TikTok fined nearly $900,000 over delayed Tokopedia deal notice

Indonesia has fined Chinese social media platform TikTok about $900,000 after the company failed to comply with the country’s regulations regarding its takeover of Tokopedia.

The country’s watchdog revealed that the ByteDance-owned social media company did not promptly disclose details of the deal with Indonesia’s largest e-commerce platform.

TikTok made a blunder

According to reports, the Commission for the Supervision of Business Competition (KPPU) announced the penalty during a hearing in Jakarta on September 29. The KKPU indicated that the social media platform had missed the legal deadline to report its $840 million purchase of a majority stake in the online retailer.

The deal was completed in January 2024 with TikTok acquiring 75.01% of the e-commerce giant Tokopedia from local group GoTo. However, in Indonesia, the law states that companies must notify the KPPU within 30 days of completing a deal. On this law, TikTok was supposed to notify the KPPU by March 19, 2024.

During the hearing proceedings, TikTok, which is the responsible entity, did not object that it failed to complete the regulatory process. However, the KPPU was lenient to the social media company, citing that it was a first-time offender with no prior violations and it cooperated with investigators.

The company was fined 15 billion rupiah and was ordered to settle the fine within 30 days once the decision is confirmed. TikTok’s troubles are not only in Indonesia. Its future in the US has been uncertain for some time over data security concerns owing to its Chinese roots.

However, the US Vice President JD Vance revealed that the US had successfully separated the platform from its Chinese parent company, ByteDance. He told Fox News that “we can ensure that the algorithm is not being used as a propaganda tool by a foreign government.”

ByteDance was looking for a way around the regulations

TikTok entered Indonesia in 2021, and its users raced to more than 100 million, but in October 2023, a shadow of regulatory tension came with the government banning TikTok Shop, saying it threatened small traders and consumer protection.

ByteDance then found a way to go skirt the regulation as it folded TikTok Shop into Tokopedia, a homegrown unicorn, thus finding its way back into the market. TikTok’s shopping under Tokopedia sidestepped the ban on social media-based retail.

GoTo Group known for resisting Chinese rivals in Indonesia retained just under 25% of Tokopedia in the deal. The partnership allows TikTok Shop operations to be merged into the Tokopedia unit in the country.

Patrick Walujo, GoTo’s chief executive, said, “The transaction is a big step forward for GoTo Group, and it will continue to bring benefits to Indonesia and its MSMEs.”

The ruling by KPPU demonstrates the increased scrutiny that international tech companies encounter in the biggest economy in Southeast Asia. Even though the fine is minimal in comparison to the size of the transaction, it highlights how strict regulators are about global companies adhering to competition laws.

The KPPU fine is not likely to stop TikTok from further pursuing its goals in Indonesia. It is however serving as reminder and warning for the social media platform to carefully navigate the arena and strictly comply with local rules for it to re-join the vast e-commerce market in Indonesia.

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