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Taking your business online: Q&A of laws you need to be aware of when doing e-commerce

The COVID-19 pandemic, and the subsequent Movement Control Order (“MCO”) imposed by the government, has greatly impacted the business community in Malaysia. Many brick and mortar businesses are now forced to shutter their doors until the end of the MCO. There certainly is no shortage of doom and gloom taking over the country.

However, the MCO also presents an opportunity or perhaps even a necessity, for business owners to re-strategise and pivot, not only to cope with the unique situation caused by the MCO, but to improve the prospect of the business long-term. One such measure that is being actively taken by business owners is to take their businesses online, for the sale and supply of goods or services through the internet. This article explores the various local laws that businesses should be aware of when making the transition onto the world wide web.

 

Are my customers and I legally bound by the terms and conditions or transactions done on my website?

  1. Electronic Commerce Act 2006 (ECA)

Yes. The ECA sets out that electronic contracts and signatures will not be denied legal effect just because they are entered into electronically. This means that the terms and conditions your e-commerce website set out are legally binding, either by express actions (checking the box) or by implied conduct of continued use by visitors of the site.

A contract is valid if electronic messages (i.e. information generated, sent, received, or stored by electronic means) are used in the formation of a contract.

 

Are there any mandatory legal requirements that apply to my website or online marketplace?

  1. Consumer Protection (Electronic Trade Transactions) Regulations 2012 (ETT Regulations)

Yes. The ETT Regulations is a regulation under the Consumer Protection Act 1999 (more on this below), that apply to any person who operates a business through a website or an online marketplace which supplies goods or services. An ‘online marketplace’ is defined as a website where goods or services are marketed by third parties for the purposes of trade.

The ETT Regulations mandate that persons who offer goods or services for trade through websites or online marketplaces (for convenience, we will refer to them as ‘traders’) are to disclose certain information contained in the Schedule of the ETT Regulations. These include:

  • identity of the trader, e.g. the person, business, or company;
  • company registration number of the trader (if applicable); and
  • email address and telephone number of the trader.

Additionally, traders shall also offer avenues through which buyers can rectify any errors prior to confirming an order.

Meanwhile, operators of online marketplace are obliged to maintain a record of the names, telephone numbers, and addresses of the traders for a period of 2 years.

 

What laws should I be aware of or be careful to avoid, when listing my goods and products on my website?

  1. Trade Descriptions Act 2011 (TDA)

When listing or describing your products online, it is tempting to use superlative language to attract the attention of potential buyers with the ultimate goal of selling your product. However, be cautioned that the TDA prohibits the following:

  • application of false trade descriptions on goods;
  • supply of goods to which false trade description are applied; and
  • offering for supply goods to which false trade description are applied.

A ‘false trade description’ is a trade description which:

  • is false; or
  • is misleading as to the nature and specification of the goods; or
  • misrepresents that the goods comply with any specified standards or is recognized by any person.

 

Can I dictate one-sided terms and conditions that are most favourable to me on my website?

  1. Consumer Protection Act 1999 (CPA)

The CPA regulates the supply of goods and services to customers, used and consumed for personal, domestic or household purposes (i.e. it applies to B2C type of businesses only).

In respect of the supply of goods, the CPA set out various implied guarantees below in favour of the consumer:

  • that the supplier has the right to sell the goods;
  • that the goods are free from undisclosed security;
  • that the consumer is entitled to quiet possession of the goods;
  • that the goods will be of acceptable quality;
  • that the goods will be fit for a particular purpose communicated by the consumer to the supplier or represented by the supplier;
  • where goods are purchased by the consumer in reliance of the description of the goods, that the goods will correspond to the description;
  • that the goods will correspond to a sample provided to the consumer by the supplier;
  • where the price of the goods is not determined upfront, that the consumer will only be liable to pay a reasonable price for the goods; and
  • that the supplier will make available facilities for the repair of the goods and the supply of spare parts for the goods for a reasonable period.

In respect of the supply of services, the CPA set out the implied guarantees below in favour of the consumer:

  • that the services will be rendered with reasonable care and skill;
  • that the services and any product thereof will be fit for a particular purpose communicated by the consumer to the supplier, or as represented by the supplier;
  • if the time frame for the service is not determined upfront, that the service will be completed within a reasonable time; and
  • where the price of the service is not determined upfront, that the consumer will only be liable to pay a reasonable price for the service.

Additionally, the CPA also contains prohibitions against various actions, including:

  • misleading conduct;
  • false or misleading representation;
  • misleading indication as to the pricing;
  • bait advertising;
  • false offering of gifts, prizes, or other free items,

Consumers and suppliers may not contract out of the provisions of the CPA. Thus, the broad disclaimers in your online T&Cs declaring that you will not be liable for anything done online is merely a false assurance. There are many online T&Cs out there which are ‘inspired’ by other similar or competing websites, some of which have little or no regard to these consumer protection laws, or which were even adapted from different jurisdictions with more relaxed consumer protection laws than ours. So, do get proper legal advice from local lawyers who are familiar with the local consumer protection laws and are experienced in drafting such terms.

  1. Sale of Goods Act 1957 (SOGA)

The SOGA only governs contracts for the sale of goods. Contrasted with the CPA, the SOGA applies to both B2C and B2B transactions.

The SOGA sets out the implied conditions or warranties below in favour of the buyer:

  • that the seller has the right to sell the goods;
  • that the buyer shall be entitled to quiet possession of the goods;
  • that the goods will be free from encumbrances not declared to the buyer;
  • where goods are purchased by the buyer in reliance of the description of the goods, that the goods will correspond to the description;
  • that the goods will correspond to the sample provided by the seller;
  • that the goods will be fit for a particular purpose, if made known to the seller by the buyer; and
  • that the goods will be of merchantable quality.

Unlike the CPA, buyers and sellers may expressly contract out of the implied conditions and warranties set out in the SOGA.

 

What should I be aware of when posting viral content or run eye-catching campaigns on my website?

  1. Communications and Multimedia Act 1998 (CMA)

The CMA regulates multimedia and communications industry players in Malaysia, among which are website operators, which fall within the ambit of ‘content applications service providers’.

The CMA prohibits the provision of content which is indecent, obscene, false, menacing, or offensive in character with intent to annoy, abuse, threaten or harass any person.

The CMA is complemented by the Content Code. The Content Code sets out guidelines and best practices for disseminating content online. However, compliance to the Content Code is on a voluntary basis and is only recommended practice.

 

What should I do when collecting users’ and customers’ information on my website?

  1. Personal Data Protection Act 2010 (PDPA)

The PDPA regulates the processing of personal data for commercial purposes. We have written about the PDPA numerous times here, here, and here.

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This article was written by Shawn Ho (Partner) & Ian Liew (Associate) from the corporate practice group of Donovan & Ho.  Shawn leads the corporate practice group of Donovan & Ho, and has been recognised as a Notable Practitioner, whilst the firm has been recognised as a Notable Firm for Corporate and M&A by Asialaw Profiles 2020.  We are also ranked as a Recommended Firm by IFLR1000 2020.

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.

 

 

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