When Indonesia's Ministry of Trade issued Regulation No. 31 of 2023 in late September 2023, almost no one outside Jakarta noticed. Within days, the implications landed hard: TikTok Shop Indonesia — a feature that had grown to serve roughly six million local merchants and millions more buyers — was ordered offline. On 4 October 2023, TikTok complied. What followed was one of the most consequential structural remedies in the recent history of platform regulation, and it is now being studied closely by other ASEAN governments.
Two and a half years on, the Indonesian model is no longer an emergency improvisation. It is a template. Whether it is a good one is the more interesting question.
What Regulation 31/2023 Actually Did
The regulation, an amendment to Trade Ministry Regulation 50/2020, drew a hard legal line between “social commerce” and “e-commerce”. Social media platforms, in Jakarta's reading, are spaces for user-generated content, advertising, and promotion. They are not spaces where transactions may be facilitated. E-commerce platforms must be licensed separately, hold their own permits, and — critically — cannot be operated by the same legal entity as the social platform that drives traffic to them.
The stated rationale was protection of Indonesia's roughly 64 million micro, small and medium enterprises (MSMEs), and concern that TikTok's algorithmic discovery, combined with deeply subsidised cross-border merchandise, was undercutting domestic sellers and traditional markets. Trade Minister Zulkifli Hasan was unusually direct: the rule, he said, would prevent foreign platforms from using social engagement data to dominate the retail economy.
The TikTok-Tokopedia Workaround
TikTok did not exit the market. In December 2023, it announced an investment of approximately US$1.5 billion in GoTo Group's e-commerce arm Tokopedia, taking a 75% controlling stake in the merged entity. TikTok Shop's Indonesian operations were folded into Tokopedia, which holds its own e-commerce license. The TikTok app itself continues to carry product discovery content; checkout happens on Tokopedia infrastructure. On the user's screen the journey feels seamless. On the regulatory ledger, two separate companies, two separate licenses, two separate sets of compliance obligations.
The deal closed in early 2024 and survived antitrust review by Indonesia's Business Competition Supervisory Commission (KPPU), which placed conditions on data-sharing and merchant-onboarding parity but allowed the structure to proceed. For TikTok, the cost was steep — both in dilution and in the operational complexity of running a hybrid — but it preserved access to Southeast Asia's largest digital economy.
What the Evidence Now Shows
Two findings stand out from the post-merger period. First, the disruption to small merchants was real but largely transitional: research from the Center for Indonesian Policy Studies and reporting by Nikkei Asia and Reuters tracked a sharp dip in seller revenue in late 2023, followed by a recovery once the Tokopedia bridge was in place. Second, the headline policy goal — pushing transaction value away from foreign-controlled funnels — has only partly been met. TikTok now owns 75% of the dominant local e-commerce platform. The flag is Indonesian; the cap table is not.
That is the central irony of Regulation 31/2023. A measure marketed as protection for domestic commerce ended up consolidating a foreign technology company's position inside the local champion. Tokopedia's pre-merger Indonesian ownership was substantial; post-merger, it is a minority. From a competition-policy standpoint, this is an unusual outcome to call a victory.
Why ASEAN Regulators Are Watching Anyway
Despite the awkward arithmetic, the structural-separation idea has caught on. Malaysian, Thai, and Vietnamese officials have reportedly cited the Indonesian model when discussing how to discipline TikTok Shop, Shopee Live, and similar hybrid offerings. The appeal is intuitive: regulators get to draw a clean line between “content” and “commerce”, assign distinct supervisors to each, and force platforms to internalise compliance costs that previously sat in regulatory grey zones.
From a proportionate-regulation perspective, the appeal is also where the danger lies. Structural separation is one of the most invasive remedies in the regulatory toolkit. It has historically been reserved for entrenched monopolies after due process — AT&T in 1982, the proposed (and rejected) Microsoft breakup in 2000, ongoing debate over Google's ad-tech stack. Indonesia applied it pre-emptively, by ministerial decree, to a market segment that was three years old. The risk for other ASEAN jurisdictions copying the template is that they import the form without the safeguards: no antitrust finding, limited public consultation, no clear off-ramp if the harm thesis turns out to be wrong.
A More Proportionate Path
There were less restrictive tools available. Indonesia could have required price-floor disclosures on cross-border listings, mandated parity in algorithmic surfacing for domestic MSMEs, tightened import-value thresholds, or licensed social-commerce activity directly rather than banning it outright. Each of those would have addressed the genuine concern about predatory pricing without forcing a structural reorganisation of an entire market.
The Indonesian episode also raises a question every ASEAN regulator should answer before copying the template: what happens when the foreign platform is large enough to simply buy the local one? Structural separation that ends in cross-ownership is structural in name only. It produces compliance theatre, transaction costs, and — as the KPPU's conditional approval implicitly conceded — a continuing need to police data flows between the two halves of a single commercial logic.
The Takeaway
Indonesia's experiment proved that a government can force a major platform to restructure its local operations and survive the political cost. It did not prove that the restructuring delivered the protection it promised. For ASEAN regulators studying the playbook, the honest lesson is narrower than the marketing: structural separation is a heavy hammer that solves some problems by creating different ones, and it works best when applied carefully, after evidence, and with remedies short of separation tried first.