommerce platforms – which have created sales for sellers and jobs for livestreamers – stack against the loss of sales for physical shops?
2. Why target just TikTok Shop when all ecommerce platforms have undermined offline merchants?
3. Why not restrict promos and subsidies instead, which appears to be what TikTok Shop’s rivals are unhappy about?
4. The government has cited TikTok’s monopolizing of social media and ecommerce as an issue. But isn’t that far from a sure thing? As Jofie notes, Shopee holds the largest share of Indonesia’s ecommerce market – almost half, in fact. Instagram has a slight edge over TikTok in terms of active users, according to third-party estimates.

Unsurprisingly, international businesses are concerned by this development. They want predictable and boring governments that make careful decisions based on clear rules, not ones that meddle at will and make sudden, bewildering moves.

The drama isn’t over yet, though, as there could be another twist. TikTok has reportedly scrambled to engage with officials on the matter in the hopes of reversing course. So Indonesia could walk back the restrictions, but this seems unlikely.