Indonesia is questioning Shopee and Lazada units for alleged anti-competitive activities

On Monday, Reuters reported that Indonesia’s antitrust agency KPPU is investigating the local branches of e-commerce platforms Shopee and Lazada for potential violations of anti-competition laws. According to the report, the companies audited are PT Shopee Internasional Indonesia and PT Ecart Webportal Indonesia, which manage the operations of Shopee and Lazada in Indonesia, respectively.

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

Meanwhile, Lazada’s case is still in the investigation stage. “We do not yet have two pieces of evidence sufficient to proceed to trial. If the evidence proves to be sufficient, we will be able to proceed,” he explained, noting that the investigative process takes at least 60 business days. Nur did not provide further details about the evidence needed.

The report on Shopee’s anti-competitive violations first appeared in February. The company is suspected of directing users to Shopee Xpress, its affiliated logistics service provider. If true, this practice limits consumer choice and impacts other logistics partners while unfairly increasing shipping volumes for Shopee Xpress.

The e-commerce company also partners with delivery service providers such as J&T Express, JNE, SiCepat, AnterAja, as well as GoSend and GrabExpress by Gojek for instant and same-day deliveries.

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

Shopee Xpress is indeed a key element of the marketplace’s business strategy. During Shopee’s parent company Sea’s first-quarter 2024 earnings call in early May, Sea president and CEO Forrest Li said SPX Express is one of the fastest and most extensive logistics operators in the markets where which Shopee operates.

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

“Having SPX Express in the Shopee ecosystem also allows us to effectively implement new features that benefit our buyers, such as the On Time Guarantee program that we launched in Southeast Asia. This program ensures a guaranteed delivery time for orders and this certainty is greatly appreciated by our buyers,” Li said during the call.

Last mile delivery is arguably the most complex and costly element of the e-commerce supply chain. It is also one of the most important factors to ensure customer satisfaction through fast delivery. Last mile delivery has become the solution the latest battleground in Indonesia’s dynamic e-commerce an ecosystem in which large players increase their logistics capabilities.

Increased competition has worsened the situation for third-party logistics (3PL) providers, who are struggling to cope with new competitive dynamics. This has also come under regulatory scrutiny.

“There are no regulations that prohibit e-commerce companies from establishing their own logistics subsidiaries. The most important thing is to ensure that consumers have the freedom to choose their preferred service providers and that marketplaces refrain from using their algorithms to favor related companies,” said KPPU’s Nur.

Lazada Logistics delivers parcels to customers and manages external suppliers. Its infrastructure and logistics network includes over 400 warehouse facilities, sortation centers and hubs, with over 85% of all first-mile parcels handled at its facilities, according to Lazada’s website.

Another major marketplace, Tokopedia, also has an affiliated logistics arm, GoTo Logistics. In April, GoTo entered into a conditional sale and purchase agreement to divest ownership of the GoTo Logistics delivery and fulfillment companies that serve Tokopedia. That said, GoTo Logistics will no longer be part of the group, although GoSend, the consumer-to-consumer delivery service available on the Gojek app, will not be affected.