ByteDance slides around Indonesian social commerce ban with $1.5 billion buy

A mere two-and-a-half months after Indonesia imposed a ban on social commerce, made-in-China social media giant TikTok and local super-app company GoTo have announced a "strategic e-commerce partnership" in a form that appears to evade the ban.

The September ban eliminated the practice of embedding e-commerce facilities in social media platforms in the archipelagic nation by barring them from accepting payments.

Bytedance's TikTok, which had previously rated Indonesia as a top e-commerce market, was forced to suspend its e-commerce services in Indonesia as a result.

At the time of the ban, trade minister Zulkifli Hasan argued that social commerce players were crushing small retailers and local e-commerce players, and making life hard for domestic manufacturers. Regulating the platform giants away was a good way to level the playing field.

The country's 64 million micro, small, and medium enterprises (MSMEs) contribute contribute 61 percent to Indonesia's GDP, according to Indonesia's Ministry for Economic Affairs.

ByteDance has seemingly found a way to again ply its wares in Indonesia, with a regulated pilot focusing on promoting MSMEs and a change in the operating unit's ownership structure according to a Monday press release.

The "strategic partnership" will see TikTok invest $1.5 billion "over time" into a venture that combines GoTo's e-commerce division Tokopedia and the TikTok Shop as of Q1 2024. More investment is expected to come at a rate that does not dilute GoTo.

"As part of the agreement, Tokopedia and TikTok Shop Indonesia's businesses will be combined under the existing PT Tokopedia entity in which TikTok will take a controlling stake. The shopping features within the TikTok app in Indonesia will be operated and maintained by the enlarged entity," explained the canned statement.

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According to an investor's note [PDF], that controlling stake will equate to 75.01 percent TikTok ownership, and the remaining shares will go to GoTo Group. As part of the transaction, Tokopedia will acquire TikTok Shop's Indonesia business for $340 million – a purchase not factored into the $1.5 billion.

GoTo has also disclosed [PDF] that TikTok is spending $840 million to buy a majority stake in Tokopedia through its new entity.

The resulting outfit will be rooted in a homegrown Indonesian business and not be a social media platform – therefore not subject to the ban on social commerce.

Monday's joint venture announcement also made the case that 90 percent of the combined customer base of TikTok, Topkopedia and GoTo merchants are MSMEs. The new venture will allegedly support this category of business by promoting Indonesia's products on its platforms, providing skill development and resources, helping boost local brands to international markets, and establishing technology centers in Indonesia.

The support to MSMEs could help to convince regulators to allow the deal, but we could find no indication of official sentiment about the proposed transaction at the time of writing. ®