1. With Motion Control Order 3.0 app (OLS 3.0) to curb the spread of COVID-19 in Malaysia, more businesses are being impacted domestically and continue to seek alternative ways to operate during this unprecedented time.
2. The closure of some physical stores represents an opportunity for businesses to innovate in order to stay afloat. As a result, to bridge the gap between businesses and their customers, businesses are increasingly extending their presence through online platforms, either through an online marketplace (e.g. Shopee or Lazada) or as an online merchant. autonomous line. To help businesses navigate the closure of physical premises, the Malaysian government has also officially recognized that online commerce, or more widely known as electronic commerce (e-commerce), is an essential service and can be carried out throughout the MCO 3.0 application. .
3. When considering venturing into this space, business owners should keep several legal aspects in mind that may differ from performing physical operations.
4. Company registration
(a) As with setting up a conventional business, online businesses are required to register with the Companies Commission Malaysia (SSM), which is an agency under the jurisdiction of the Ministry of Internal Trade and of Consumption.
(b) In a 2017 statement issued by Datuk Zahrah Abd Wahab Fenner, the former Managing Director of SSM, it was provided that all online merchants who conduct business through marketplace or e-commerce companies must be registered with SSM and failure to do so would result in action being taken under the Registration of Businesses Act 1956 (ROBA), financial penalties of up to RM50,000 for non-compliance.1
(c) The foregoing statement is in accordance with article 5 of the ROBA, according to which all companies must be registered with the SSM. In fact, ROBA broadly defines the term “business” to include any form of trade, craft, calling, profession or other activity carried on for profit, excluding any office or employment or any charitable endeavor or occupation as specified under the ROBA;2 thus making ROBA applicable to e-commerce activities. Note, however, that ROBA does not apply to, among other things, any business owned and operated solely by a company registered under the Companies Act 1965 (now repealed by the Companies Act 2016) ( THAT).3
(d) In accordance with the Guidelines for Registration of New Businesses published by SSM, businesses that can be registered under ROBA are those operating in West Malaysia, which comprises all of Peninsular Malaysia and the Federal Territories of Putrajaya and Kuala Lumpur. Businesses can also be registered as a sole proprietorship or as a partnership with up to 20 partners. To be eligible for registration with the SSM, businesses must be owned by a Malaysian citizen or permanent resident of Malaysia who is at least 18 years of age. In addition, any person responsible for a company is required to separately register all of its trade names, if any.4
(e) At this point, it should also be noted that the mere act of offering goods or services online to Malaysians by foreign traders who operate outside Malaysia (i.e. e-commerce cross-border) would not necessarily warrant the registration or incorporation of the foreign trader. with SSM.
(a) Online businesses rely heavily on the influence of online advertising to drive sales, as online advertising is an integral tool used to promote products and services in the absence of in-store experiences or physical displays. Although there is no single law regulating online advertisements as such, the Communications and Multimedia Content Forum of Malaysia (CMCF)5 established the Malaysian Communications and Media Content Code (Content code),6 which sets out best practice guidelines and procedures and content standards disseminated to the public by service providers in the communications and multimedia industry in Malaysia. In particular, the content code is only applicable to the extent that advertisements are communicated or disseminated via electronic media in Malaysia, which includes online advertising activities as opposed to traditional forms of print media. The Content Code places the responsibility for adhering to the advertising parameters under it on “advertisers”, which is described as anyone who uses an electronic medium to advertise its products and services.7
(b) The Content Code prescribes, among other things, that all online advertisements must be legal, decent, honest and truthful, and that such advertisements must also adhere to generally accepted business principles of fair competition.8 For example, when pricing products, the same should be done clearly and advertisers should ensure that prices match the products pictured. In addition, if the price of one product depends on the purchase of another, the extent of any consumer commitment should be specified and the availability of benefits likely to be obtained by consumers should not be exaggerated.9
(c) More importantly, when using the global “guarantee” in advertisements, such connotation should not be used in a way that might diminish the legal rights of consumers. The substantial limitations must be clearly specified in the advertisement, and that before any commitment, consumers must be able to obtain the full terms of the guarantee from the advertisers. Advertisers should inform consumers of the nature and extent of additional warranty rights beyond those provided by law, and should clearly indicate how to obtain redress.ten
(d) When you choose to advertise products online, certain products and services are considered objectionable under the Content Code. In this regard, advertisers should avoid promoting products and services that may be considered contrary to the public interest, such as cigarettes, tobacco products and their accessories, sexually explicit content and any form of gambling, including bets and game tips (among others).11
(e) Note also that the publication of false or misleading statements in any advertisement for goods or services, including any form of advertisement published electronically, is an offense under the Trade Descriptions Act 2011 (TDA ).12 An advertisement may be considered false or misleading in the event that it leads consumers to obtain goods and services provided in an erroneous manner by relying on it.
6. Legal relations and consumer protection
(a) The Electronic Commerce Act 2006 (ECA) recognizes the establishment of commercial relationships online. In accordance with article 7 of the LCE, a contract formed by means of an electronic message13 is legally valid, binding and enforceable against contracting parties (provided the elements of a valid contract are met). To facilitate the creation of such contracts, Article 9 of the ECA further recognizes the use of electronic signatures in commercial transactions,14 which are signatures executed by electronic means in accordance with the ECA or digital signatures created in accordance with the requirements of the Digital Signatures Act 1997.
(b) Online traders also have a responsibility to ensure compliance with the Consumer Protection Act 1999 (CPA), which, among other things, provides that no one shall make any false or misleading representations as to the quality and to the quantity of the goods supplied or misleading indication as to the price of the said goods or services offered.15 Furthermore, it is prohibited to prepare general terms and conditions of consumption in a way that would result in an unfair advantage for the supplier or an unfair disadvantage for the consumer.16 (e.g. abuse of the online merchant’s bargaining power, for example); or to conclude terms and conditions of sale which are substantially unfair to the consumer17 (for example, the insertion of terms that exclude or limit an online merchant’s liability for negligence).
(c) The Consumer Protection (Electronic Commercial Transactions) (CPR) Regulations 2012, issued under the CPA, also requires anyone carrying on a business through a website or through an online marketplace to disclose information following on its website:18
(i) The name of the person who carries on a business for the purpose of providing goods or services through a website or in an online marketplace, or the name of the business, or the name of the company.
(ii) Business or company registration number, if applicable.
(iii) The e-mail address and telephone number, or address of the person who carries on a business for the purpose of providing goods or services through a website or in an online marketplace.
(iv) A description of the main characteristics of the goods or services.
(v) The total price of the goods or services, including transportation charges, taxes and any other costs.
(vi) Method of payment.
(vii) Terms and Conditions.
(viii) The estimated time for delivery of the goods or services to the buyer.
(Note that providing false or misleading information regarding the above is an offence.)
(d) In addition, online merchants must provide appropriate means to allow a buyer to rectify any errors before confirming any order placed; and acknowledge receipt of the order to the buyer without undue delay.19
E-commerce has paved the way for business viability and continuity at a time when social and business interactions are experiencing unexpected challenges. With the government recognizing the importance of meeting the needs of businesses and consumers during a nationwide lockdown, e-commerce services are increasingly relied upon to carry out day-to-day operations. If there was ever a time for businesses to grow and redefine their strategies, they should seize the opportunity to move their operations online now. When doing so, companies should be aware of the legal obligations involved and seek legal advice if necessary.