Laws Governing E-Commerce in Malaysia

E-commerce is the trading of services and products through the internet. It has revolutionized the whole shopping experience by offering people the ability to buy things with a simple click of their finger.

E-commerce has been popular in Malaysia since its introduction but the usage has definitely grown exponentially as a result of the Covid-19 pandemic whereat physical shops are forced to close for a long time.

However, like everything else, e-commerce is not all made of roses. There are many challenges that a consumer may face whilst using e-commerce. These include cybersecurity issues, misleading online advertisements, fraudster sellers, and many more.

This article discusses the various statutes and regulations in Malaysia that regulate e-commerce, and discusses whether there is a need for more laws.

Main Legislations that Govern E-Commerce

While there is no one single legislation that consolidates all the laws on e-commerce, credit is to be given to the Malaysian government in the 2000s who had the foresight of introducing many progressive and comprehensive statutes and regulations that are able to provide for the e-commerce world today.

The relevant main laws governing e-commerce transactions within Malaysia are as follows:

1. Electronic Commerce Act 2006 (“ECA 2006”)

The primary function of the ECA 2006 is that it recognises the validity of electronic communications in the formation of contracts. The ECA 2006 has, in effect, allowed a contract formed online to be treated as good as a contract formed in the physical world.

The ECA 2006 applies to any commercial transaction conducted through electronic means including commercial transactions by the Federal and State Governments, with the exception of the following transactions or documents:

• Power of attorney
• The creation of wills and codicils
• The creation of trusts
• Negotiable instruments

The ECA 2006 also recognizes the concept of electronic signature and has given a broad definition to “electronic signature”.

2. Consumer Protection Act 1999 (“CPA 1999”)

The CPA 1999 which provides numerous protections to consumers on the goods and services they purchase.

The Consumer Protection (Amendment) Act 2007 amended section 2 of the CPA 1999 to include “any trade transaction conducted through electronic means”, which officially brings the CPA 1999’s application to transactions in the cyberworld.

Amongst others, the CPA 1999 requires sellers to provide sufficient and correct information to consumers to avoid consumers purchasing misleading and deceptive products. The CPA 1999 also provides that there shall be an implied guarantee that the goods are of “acceptable quality”. The amendment to the CPA 1999 in 2010 has also introduced two new parts to the CPA 1999, namely, Part IIIA which provides protection to consumers from unfair contract terms, and Part XIIA which establishes a Committee on Advertisement to monitor and take necessary action against sellers that produce false and misleading advertisements.

If there is any non-compliance on the part of the seller, an award of not more than RM50,000 may be awarded to the consumer by the Tribunal for Consumer Claims. Read how to file a claim here.

3. Consumer Protection (Electronic Trade Transactions) Regulations 2012 (“CPR 2012”)

In exercise of the powers conferred by paragraph 150(2)(a) of the CPA 1999, the Minister made the CPR, which has further strengthened consumer protection in e-commerce.

The CPR 2012 imposes obligations on sellers to disclose certain information on their e-commerce website. This information include:

1. Name of the seller’s business;
2. Email address and telephone number or address of the seller’s business;
3. Description of the main characteristics of the goods or services;
4. Full price of the goods or services;
5. Terms and conditions of the sale; and
6. Estimated time of delivery of goods and services.

A failure to disclose this information or disclosing this information knowing or having reason to believe that they are false or misleading, is an offence.

The CPR 2012 also stipulates that the seller must provide appropriate means to enable consumers to rectify any errors prior to the confirmation of their order and to acknowledge receipt of the order without undue delay.

Any non-compliance on the part of the seller may lead to a fine of up to RM50,000 or imprisonment up to three years or both.

4. Contracts Act 1950 (“CA 1950”) and Sale of Goods Act 1957 (“SOGA 1957”)

The CA 1950 is the legislation in Malaysia that regulates the formation of contracts, which by virtue of the ECA 2006 mentioned above, has extended its application to electronic contracts as well.

The CA 1950 provides for the basic principles and existing doctrines of conventional contracts such as the doctrines of duress, undue influence, fraud, and misrepresentation that now apply to e-commerce contracts as well.

On the other hand, SOGA 1957 can also be referred to when dealing with sales of goods online. SOGA 1957 provides for implied conditions as to the quality and fitness of the goods, the delivery of the goods, amongst others.

5. Section 420 of the Penal Code

Section 420 of the Penal Code provides that “whoever cheats and thereby dishonestly induces the person deceived” shall be punished with imprisonment for a term which shall not be less than one year and not more than ten years and with whipping, and shall also be liable to a fine. Fraudsters or scammers who fraudulently or dishonestly induce a person to transfer property i.e. money through e-commerce commits a crime under this provision. This helps curbs consumers and business owners from falling prey to dishonest online users.

Other Legislations that are Relevant to E-Commerce

Besides the above, there are other relevant legislations that play a role in e-commerce, such as the Computer Crime Act 1997, the Registration of Businesses Act 1956, the Digital Signature Act 1997, the Personal Data Protection Act 2010, the Trade Description Act 2011, the Price Control and Anti-Profiteering Act 2011, and the Weights and Measures Act 1972.

For example, the Trade Description Act 2011 deals with commercial advertisements published by online shops. It prohibits false trade descriptions by imposing a penalty of a fine or imprisonment or both on offenders. Whereas for the Digital Signature Act 1997, it regulates and recognizes the use of digital signature (which is different from “electronic signatures”), at the same time providing for matters connected therewith. Another one is the Registration of Businesses Act 1956 which requires online businesses to be registered as well.

The rest mentioned deal with collateral issues such as protecting collected personal data from being abused, controlling price of online goods, and regulating fair weights and measure requirements during online transactions.

Does the Current Law for E-Commerce Require Change?

E-commerce laws should focus on achieving 3 underlying objectives, namely facilitate economic activity and innovation, protect consumers, and prevent online criminal activities.

Viewing the rapid change and innovation in the e-commerce ecosystem, the laws governing e-commerce should also continuously develop to ensure they are up to date and are able to achieve the 3 objectives.

For example, currently, there are very loose obligations on online market operators like Shopee and Lazada, compared to the obligations on business owners and sellers. There is limited responsibility in law for the market operators to regulate the vendors on their platform.

That being said, the author’s view is that the problem is not a lack of laws but rather a lack of enforcement.

Despite the numerous laws mentioned above, we continue to see frequently instances of false advertisements, “bait and switch” tactics, abuse of personal data, counterfeit products, and so on.

Thus, it is suggested that there should be stricter enforcement of the laws by the authorities and enhancement of the manpower in investigating such cases.

A reason for the lack of enforcement could be also because there is a lack of incentive for consumers to report a wrongdoing, for example, a consumer would rather take the loss than go through the hassle to sue to get a refund of a 50 ringgit spent on an unsatisfactory product. This should however be changed by easing the way a consumer makes a complaint, and that law enforcement agencies should be reminded to take all complaints seriously.

Conclusion

E-commerce has brought us tremendous convenience. We should continue to improve the e-commerce ecosystem particularly in light of what we witnessed during the Covid-19 pandemic.

Whilst improving the laws governing e-commerce are necessary, it is by no means the only solution. Strengthening the enforcement of existing laws, and educating e-commerce users of their rights, are equally paramount in creating a safe and stress-free e-commerce world.

If you require any further advice on e-commerce laws, feel free to Contact Me.

Authored with the assistance of my able interns, Connie Yap and Bernice Ho.