TIKTOK Shop’s acquisition of Tokopedia clarifies the motive behind the government’s decision to ban and then allow the Chinese online trading platform to operate in Indonesia. As well as bringing benefits for GoTo Gojek Tokopedia, Tokopedia’s parent company, it also changes the map of e-commerce in Indonesia.

In the middle of December 2023, GoTo announced the sale of 75.01 percent of Tokopedia shares to TikTok for Rp23.3 trillion (around US$1.5 billion). With this massive capital injection, Tokopedia will be in a much stronger position to implement strategies to maintain its hold on the market currently dominated by Shopee, an e-commerce company from Singapore.

The strategy of ‘burning money’ to increase turnover, which Tokopedia had stopped doing, has been revived. TikTok Shop customers can make transactions on Tokopedia. GoTo will also see an increase in profits because of the agreement that TikTok will deposit funds amounting to 0.4 percent of the total value of its transactions with Tokopedia.

TikTok Shop, which has a live shop service, had been a threat to the business sustainability of e-commerce platforms such as Tokopedia and Shopee.

On the other hand, Indonesia is a tempting market. In the e-Conomy SEA 2023 report, Google, Temasek and Bain & Company project, the gross merchandise value of e-commerce in Indonesia will reach US$62 billion, or around Rp962.2 trillion. There are concerns that TikTok Shop with its 106.52 million users in Indonesia, the second highest total after the United States, will take a large portion of this market.

But what has made people suspicious is the way the government intervened to ease the way for TikTok Shop’s business transactions with Tokopedia. In October 2023, the government suddenly banned TikTok Shop from operating in Indonesia because it was judged to have been in violation of Trade Minister Regulation No. 31/2023 on Business Licensing, Advertising, Guidance and Supervision of Businesses in Trading using Electronic Systems. The government claimed that TikTok Shop had the potential to bankrupt hundreds of thousands of traditional market traders across the nation because of the influx of cheap products from China.

But after two months, TikTok Shop was allowed to resume operations after coming to a cooperation agreement with Tokopedia. This revocation and restoration of the operating permit led to suspicions of a conflict of interest behind the government’s decision, given that among the holders of GoTo shares is Garibaldi Thohir, older brother of State-Owned Enterprises Minister Erick Thohir.

In addition to the matter of protection of small and medium enterprises not yet being clear, TikTok Shop’s transactions with Tokopedia could lead to a problem with consumer data protection. The government must take into consideration the warning signs from a number of European nations that previously banned TikTok Shop from operating because of doubts about its personal data security system.

It is crucial that there are clear regulations concerning this because there have been many leaks of personal data using various fraudulent methods. The ease of social media transactions must not be allowed to cause problems for the people.