The Malaysian Communications and Multimedia Commission (MCMC) has introduced a new Regulatory Framework to foster a safer online environment, addressing the increasing risks of online harm. This framework amends the Communications and Multimedia (Licensing) (Exemption) Order 2000 and the Communications and Multimedia (Licensing) Regulations 2000, impacting Internet Messaging and Social Media Service Providers such as Facebook, Instagram, WhatsApp, and TikTok.
Key Components of the Regulatory Framework
Previously, these platforms were exempt from licensing requirements under the Communications and Multimedia (Licensing) (Exemption) Order 2000. However, under the new framework, any service provider with 8 million or more users in Malaysia must now apply for an Applications Service Provider Class Licence (ASP (C)) under the Communications and Multimedia Act 1998 (CMA 1998). The key requirements for obtaining an ASP (C) include:
- Payment of the prescribed registration fees;
- Incorporation of a local company (we note that there are no restrictions on foreign shareholding); and
- Submission of the necessary documents required as per the class licence application checklist.
The ASP (C) is valid for one year from the registration date, and service providers are required to reapply annually. The licensing requirement takes effect on 1 January 2025, with a grace period from 1 August 2024 for affected service providers to comply.
Implications for Businesses
- Compliance Requirements: Non-compliance with the licensing requirement may lead to enforcement actions under Section 126 of the CMA 1998. Penalties include fines of up to RM500,000, imprisonment for up to 5 years, or both. Additional fines of RM1,000 per day may apply for continued non-compliance after conviction;
- Implementation of Practical Measures: Service providers will need to allocate resources to meet the conduct requirements and obligations that MCMC will establish through public consultation. Key proposed requirements include:
– Developing policies for user data protection, content moderation, advertisements, and combating online harms;
– Implementing child safety measures;
– Establishing effective user complaint procedures;
– Managing deepfakes and harmful AI-generated content; and
– Regularly reporting on these measures. - Requirement for Incorporating a Local Entity: Incorporating a local entity is a prerequisite for obtaining an ASP (C). However, under sub-regulation 23(2) of the Communications and Multimedia (Licensing) Regulations 2000, the Minister may permit foreign companies to register as class licensees on a case-by-case basis. There are no restrictions on foreign shareholding under the class licence, which was fully liberalised in 2012, allowing foreign-owned companies incorporated in Malaysia to provide services to local users.
A Safer Digital Environment
There is growing consensus that service providers have a responsibility to prevent illegal and harmful content online. The introduction of this Regulatory Framework reflects a concerted effort to address these challenges and create a safer digital environment for users in Malaysia.
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This article was written by Low Rui Thong (Pupil in Chambers) from Donovan & Ho’s corporate practice.
Our corporate practice group advises on corporate acquisitions, restructuring exercises, joint venture arrangements, shareholder agreements, employee share options and franchise businesses, Malaysia start-up founders and can assist with venture capital funds in Seed, Series A & B funding rounds. Feel free to contact us if you have any queries.
