E-Commerce Challenges and Solutions: Malaysian Legal Rights Analysis

This report, a pair assignment for PPB 3133, delves into the challenges and solutions surrounding e-commerce within the framework of Malaysian law. It examines issues like fraudulent transactions, misuse of personal data, and consumer protection concerns arising from online buying and selling. The study references the Contracts Act 1950, the Sale of Goods Act 1957, and the Electronic Commerce Act 2006, alongside the Consumer Protection Act 1999, to analyze legal safeguards. The research employs a secondary source methodology, drawing on articles and journals to offer insights into the scope of e-consumer protection, including product authenticity, transaction fraud, and privacy. The report also compares the legal landscape in Malaysia with that of Singapore, highlighting the government's role and the need for enhanced e-consumer regulations to boost consumer confidence in online transactions. The report identifies the challenges that need to be addressed by the government and provides an overview of the literature on the topic.

BUSINESS LAW - PPB 3133
Pair Assignment
Title:
E-COMMERCE CHALLENGES AND SOLUTION FROM A
MALAYSIAN LEGAL RIGHT
NAME: MATRICS NO.:
MUHAMMAD AKMAL BIN SAIFUL NIZAM D20191090068
MUHAMMAD RIEDZWAN BIN NASRULLAH D20191090074
SUBMIT TO : DR SASLINA BINTI KAMARUDDIN
SUBJECT : PPB 3133
GROUP : D
SEMESTER : 5

E-COMMERCE CHALLENGES AND SOLUTION FROM A MALAYSIAN LEGAL
RIGHT
Muhammad Akmal bin Saiful Nizam & Muhammad Riedzwan bin Nasrullah
Faculty of Management and Economics, Universiti Pendidikan Sultan Idris, Tanjong Malim,
Perak Darul Ridzuan, Malaysia.
ABSTRACT
E-commerce is the online buying and sale of goods and services using computers, tablets,
smartphones, and other devices. E-commerce is also a means of conducting virtual electronic
transactions that are not constrained by location or time. A firm or a business can put up a
virtual office in this virtual environment as well, which consumers can visit at any time.
Nowadays, almost anything can be purchased through e-commerce. However, the distance and
timing of internet buying have created some additional consumer protection issues and
obstacles. Many issues confront vendors and consumers in e-commerce, including fraudulent
transactions, misuse of personal data, and more. Consumers can use the Contracts Act 1950,
the Sale of Goods Act 1957, and the Electronic Commerce Act 2006 to protect themselves in
sales contracts. This study aims to examine and identify challenges and solutions related to
issues that occur in e-commerce from the point of view of Malaysian law and the challenges
that need to be addressed by the government. This study also uses research methodology which
is a secondary source by taking several articles and journals to be used as authentic reference
material to produce and complete this article. The scope of e-consumer protection regulations
is fairly extensive in the realm of e-commerce operations. Product authenticity, transaction and
delivery fraud, the price of goods sold is not affordable and privacy and security are some of
the issues or challenges that electronic consumers face. As a result, based on the Consumer
Protection Act of 1999 and other laws, there are numerous options to overcome these issues.
As a result, authorities must tighten existing e-consumer regulations so that consumers are
more trusting and confident while making online purchases.
Keyword: E-commerce, Consumer, Legal Protection, Sales of good

INTRODUCTION.
Malaysia's economic prosperity has been aided by the rapid development of
information technology. The rise of internet users in Malaysia is a phenomenon that has both
positive and negative implications for the business world. The Internet has also been shown to
have a large-scale impact and benefit on human existence, which should not be overlooked by
today's businesses. The extensive and comprehensive usage of electronics in numerous
industries such as e-commerce has been impacted by the rapid development of the internet in
the realm of information technology.
E-commerce is a type of business that makes use of information technology,
particularly advanced telecommunications and internet lines, to make dealing with clients
easier. Not only that, but e-commerce is a type of business that uses the internet as a medium
or one of the marketing sites to reach customers all over the world without regard for
geography. In general, e-commerce can be classified into two categories: business-to-business
e-commerce and business-to-consumer e-commerce. According to Zulfamy and Mohamad
Fazli (2016), e-commerce between business and business involves transactions between two or
more companies, one party is a supplier company to the other while for e-commerce between
business and consumer it involves transactions between product sellers. end with the user.
Furthermore, e-commerce makes use of the internet as a platform to build a network
that connects customers, vendors, and third parties such as banks, financing companies, and
other businesses in a secure electronic environment. With the introduction of e-commerce, a
business or individual can perform buying and selling transactions from any location and at
any time. The prerequisites for doing e-commerce operations, however, remain the same,
requiring the most up-to-date information in administrative and business procedures. E-
commerce can also be viewed as an alternative to some of the previous companies' challenges,
the most significant of which is the problem of advertising and selling their products and
services.
However, e-commerce is becoming increasingly vulnerable to security breaches, and
the prevalence of e-commerce fraud is on the rise. The Electronic Commerce Act of 2006
(ECA), which recognizes the legality of contracts and electronic signatures, protects
consumers. Identity theft alone cost $ 1.48 billion in losses in 2018, according to a Consumer
Affairs survey, and the number is steadily rising. While increased internet access has aided in
the revolutionization of the e-commerce business sector by changing the entire world into a

single global market. Fraud has been far more prevalent in recent years, resulting in
considerable losses for both traders and purchasers.
OVERVIEW OF INTERNATIONAL LITERATURE.
In a global context, e-commerce losses due to online payment fraud are estimated to
exceed $20 billion in 2021, according to estimates. This represents an increase of nearly 14%
above the previous year's figure of $17.5 billion. Because most organizations rely on electronic
data and computer networks to run their operations, a rising amount of personal and financial
data is being moved and kept online. Individuals are susceptible to privacy breaches, and
financial institutions and other organizations face potentially substantial liabilities as a result.
These users subsequently conduct online transactions, and sensitive personal information can
fall into the wrong hands, resulting in financial losses (A/P Sinnathamby & Zukarnain, 2021).
Literature review in Singapore.
Rising labour expenses and high rents are typical complaints among businesses, but
even as these prices continue to put pressure on firms, a tiny but increasing group of e-
commerce businesses is succeeding by avoiding these expenditures. Singapore is well-
connected in terms of the internet, with ecommerce sales accounting for 15% of total retail
volume in areas such as the United States and Europe (2013). More ecommerce companies are
expected to develop, according to analysts. Because there were inefficiencies in the system
surrounding sales commissions and real estate prices, internet retail was able to eliminate about
20% of the costs that shops faced by operating online. Aside from offering lower pricing, some
online merchants are using technology to distinguish their online shopping experience from
that of traditional brick-and-mortar stores. Despite the fact that 75 percent of the population in
Singapore uses the Internet, ecommerce firms claim that more consumers are coming online as
they get more familiar with Internet and mobile payment methods.
OVERVIEW OF LOCAL LITERATURE.
Within the local context, recent research has primarily focused on the adoption of e-
commerce, which necessitates adequate business models as well as other tactics to make this
technology more accessible to enterprises (Carla Ruiz Mafe and Silvia Sanz Blas, 2006). E-
commerce can create a significant amount of revenue. The loss of money as a result of fraud,
on the other hand, is extremely unpleasant. E-commerce fraud is one of the most significant

dangers and disadvantages that retailers face. Even as fraudsters evolve, traders and buyers
must safeguard their personal rights in order to avoid becoming victims. E-commerce and
internet technologies have a well-known impact on the value of a company. Organizations have
found that information and communication technology (ICT) has proven to be a useful
instrument for increasing efficiency (Ali, Khatibi. 2002). E-commerce fraud cases are difficult
to prosecute, increasing the problem. Scams like this are on the rise, and they're tough to deal
with, prevent, identify, and punish. Traders are supposed to employ the most up-to-date
technology tools and information to counteract this fraud, but small enterprises often lack the
cash and technical knowledge to do so. The fact that law enforcement agencies lack a
comprehensive anti-fraud structure to deal with such situations makes it harder to combat
dishonesty.
THE GAP OF LOCAL AND INTERNATIONAL LITERATURE.
Based on the literature, a comparison of the legal systems in Singapore and Malaysia
for the subject of e-commerce fraud is made based on the literature. Foreign countries underline
that fraud by a company or an individual is a severe offence that can be prosecuted in court.
With a new set of rules to assist merchants enhance the entire ecommerce process, consumers
are already getting the finest online shopping experience. The rules encompass things like
browsing, purchasing, paying for it, and getting it delivered. For e-commerce players, return
and exchange policies must be clearly established, which means retailers must give specifics
about product warranties, taxes, and additional surcharges for various payment choices. As a
result, client enquiries and concerns must be handled. Enterprise Singapore and industry
players have now released the guidelines. The guideline, according to the agency, helps firms
become more customer-centric, boosts consumer confidence, and propels the e-industry
forward. Consumers will be able to make more informed purchasing decisions and shop with
greater confidence as a result of the new standard.
Meanwhile, authorities in Malaysia are finding it tough to deal with the situation. In
reality, if too many of these crimes go unsolved, many more people will be defrauded.
According to the World Bank, Malaysia's SME sector has grown from 98.5 percent to 920 000
businesses, however SME digital adoption lags behind that of bigger businesses. Meanwhile,
according to a poll conducted by the Malaysian SME Association, 26% of local SMEs have
chosen digitalization or e-commerce platforms as a survival strategy. One of the major barriers
to businesses adopting digitalization has been discovered to be the expense of digitalization,

which includes software subscriptions, digital devices, and internet access. There is a belief
that digitization is costly, and approximately half of SMEs said that money is the most
significant barrier to digitalization. The government has allocated 59 million dollars in budget
2022 to support e-commerce activity. SME can also take advantage of 47 million dollars in
grants to take advantage of Malaysia's digitalization.
Unfortunately, despite the fact that rules are in place, some businesses or organizations
are bold enough to break the law and even engage in this irresponsible behavior. This paper
will focus on the problem of e-commerce fraud and abuse. The first section of this paper will
go through Malaysia's legal position on the problem. The second section of the study will focus
on the issues that arise in Malaysia. In the third phase, a sophisticated new methodology will
be used to list various fraud prevention strategies.
DEFINITION OF TERMS.
1. E-commerce.
Simply explained, e-commerce is the practice of purchasing and selling goods using
electronic channels such as mobile apps and the Internet. The simplicity achieved
through online purchases is the ideal experience that encourages consumers to continue
to conduct transactions solely through the e-commerce platform's screen display. Both
retail and online purchasing, as well as electronic transactions, are referred to as e-
commerce. There are two basic sorts of business models in Ecommerce. They are B2C
(business to consumer) and B2B (business to business) (Bolumole, Closset al.2015). In
the B2C model, a business website is a location where all transactions between a
company and its customers take place directly (Miangiaracina, Marchet et al. 2015).
2. Consumer Protection Act 1999.
Consumer Protection Act of 1999 protects customers by prohibiting misleading and
deceptive conduct, false representation, and unfair practices that could lead to consumer
error. It also includes measures for unfair contract conditions and criminal penalties for
violations of these provisions. In addition, the Act establishes assurances for the
provision of products and services, as well as rights against suppliers and producers.
The purpose of information security features on the internet and in e-commerce
applications is to keep data secret, authenticate and identify data, and control user
access. According to (Niranjanamurthy & Chahar, 2013), e-commerce companies

should make sure that software developers improve safety and security by including
features such as encryption, virus prevention, biometric authentication, and digital
signatures. When a seller and a customer trade over the internet, security must be a top
priority. Consumer confidence in the enhancement of security features offered in order
to maintain the security of information and financial transaction processes, such as the
usage of this security code, may be maintained and infiltration by third parties avoided.
3. Sale of Goods Act 2006.
The Sale of Goods Act of 1957 covers all sorts of sales contracts, including secondhand
sales, and does not distinguish between commercial and consumer sales. When it comes
to selling things, there is sometimes a basic power imbalance between customers and
traders in terms of negotiating strength, understanding of the nature and technical
components of items, and resources. More protection is required in the consumer
market. The outmoded consumer protection regulations enshrined in the Sale of Goods
Act of 1957 are incapable of addressing the issues confronting the 21st century's
modern and sophisticated society.
4. Electronic Commerce Act 2006
The Electronic Commerce Act of 2006 establishes legal recognition of electronic
messages in business transactions, as well as the use of electronic messages to meet
legal requirements, permit and facilitate commercial transactions by electronic means,
and other related matters. The law acknowledges all electronic transactions while
leaving traditional transactions unaffected. The act also emphasizes consumer
protection in order to ensure that consumers have confidence in doing electronic
transactions. The Act encourages the development of e-commerce by providing a way
for safe online transactions through the use of digital signatures, according to (Shireen
Ng., Ainin.S, 2001).

FINDINGS.
CHALLENGES FACED BY CONSUMERS IN E-COMMERCE.
1. Product authenticity.
Product authenticity is one of the main concerns that consumers always think about.
There are some cases that always show that the product being sold is not genuine. This will
raise consumer doubts to other sellers. These counterfeit products indirectly have a huge
impact on consumers ’trust in the seller and will indirectly cause concern to consumers and
make consumers publicize the problems they face to the public. Therefore, any seller who
puts non-genuine products on the market needs to be known for sure to prevent the same
thing from happening. This can be done by taking legal action against any seller who
commits an offense such as defrauding the authenticity of the product.
Also, product authenticity is not a big issue but there is value in distinguishing
genuine products from counterfeit ones. Usually, the quality of the product is related to the
original product. For example, many issues arise related to beauty products, health products
and so on. Based on Malaysian law, every health product must obtain permission from the
Ministry of Health Malaysia (MOH) before being sold to the public. This is because, based
on the Drug Control Authority (DCA) states that it only has the power to control the
registration of pharmaceutical and cosmetic products and does not include health products
categorized as food. In addition, consumers will be deceived into buying counterfeit
products because of its packaging pattern that almost resembles the original packaging.
Despite having shown such images, some of them really seem illogical and can raise doubts
in the minds of consumers (Muhammad Asyraf Ashaari et al., 2016).
Every seller who does business online should provide the necessary seller
information to help consumers make a decision before proceeding with the purchase of any
product from a particular seller. Transactions that take place online make consumers
unhappy because consumers interact with unknown sellers. Therefore, online platforms that
provide online buying services such as Lazada, Shoppe and so on, need to identify
authorized sellers before sales market their products on those platforms. This process is to
gain the trust of the customer then the trust of the customer towards the seller will last a
long time. Consumers will therefore be more confident as the Act gives the Commission
broad powers to regulate online speech, provided no content service provider, or other
person using content application services, can provide indecent, obscene, false, threatening,

content. or is offensive with intent to abuse, harass and harass any person” (Hsin Hsin
Chang, Kit Hong Wong, 2016).
2. Transaction and delivery fraud.
Online scams are a major factor why people feel anxious to buy goods through
online. It is very important to allow each seller to be trusted through some verification and
certainty. Not only that, find out or confirm whether the company or business has been
registered with the responsible party, namely the Companies Commission of Malaysia
(SSM) to prove that the company or business exists or not. It is important to know the
techniques used by scammers to commit fraud against consumers. There are several ways
of fraudulent sales operations used by sellers to deceive. However, trust in online
transactions is often said to be a key factor in determining the success and failure of e-
commerce (Malin Gustavsson & Ann-Marie Johansson, 2016)
In addition, there are some cases of fraud that is when the buyer makes a payment
to the bank account, the buyer will not receive any info or information from the seller after
making the transaction. Upon investigation, the bank account number used by the seller did
not belong to the seller but the seller actually asked someone else to open a bank account
by offering some large sum of money. For example, a fraudster may have access to another
account through an ATM card. This is the same method as a phone number used or possibly
belonging to someone else. Fraudsters will do various ways to ensure they will not be
detected by the authorities or the buyer after the transaction is successfully done.
Buyers may not be aware that the transaction is a scam until they do not receive the
product they have ordered and it is also likely that buyers will realize it when the item they
ordered takes a long time to reach the buyer. Buyers only realized that the transaction was
a scam as soon as they tried to contact the seller but unfortunately the number given from
the seller could no longer be contacted. There are also other scams such as the buyer
receiving an item that he did not order such as the buyer making a purchase of an IPhone
brand mobile phone but the item that reaches the buyer is a Nokia brand. After that, the
buyer tries to contact the seller but the seller fails to be tracked. It will make it worse when
they publicize their bad experiences (Mohamad Alif Fikri Mukhtar et al., 2016).
3. The price of goods sold is not affordable.

In relation to the price of the goods sold, each buyer has a certain budget to buy the
goods. When the price of the goods sold is too high from the seller's budget then the buyer
cannot afford to buy the goods. This is because there are a number of sellers who set the
price higher than the market price to get a bigger profit. The seller does so because the
buyer may not be aware of it and the buyer may not do a study of the price of the item in
the market first before buying the item.
Next, an unreasonable price is also likely to indicate the seller is not a serious seller
because the seller may be obtaining the product from an unauthorized supplier. Buyers may
want to avoid some layers of sellers as it can affect prices and can also affect product
handling. Not only that, there is a trend in the online market that the price placed after the
discount amount is cheaper than the original price. However, the price is actually placed
higher than the market price.
The main reason a company or business uses an online business is to lower purchase
prices or conduct more efficient purchasing operations for buyers and perhaps also to create
new markets or reduce sales risk for suppliers. This is because the prices of online market
products are expected to be lower than products sold in malls. However, there is a reason
why the purchased price may not be as expected i.e. the purchase price includes one -time
shipping costs. To avoid this confusion, the seller can state the shipping cost and allow the
buyer to decide to buy the item or not to buy the item.
4. Privacy and security.
Every buyer definitely wants privacy and security while making a transaction.
For example, the buyer's personal data such as name, address, telephone number and
also the buyer's transaction details cannot be disclosed to third parties or others. This is
because, security policy is also one of the important aspects to make an online purchase.
Security and privacy factors affect consumer confidence in shopping on the Internet.
Therefore, the personal data of the buyer should be well kept and not
disseminated if the seller is not doing strange things or trying to deceive the seller. Any
distribution of disclosed data must obtain prior consent from the buyer. The impact of
unguarded privacy and security causes potential users to buy and deal are often
prevented from doing so online because of their concerns about security or their
personal data being spread to others. Undoubtedly, there are irresponsible sellers
misusing their buyer information (Dr. Abd Razak Che Husin et al, .2016).

SOLUTIONS FOR CONSUMERS TO OVERCOME E-COMMERS CHALLENGES
The expansion of e-commerce requires legal support to foster consumer trust and
confidence (Naemah Amin & Roshazlizawati Mohd Nor, 2013). The law and consumer
protection policy must be updated to meet the needs of this new environment and economic
challenges, as the stated goal of the law and consumer protection policy is to provide consumers
with protection and rights against manufacturers and providers of damaged or defective goods
and services. Malaysia has a number of laws that can be used. Among them are the following:
1. Consumer Protection Act 1999.
The Consumer Protection Act is a federal statute that regulates the sale of goods
and services, both in person and online. The Consumer Protection Act provides protection
to all customers, regardless of the nature or method of business transaction. The Consumer
Protection Act also includes a legal notion that sets aside privacy regulations, allowing
consumers to file warranty claims and manufacturers to be held liable. The Consumer
Protection Act's protections cannot be contracted, which solves the problem of exclusions
in consumer contracts to some extent. The Consumer Protection Act's major purpose is to
give consumers adequate protection and compensation for goods and services.
The Consumer Protection Act emphasizes the need of ensuring the quality of goods
and services. In this scenario, the Consumer Protection Act says in Section 32 (2) (a) of the
CPA 1999 that the items obtained must be fit for their intended use, free of minor flaws,
acceptable in appearance, and packaged in a safe and lasting manner. Consumers benefit
more from the concept of acceptable quality, which encompasses all aspects of a product,
not just its quality and suitability, but also its safety. Non-contracting consumers, on the
other hand, may have difficulty defending their rights. (Roshazlizawati and Naemah, 2013).
For example, before serving any claim, the user is unable to present any proof of e-
transaction as required by the e-trader.
Electronic consumers are likewise protected under the Consumer Protection Act of
1999 from all misleading and deceptive behavior as well as unfair practices. This is
especially crucial for electronic shoppers who rely solely on information from websites like
Lazada, Shoppe, and other online shopping platforms. Misleading pricing indicators and
deceptive advertising strategies are examples of unfair trading practices in online buying.
For example, vendors may advertise products and services at lower prices than the market
price in order to entice buyers to purchase them. Instead, the customer is told that the item

they want is out of stock, but the merchant has other items, such as higher prices, to offer.
In such circumstances, Section 13 of the Consumer Protection Act of 1999 mandates that
electronic customers be protected against deceptive advertising practices.
The Consumer Protection Act also includes a remedy for breach of warranty that is
based on either a failure of the goods or a failure of the consumer. If a failure is repairable,
the supplier may repair or replace the items, or provide a refund if repair or replacement is
not reasonably possible (Section 42, CPA 1999). Only in the event of a major failure is it
possible to reject the items and request a refund or replacement. The consumer has only the
right to reject an object if he or she has lost faith in its utility or dependability. Furthermore,
when a product is given and there is an implied warranty that the product is the same as the
description, according to Section 34 of the CPA 1999. If the products obtained by the buyer
do not match the description pertaining to the product purchased in terms of its nature or
quality, the seller is deemed to have breached the implicit warranty under this article.
2. Sale of Goods Act 1957.
The Sale of Goods Act of 1957 covers all forms of sales contracts, including second-
hand sales, and makes no distinction between commercial and consumer sales. Because
there is no explicit restriction barring the selling of goods via the internet, the Sale of Goods
Act may apply to E-commerce. The nature of online purchasing, on the other hand, makes
it impossible for electronic shoppers to be cautious when making purchases. Consumers do
not have the opportunity to check the items or get to know the seller, nor do they have the
option to ask questions about the things on offer.
The major protections for consumer electronics may be found in the rules relating
to implied conditions on the quality and fitness of items that can be transferred, which is
one of the most important sections of the Sale of Goods Act 1957. In this situation, the
things shipped must match the description exactly. This is because the user relies on the
seller's website description, and all online sales might be classified as sales based on the
description. Section 62 of the SOGA 1957 allows for the express exclusion of implied
requirements in a contract of sale of goods. As a result, electronic consumers would be
bound by the assertion that "goods sold on the website cannot be returned or exchanged."
Section 17 of SOGA 1957 states that the number of products must be equal to the sample
in the quality displayed, that the purchaser must be able to compare the quality of the goods