Malaysia’s proposed e-commerce bill must rein in platform power

The government’s plan to fast-track the e-commerce bill and consider registration requirements for platforms is timely.

E-commerce platforms are not neutral connectors between sellers and consumers; they are complex ecosystems built on heavy investments, extracting rental income from locked-in consumers and dependent businesses.

While platforms appear “free” to users, sellers pay steep costs—search ads, commissions, vouchers, and shipping campaigns—to remain visible.

Through network effects, data concentration, and control over transactions, platforms dictate how businesses access markets and reach consumers.

Their power and decision-making effectively make them private regulators, governing both businesses and consumers. Dependence on algorithmic profiling, automated decisions, and predictive analytics deepens the imbalance of power.

A recent fundamental research grant study by Universiti Malaya’s law faculty identified several major harms in Malaysia’s e-commerce sector:

Market access, data dependency

Platforms set operational rules—visibility rankings, traffic, fees, and data insights.

Meanwhile, businesses build reputation and rankings over time, but this visibility is tied to platform data, which cannot be replicated elsewhere. Non-transferability locks sellers in, strengthening platform dominance and widening the power gap.

Price, advertising pressures

By leveraging data and AI analytics, platforms fuel intense price and advertising competition. This forces businesses into trade-offs between cost efficiency and product quality, undermining long-term consumer welfare.

Predatory pricing

Platforms often sell below cost, subsidising vouchers and shipping to drive weaker competitors out. Exclusive contracts with affiliated businesses further distort competition, as transaction revenues fall below logistics and fulfilment costs.

Self-preferencing

Platforms use internal data to identify successful third-party products, replicate them under private labels, and manipulate search algorithms to favour their own offerings. This sidelines independent sellers.

Algorithmic bias

Search and recommendation systems are coded to favour certain products or brands, undermining neutrality and fairness.

Data asymmetry

Platforms aggregate granular transaction and consumer behaviour data from sellers, using it to optimise proprietary retail strategies, leaving sellers disadvantaged.

Algorithmic repricing

Automated pricing tools trigger margin wars, forcing smaller sellers into unsustainable profit thresholds.

Fee exploitation

Locked-in businesses face rising fees, mandatory ad spending, and high fulfilment costs simply to maintain visibility.

Vertical restraints

Platforms enforce price-parity clauses, mandatory discounts, and algorithmic penalties, stripping sellers of pricing flexibility and eliminating competition.

Exclusive dealing

Platforms restrict sellers to list exclusively on their marketplace (“single-homing”), penalising cross-listing. Though competition law limits exclusivity to two years, platforms’ shorter contracts often auto-renew, cumulatively foreclosing competition and reducing consumer choice.

Tied logistics

Platforms increasingly force sellers to use their own logistics services, sidelining independent delivery companies and raising costs for businesses with existing systems. Consumers lose delivery options, while competition in logistics is destroyed.

Unfair Contracts

“Take-it-or-leave-it” contracts impose restrictive clauses on both businesses and consumers. Price-parity rules prevent sellers from offering cheaper prices elsewhere, while sudden changes in platform terms expose both sides to exploitation. Consumer protection laws are weakened as liability is shifted away from platforms.

Cross-border factory dumping

Certain platforms integrate directly with Chinese manufacturers via proprietary software, dictating production in real time. This model bypasses import taxes through loopholes, flooding markets with cheap, unsafe products. Platforms cannot claim neutrality when they control supply chains, data, and algorithms.

Copying and grooming

Platforms mine seller dashboards to identify successful local products, replicate them through white-label factories, and push replicas to the top of feeds. Local merchants often find their intellectual property registered abroad, undermining expansion efforts.

International precedents

Global regulators are acting against platform abuses. In the US case of Oberdorf v. Amazon (2019), Amazon was held liable as a “seller” for defective third-party products, recognising its active role in sales and distribution.

In Europe, the Digital Services Act (2022) imposed record fines on AliExpress (Euros €550m) and Temu (€200m) for failing to curb illegal and unsafe goods.

Closer to home, Thailand introduced strict platform regulations in 2022, the Philippines enacted the Internet Transactions Act (2023), Vietnam suspended Temu and Shein for registration non-compliance before passing its Law on E-Commerce (2025), and Indonesia banned Temu to protect local industries.

Conclusion

Malaysia’s upcoming e-commerce bill must directly address structural algorithmic, competitive, and consumer harms.

Platforms are not neutral intermediaries but powerful private regulators shaping markets, data flows, and consumer access.

Without robust legal boundaries, Malaysia risks undermining trust in e-commerce, harming consumers, and weakening domestic retail and manufacturing sectors.

Ong Tze Chin is a senior lecturer at Universiti Malaya’s law faculty and is contactable at [email protected].

The views expressed are those of the writer and do not necessarily reflect those of FMT.

Subscribe to our newsletter and get news delivered to your mailbox.