Indonesia probing Shopee, Lazada units for alleged anti-competition moves

Indonesia probing Shopee, Lazada units for alleged anti-competition moves

FILE PHOTO: The Shopee logo is seen at an office building in Singapore January 17, 2018. REUTERS/Thomas White/File Photo

Indonesia’s anti-trust agency KPPU is said to be investigating the local branches of e-commerce platforms Shopee and Lazada for potential anti-competition rule violations, Reuters reported on Monday. The companies under scrutiny are PT Shopee Internasional Indonesia and PT Ecart Webportal Indonesia, which manage Shopee and Lazada’s operations in Indonesia, respectively, the report said.

Deswin Nur, head of the bureau for public relations and cooperation at KPPU, told DealStreetAsia that Shopee and Lazada are allegedly favouring their own affiliated logistics services over other providers. He also confirmed that a preliminary hearing for Shopee is scheduled for Tuesday morning. “Shopee must attend the hearing because they are a reported party in this case,” Nur said.

Meanwhile, Lazada’s case is still in the investigation phase. “We don’t yet have the two pieces of sufficient evidence required to proceed to a hearing. If the evidence becomes sufficient, we can move forward,” he explained, noting that the investigation process takes a minimum of 60 working days. Nur did not provide further details about the evidence needed.

A report alleging anti-competition rule violations by Shopee first surfaced in February. The firm is suspected of directing users to Shopee Xpress, its affiliated logistics provider. If true, such a practice restricts consumer choice and impacts other logistics partners while unfairly boosting shipping volumes for Shopee Xpress.

The e-commerce company also collaborates with delivery service providers such as J&T Express, JNE, SiCepat, AnterAja, as well as Gojek’s GoSend and GrabExpress, for instant and same-day deliveries.

DealStreetAsia has reached out to Sea Ltd and Lazada for comments.

Shopee Xpress is indeed a crucial component of the marketplace’s business strategy. In Shopee’s parent company Sea’s Q1 2024 earnings call earlier in May, Sea chairman and CEO Forrest Li said SPX Express is one of the fastest and most extensive logistics operators in markets where Shopee operates.

In the first quarter, about 70% of SPX Express orders in Asia were delivered within three days of order placement. The company also managed to reduce its logistics costs; SPX Express’s cost per order decreased by 15% for Asia and 23% for Brazil year-on-year in the first quarter.

“Having SPX Express in the Shopee ecosystem also allows us to efficiently roll out new features that benefit our buyers, such as the ‘On Time Guarantee’ programme that we launched in Southeast Asia. This programme provides a guaranteed delivery time for orders, and this certainty is very well appreciated by our buyers,” Li said during the call.

Last-mile delivery is arguably the most complex and expensive component of the e-commerce supply chain. It is also one of the most crucial factors in ensuring customer satisfaction through speedy deliveries. Last-mile delivery has emerged as the latest battleground in Indonesia’s dynamic e-commerce ecosystem, with big players ramping up their logistics capabilities.

Heightened competition has queered the pitch for third-party logistics (3PL) providers which are struggling to navigate the new competitive dynamics. It has also come under regulatory scrutiny.

“There are no rules preventing e-commerce companies from establishing their own logistics subsidiaries. What matters most is ensuring that consumers retain the freedom to choose their preferred service delivery providers and that marketplace platforms refrain from leveraging their algorithms to favour affiliated companies,” KPPU’s Nur said.

Lazada Logistics handles customer parcel delivery and manages third-party providers. Its logistics infrastructure and network include over 400 warehouse facilities, sortation centres, and hubs, with more than 85% of the total first-mile parcels handled at its facilities, according to Lazada’s website.

Another marketplace major Tokopedia also has affiliated logistics arm GoTo Logistics. In April, GoTo engaged in a conditional sale and purchase agreement to divest ownership of the delivery and fulfillment businesses within GoTo Logistics that support Tokopedia. That said, GoTo Logistics will no longer be part of the group although it does not affect GoSend, the consumer-to-consumer delivery service available on the Gojek app.

Edited by: Joymitra Rai

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