Malaysia considers banning e-commerce transactions on TikTok amidst pricing and data privacy concerns

The Malaysian government is currently deliberating a policy similar to that of its Indonesian counterpart, contemplating the prohibition of e-commerce transactions on the social media platform TikTok.

The move comes in response to mounting concerns over pricing practices and data privacy issues related to the platform’s TikTok Shop feature.

The Malaysian Minister of Communications and Digital, Fahmi Fadzil, acknowledged receiving complaints from the public about the adverse effects of buying and selling on TikTok Shop.

He revealed that major retailers had also expressed concerns about pricing competition for products sold through the platform.

The Malaysian Minister of Communications and Digital, Fahmi Fadzil. (Photo: thesundaily.com)

Quoted from Malay Mail on Saturday (7 Oct), several large stores in Malaysia have complained about the prices of products offered on the TikTok platform.

“Many Malaysians use the TikTok Shop platform to sell goods,” said Fahmi Fadzil, as quoted from The Star on Monday (9 Oct).

“So, I will request the Malaysian Communications and Multimedia Commission (MCMC) and the ministry to examine the actions taken by the Indonesian government,” he added.

The pricing concerns raised by large retailers in Malaysia mirror those that led to the prohibition of TikTok Shop in Indonesia, with allegations of predatory pricing aimed at local entrepreneurs.

Predatory pricing is a strategy where businesses sell products at extremely low prices to eliminate competitors from the market and deter potential new entrants.

The Malaysian government will request an explanation from TikTok regarding this matter. “I believe TikTok needs to come forward and clarify because one of the reasons TikTok Shop was banned in Indonesia is due to concerns about predatory pricing that threatens local entrepreneurs there,” he said.

Fahmi also emphasized that TikTok should provide explanations regarding the protection of personal data, which is a concern for users when shopping on the platform.

“I believe all (social media) platforms will study their users’ behavior, starting from what we like, what we share, what we buy, and what we watch,” he explained. “So, there are several aspects that need to be examined by the Ministry and MCMC, especially in terms of consumerism and personal data protection. I will immediately call TikTok to discuss this matter,” he added.

The discussions surrounding TikTok are pivotal, as the Ministry has received complaints from media organizations about the impact of social media usage on their operations.

Many companies have shifted their advertising budgets from traditional media to social media platforms, posing challenges for traditional media outlets.

TikTok officially shut down TikTok Shop in Indonesia on Wednesday (4 Oct), in compliance with the ban on social commerce conducting business like e-commerce. TikTok expressed its respect for Indonesian regulations and laws, stating that it would no longer facilitate e-commerce transactions within TikTok Shop Indonesia.

Despite the closure, TikTok pledged continued coordination with the Indonesian government regarding future business plans.

The Indonesian Ministry of Trade signed Ministerial Regulation No. 31/2023, which included regulations on e-commerce and social commerce. Among these rules was a prohibition on social commerce models facilitating electronic payment transactions due to predatory pricing concerns.

Illustration. TIkTok Shop livestreaming. (Photo: malaya.com.ph)

Director of the Center of Economic and Law Studies (Celios), Bhima Yudhistira, pointed out that this policy did not eliminate predatory pricing practices in Indonesia entirely.

“The practice of predatory pricing is also found on platforms other than TikTok Shop,” said Bhima, emphasizing that predatory pricing continues to exist on platforms other than TikTok Shop.

He further elaborated that this was becoming increasingly urgent, as there would likely be a shift in e-commerce sellers.

With TikTok‘s market share in Indonesia reaching 5 percent, the closure of TikTok Shop is expected to result in sellers moving to other e-commerce platforms, particularly Shopee and Tokopedia.