Shopee and its courier service, Shopee Express, have agreed to modify their practices after admitting to a breach of competition regulations in Indonesia, as confirmed by the country’s competition watchdog, the Komisi Pengawas Persaingan Usaha (KPPU).
Shopee, the e-commerce arm of Southeast Asian tech giant Sea Limited, acknowledged the violation of Indonesia’s Law No. 5 of 1999, which pertains to anti-monopoly and unfair business practices. This admission led to a series of agreed behavioral changes that were approved by the KPPU Council during a hearing.
In a statement translated by Google, KPPU indicated that Shopee proposed adjustments to its practices on June 20, which were subsequently approved by the commission. Radynal Nataprawira, the head of public affairs at Shopee Indonesia, confirmed this in comments to CNBC, stating that Shopee is committed to adhering to all applicable regulations and laws in Indonesia.
Nataprawira detailed that Shopee Indonesia participated in a meeting with KPPU on June 25 to discuss the integrity pact points. He also mentioned that on June 20, Shopee proposed changes to its user interface to enhance service delivery and ensure compliance with the feedback provided by KPPU.
“We are always committed to complying with all applicable regulations and laws in the Republic of Indonesia in conducting our business operations,” said Nataprawira.
Last month, KPPU disclosed findings from its preliminary investigation, revealing that Shopee allegedly prioritized Shopee Express for package deliveries to consumers. The watchdog accused Shopee of discriminatory practices, citing that Shopee Express and J&T Express were automatically activated on the seller dashboard, unlike other courier services with good performance records that were not selected automatically.
Additionally, KPPU highlighted a conflict of interest within Shopee’s operations. An employee holding director positions in both Shopee Indonesia and Shopee Express was identified, which, according to KPPU, could influence competition and control behaviors of both entities.
The scrutiny is not limited to Shopee. KPPU is also investigating Shopee’s rival, Lazada, the Southeast Asian e-commerce arm of Chinese tech giant Alibaba, for similar violations. If proven guilty, Lazada could face fines amounting to 50% of net profits or 10% of total sales within the affected market during the violation period, according to KPPU.
| Key Findings | Details |
|---|---|
| Prioritization | Shopee allegedly favored Shopee Express for package deliveries |
| Discriminatory Behavior | Shopee Express and J&T Express were automatically activated on the seller dashboard |
| Conflict of Interest | Dual director positions held by an employee in both Shopee Indonesia and Shopee Express |
| Proposed Adjustments | Shopee proposed changes to its user interface and practices |
| Ongoing Investigations | KPPU is also investigating Lazada for similar violations |
This case underscores the importance of fair competition practices within the e-commerce sector in Indonesia. The adjustments proposed by Shopee include changes to their user interface and operational procedures, aiming to address the issues raised by KPPU and improve overall service quality.
- Behavioral Changes: Shopee has agreed to implement a series of behavioral changes as determined by KPPU to rectify the breach.
- User Interface Adjustments: Proposed changes to Shopee’s user interface aim to enhance service compliance and user experience.
- Compliance Commitment: Shopee has reaffirmed its commitment to complying with Indonesian laws and regulations.
- Conflict of Interest: KPPU identified potential conflicts of interest within Shopee’s management structure.
- Broader Investigations: Similar investigations are underway for Shopee’s competitor, Lazada.
KPPU’s investigation revealed that Shopee allegedly prioritized its courier service, Shopee Express, for package deliveries, giving it an unfair advantage over other courier services. This practice violates the principles of fair competition, as it may limit the opportunities for other competent courier services to compete on an equal footing.
The automatic activation of Shopee Express and J&T Express on the seller dashboard was another significant point of contention. This practice was deemed discriminatory as it excluded other courier services that had demonstrated good service performance from being automatically selected. Such practices can distort the competitive landscape, making it difficult for other services to gain visibility and market share.
The dual director positions held by an employee in both Shopee Indonesia and Shopee Express were identified as a conflict of interest. This situation has the potential to influence competition and control behaviors in a manner that favors Shopee Express, undermining the integrity of the competitive process.
In response to these findings, Shopee proposed several adjustments to its practices. These include changes to their user interface to enhance service delivery and compliance with regulatory feedback. These adjustments were approved by KPPU, signaling a step towards rectifying the identified issues and improving compliance with Indonesian competition laws.
In addition to investigating Shopee, KPPU is also scrutinizing Lazada for similar violations. The implications for Lazada could be severe if found guilty, with potential fines of up to 50% of net profits or 10% of total sales during the period of the violation. This highlights KPPU’s commitment to enforcing fair competition practices within the e-commerce sector.
These investigations and subsequent actions by KPPU are crucial in maintaining a level playing field in the Indonesian e-commerce market. By holding companies accountable for unfair practices, KPPU aims to ensure that all players, regardless of size, have the opportunity to compete fairly and contribute to a healthy market environment.
The agreement by Shopee and Shopee Express to adjust their practices following the admission of competition rule violations marks a significant development in Indonesia’s e-commerce sector. The actions taken by KPPU serve as a reminder of the importance of adhering to fair competition laws and the potential consequences of non-compliance. As KPPU continues its investigations, the emphasis on fair competition is expected to drive more equitable practices within the industry.
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