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

The Malaysian government's push to swiftly pass an e-commerce bill signals a critical moment for the country's digital marketplace. Platforms are not mere intermediaries, but complex systems with extensive investments and significant influence over both sellers and consumers. While users may perceive platforms as free, sellers face steep costs for visibility, from search ads to commissions and shipping campaigns.

Platforms wield power through network effects, data concentration, and control over transactions, effectively becoming private regulators that dictate market access and consumer relationships. Their decision-making processes, bolstered by algorithmic profiling and automated systems, deepen the imbalance of power. A study from Universiti Malaya's law faculty revealed several pernicious issues in Malaysia's e-commerce sector, including market access restrictions, vendor dependency on platform data, and predatory pricing practices.

Platforms often undercut competitors by selling below cost, using vouchers and shipping subsidies to drive weaker rivals out. They also engage in self-preferencing, where private label products are favored over independent sellers through internal data manipulation. Algorithmic biases skew search and recommendation systems, undermining neutrality and fairness. The aggregation of granular transaction data by platforms creates algorithmic repricing wars, forcing smaller sellers into unsustainable profit margins.

Exclusivity clauses and mandatory advertising further limit competition, while the forced use of platform logistics services erodes competition in the delivery sector. "Take-it-or-leave-it" contracts with restrictive clauses further exploit both businesses and consumers, while consumer protection laws are weakened as liability is shifted away from platforms. The integration of platforms with overseas factories enables tax evasion and the flooding of markets with unsafe products.

International examples show that regulators are taking action against platform abuses. In the US, Amazon was held accountable for defective third-party products, and European authorities imposed hefty fines on AliExpress and Temu for failing to prevent illegal goods. Thailand and the Philippines have also enacted strict platform regulations, while Indonesia banned Temu to protect local industries.

Malaysia must ensure that its e-commerce bill directly addresses structural algorithmic, competitive, and consumer harms to prevent undermining trust in e-commerce, harming consumers, and weakening domestic retail and manufacturing sectors.