IN an online survey conducted in 2018, the Malaysian Communications and Multimedia Commission found that more than 50% of Malaysians used e-commerce platforms to shop and sell online.
The Covid-19 pandemic and the consequent movement control order have made consumers turn to e-commerce at an unprecedented rate. Despite widespread unemployment and a drop in earnings, global retail e-commerce sales are expected to grow by 16.5% in 2020, albeit slower than the 20.2% last year.
However, nine countries including Malaysia are expected to see more than 20% growth, a substantial acceleration over 2019. (E-marketer Insider Intelligence, 2020)
E-commerce regulations in Malaysia
The regulation of e-commerce is the responsibility of the Domestic Trade and Consumer Affairs Ministry. When the Consumer Protection Act 1999 (CPA) was adopted, the ministry insisted on excluding e-commerce from its scope – Section 2(2)(g) provided that the CPA shall not apply to e-commerce.
This was only resolved in 2007 by an amendment act, and the CPA now explicitly provides that it shall apply in respect of all goods and services that are offered or supplied in trade including any trade transaction conducted through electronic means.
We had to wait another seven years before the Consumer Protection (Electronic Trade Transactions) Regulations 2012 became effective on July 1, 2013.
The focus of these regulations is online marketplace suppliers, i.e. traders. They are required to disclose, on their websites, basic information such as where the online business is conducted, identity and contact information of the supplier, information including the full price of the goods or services supplied, method of payment and terms and conditions of supply, and estimated time of delivery of the goods or services.
Traders are also required to provide the appropriate means to enable the buyer to rectify any errors before the confirmation of the order is made and acknowledge receipt of any order made by the buyer without undue delay.
The National Consumer Complaints Centre has continued to receive an ever-increasing number of complaints on unfair trade practices by e-commerce traders.
This includes misleading advertising and product information, inconvenient payment processes, low-quality and imitation goods, guarantees and warranties less than as provided by the CPA, unfair returns and refunds policies including offering only a credit when a refund is due, late or even non-delivery of products, defective products, products not compliant with Malaysian standards, and suppliers not responding to complaints.
Clearly, the approach adopted in our regulations has not had the desired outcome.
Digital platforms
Though some e-traders market their products on their own websites, the vast majority do so through digital platforms.
Digital platforms bring together a set of parties to interact and create value; they assume an intermediary role, and for this, provide open platforms and set governance conditions for their use.
The business models of digital platforms vary and are evolving rapidly. Defining such a “moving target” is challenging.
The online marketplace is a category of digital platforms – it brings together traders and consumers. Consumers are familiar with Amazon, Alibaba, Airbnb, Grab, Lazada and Shopee. The providers of e-commerce platforms typically monetise their platforms by charging traders listing fees, commissions on the sales made, and through paid advertisements by traders or others. They make immense profits from their intermediary role.
Hitherto, e-commerce platform providers have avoided responsibility for the goods and services sold on their platforms because they have likened their role to that of a shopping mall, where consumers go to purchase goods from trading outlets.
Hence, our regulations merely require the marketplace operator to take reasonable steps to maintain a record of the names, telephone numbers and addresses of those that supply goods or services in the online marketplace, for a period of two years.
The “shopping mall” analogy is misleading, even duplicitous, and governments need to wise up to this reality. After all, even shopping mall operators are responsible for the safety of those who patronise their malls, and they do not get a commission on the sales made by their tenants.
E-commerce is very different from conventional shopping at brick-and-mortar outlets. E-commerce involves a new technology without face-to-face contact between buyer and seller at a specific geographical address, which the consumer can physically access for pre- and post-sales interaction.
The seller and buyer may reside in different countries, and the enforcement of rights becomes problematic. It is also elementary for a fictitious e-commerce trader to rip off consumers.
In consumer law, duties have been imposed on the importers of goods and services principally because it is difficult to bring an action against producers outside of the jurisdiction in which the consumer resides.
In an analogous approach, governments have begun to impose responsibilities on e-commerce platform providers. The approach is also cogent because e-commerce platforms also market goods of foreign traders.
New genre of e-commerce laws
The e-commerce law of the People’s Republic of China came into force on January 1, 2019. Since then, several countries have adopted new e-commerce laws, including India (Consumer Protection (E-Commerce) Rules, 2020), Indonesia (Government Regulation No. 80 of 2019 on Trading through Electronic Systems) and Cambodia (Law on E-commerce 2019).
These new laws deal with an array of aspects including consumer protection, sustainable consumption, intellectual property, data protection, complaints handling and dispute resolution. They also introduce many novel features.
The e-commerce law in China applies to all “e-commerce operators”, defined as anyone who sells goods or provides services through the internet and other information networks. This covers e-commerce platform operators, traders who operate via these platforms, and those who operate through their own websites or other web services.
E-commerce platform providers
The principal focus of China’s new e-commerce law is “e-commerce platform operators”, defined as those who provide online business premises, transaction matching, information distribution and other services so that parties may engage in independent transactions. In the Malaysian context, this would include Lazada (owned by China-based Alibaba) and Shopee (headquartered in Singapore).
It is their intermediary role in e-commerce as between traders and consumers, that is the focus of the new genre of regulations – be it China, India or Indonesia. The rationale is that they can play the role of gatekeeper for consumer protection and assume responsibility for the conduct of the merchants who use their online premises.
China has been most radical in this aspect. Article 38 of its law makes e-commerce platform operators jointly and severally responsible for compliance with consumer protection law:
An e-commerce platform operator that knows that the goods sold or services provided by traders on their platform are not in compliance with requirements for safeguarding personal and property safety, or otherwise infringe upon the legitimate rights and interests of consumers, but fails to take necessary measures, shall be jointly and severally liable with such traders.
China also imposes responsibility on other intermediaries, including express delivery service providers and electronic payment service providers.
Express delivery service providers, for instance, are required to remind the consignee to inspect and check deliveries on the spot, and have the consent of the consignee if delivery is to be made to anyone else.
There is even a nod to sustainable consumption, with express delivery service providers required to use environmentally friendly packaging, minimise material use, and recycle where possible.
Electronic payment service providers are required to inform users of the functions, method of use, important cautions, risks, charging standards and other matters in relation to the electronic payment service, and shall not impose any unreasonable transaction conditions.
They are even required to provide users, free of charge, with account statements and transaction records for the latest three years.
Indonesia requires e-commerce platform operators to prioritise domestic products, improve their competitiveness, and facilitate a special section on their website or marketplace to promote local products.
Complaints handling
The new e-commerce laws of China, India and Indonesia focus on complaints handled by the trader. The Indonesian law, for instance, requires e-commerce businesses to provide a complaint service for consumers.
This must at least include the process on how consumers can complain, complete with address and contact number to file complaints, competent staff to handle complaints, follow-up procedures for complaints, and the time period for resolving complaints.
Where an e-commerce company fails to settle a dispute, Indonesian authorities will add it to a publicly available priority monitoring list.
Lessons for Malaysia
The US (68%) and China (22%) dominated the market capitalisation value of the 70 largest digital platforms in 2019. Their laws are designed to further develop their e-commerce capacity.
They operate on the basis that businesses are developed by building consumer trust and confidence, not by consumer exploitation.
Though the US stance at international forums is that e-commerce should be left to the free market, it has in its domestic law imposed joint and several liability on creditors for the unfair or deceptive acts or practices of sellers (US Electronic Code of Federal Regulations (eCFR) Section 433.2).
This principle of “connected lender liability” was first introduced by the United Kingdom in Section 75 of the Consumer Credit Act 1974.
E-commerce is a rapidly changing industry and it needs rapid regulatory responses.
Malaysia’s Domestic Trade and Consumer Affairs Ministry has to urgently revise the Consumer Protection (E-commerce Trade Transactions) Regulations 2012 to protect consumers and grow the e-commerce industry. – The Vibes, December 31, 2020
(Statistics cited from UNCTAD 11th Research Partnership Platform, December 18, 2020)
Prof Datuk Sothi Rachagan is a former dean of Universiti Malaya’s Law Faculty and headed numerous international consumer rights bodies
.JPG)
