Attention e-commerce businesses: Fraud, the law and you

• A new law to protect users of online trading portals goes into effect July 1
• While it may cost them a bit, operators of such businesses will have to comply

Bread & Kaya by Foong Cheng Leong

E-COMMERCE is booming in Malaysia. Euromonitor International estimated that Internet retailing in Malaysia reached RM842 million (US$268.3 million) in 2011; Goldman Sachs forecasts that e-commerce in Malaysia is projected to hit RM3.4 billion (US$1.1 billion) this year with a 30% year-on-year growth.
 
Notwithstanding such growth, online fraud is rampant in Malaysia. If you scour our online auction or listing websites, you'll find many dodgy sellers and buyers selling or offering to buy products and services.
 
But the long arm of the law recently caught Mohd Yunus Jan Muhammad for approaching six victims who had advertised to sell their gadgets through an Internet trading portal, by posing as a customer and setting up appointments. At these meetings, he would grab the merchandise and flee. He was sentenced to one year’s jail. The Court also fined and imposed a whipping on Mohd Yunud.
 
Sometime in 2011, the Ministry of Domestic Trade, Co-operatives and Consumerism proposed that the Electronic Commerce Act 2006, an act that regulates online commercial transactions, be amended to regulate the online market place industry. I am told that consultation was held with the industry and I understand that some industry players had taken steps to lobby against the amendment.
 
In April 2012, its minister Datuk Seri Ismail Sabri Yaakob announced that the amendment would ensure that electronic transactions could be done in a safer and secured environment.
 
The law came about in the form of the Consumer Protection (Electronic Trade Transactions) Regulations 2012 ("Regulation"), a regulation under the Consumer Protection Act 1999.
 
The Regulation will be in force on July 1, 2013. Under this Regulation, an online marketplace operator is required to, among others, provide their full details, terms of conditions of sale, rectification of errors and maintenance of records.
 
The new law applies to two (2) types of persons namely:

• A person who operates a business for the purpose of supply of goods or services through a website or in an online marketplace ("Online Business Owner"). "Online marketplace" means a website where goods or services are marketed by third parties for the purpose of trade. This may include your typical blog shops and sellers with accounts with eBay, Lelong and Mudah online stores.

• A person who provides an online marketplace ("Online Marketplace Operator"). This may include group buying websites operators such as GroupOn, auction and listing websites such as eBay, Lelong and Mudah, and online shopping websites where third party products as sold such as Zalora.

Online business owners
 
Under the Regulation, Online Business Owners shall disclose on the website where the business is conducted and the following information, failing which the operator commits an offence.

1. The name of the person who operates a business for the purpose of supply of goods or services through a website or in an online marketplace, or the name of the business, or the name of the company.
2. The registration number of the business or company, if applicable.
3. The e-mail address and telephone number, or address of the person who operates a business for the purpose of supply of goods or services through a website or in an online marketplace.
4. A description of the main characteristics of the goods or services.
5. The full price of the goods or services including transportation costs, taxes and any other costs.
6. The method of payment.
7. The terms and conditions.
8. The estimated time of delivery of the goods or services to the buyer.

Any person who discloses or provides the above information that he knows or has reason to believe is false or misleading, commits an offence.
 
Online Business Owners shall also:

1. provide the appropriate means to enable the buyer to rectify any errors prior to the confirmation of the order made by the buyer; and
2. shall acknowledge receipt of the order to the buyer without undue delay.

The order and the acknowledgement of receipt shall be deemed to have been received by the person who operates a business for the purpose of supply of goods or services through a website or in an online marketplace and the buyer, respectively, when the person and the buyer are able to access to such order and the acknowledgement of receipt.
 
The Online Marketplace Operator shall take reasonable steps to keep and maintain a record of the names, telephone numbers and the address of the person who supplies goods or services in the online marketplace, for a period of two years, failing which an offence is committed.
 
In addition to the terms and conditions, Online Business Owners and Online Marketplace Operators must comply with the Notice and Choice Principal provided by Personal Data Protection Act 2010 by inserting a privacy notice, in the National and English languages, on their website before the collection of any personal data.

Extra costs for businesses
 
Although this law seeks to protect consumers from unscrupulous traders, the introduction of this new law increases the startup costs and cost of operation of an e-commerce business.
 
Engaging lawyers to draft terms and conditions for e-commerce businesses can be expensive. But it is something any e-commerce business should invest in to protect themselves and their users.
 
The new law doesn't specify in detail how the terms and conditions should be. Therefore, one can have a very simple set of terms and conditions.
 
Alternatively, one may opt to adopt the terms and conditions of other e-commerce businesses provided that one is well versed in drafting and amending agreements. But one should take note that every set of terms and conditions is customized for specific businesses.
 
It would be ideal if we have affordable online services to draft terms and conditions and privacy policies for SMEs (small and medium enterprises) like SnapTerms, which allows start-up companies the opportunity to customize their website's terms and conditions without having to pay the fees typically associated with having the documents drafted by a lawyer.
 
But one must bear in mind that SnapTerms is a service provided by people who are well versed in the laws of their country and perhaps not Malaysia.
 
To digress a little, e-commerce businesses should also protect their intellectual property such as their trademarks, copyright and patents. These rights are registerable and one can protect these rights in Malaysia by filing them with the Intellectual Property Corporation of Malaysia or MyIPO.
 
Other than that, it is pertinent to protect your brand from being taken in well-known social media websites like Facebook and Twitter. You can use Knowem to check for the use of your brand, product, personal name or username instantly on over 550 popular and emerging social media websites.
 
Closing
 
The introduction of laws to track and record Internet transactions is nothing new. Last year, Section 114A of the Evidence Act 1950 and Cyber Centre and Cyber Cafe (Federal Territory of Kuala Lumpur) Rules 2012 were introduced to track and record such transactions.
 
These laws will not be the last. I foresee that many more such laws will be introduced in the near future.
 
Foong Cheng Leong is a blogger pretending to be a lawyer, and a lawyer pretending to be a blogger. He blogs at xes.cx and foongchengleong.com, and tweets at @xescx and @FCLCo.
 
 
Previous Bread & Kaya:
 
PDPA: Businesses have responsibilities and burdens
 
 
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