SEPTEMBER 2 — The recent government’s announcement to expedite the e-commerce bill and to consider registration requirements for e-commerce platforms are highly welcome. E-commerce platforms are not mere neutral intermediaries connecting sellers and consumers. Instead, they form highly integrated ecosystems of interconnected, interdependent entities working together to facilitate e-commerce.
Built through substantial up-front investments, these ecosystems extract streams of rental income from locked-in ancillary businesses (such as third-party sellers, manufacturers, and retailers).
While platforms appear ‘free’ to consumers, participants on the other side pay heavilyand free shipping campaign costs to survive the constant fight for digital visibility
E-commerce platforms through network effects, data concentration and control over digital transactions dictate how businesses access online markets and reach consumers.
E-commerce platform power and decision-making, act as private regulators of their ecosystems, which govern businesses and consumers as users, effectively running as private turf.
Consumers, businesses and participants are increasingly dependent on algorithmic profiling, automated decision-making and predictive analytics, creating a power imbalance between the platform and its participants.
Recent concluded FRGS competition research by the Faculty of Law, Universiti Malaya, the research identified competition and consumer harms of e-commerce in Malaysia as follows:
E-commerce platforms set the operational rules for market access, regulating vital commercial levers such as visibility rankings, platform traffic, fee structures and data insights.
As businesses participate in the e-commerce platforms have built their visibility, accumulate reputation, rankings over a period of time, they are data dependence on the platforms they participated in.
The author says online marketplaces are not neutral middlemen anymore but have become powerful gatekeepers that control sellers’ access to consumers, data, pricing, visibility and logistics, so Malaysia’s upcoming e-commerce law needs to regulate that power
Due to the traffic concentration, control over data and access to consumers, there is no possibility to create such data elsewhere.
This non-transferability further locks in their dependency, enhancing the platforms’ market power and creating a severe power imbalance between e-commerce platforms and its sellers.
Leveraging on data and AI analytics, e-commerce platforms create intense price and advertising competition that heightens the conflict between cost efficiency and quality signalling, generating critical trade-offs between product quality and cost.
As e-commerce platforms are technology company, they are heavily fuelled by investment or big parent companies which prioritise expansion and growth of its tech-endeavours over its participants; consequently, they operate with disregard for downstream market competition and long-term consumer welfare.
Among others, the e-commerce competitive harms include predatory pricing – selling below cost for a sustained period to drive weaker competitors out of the market.
Self-preferencing, platforms use internal data to identify high-performing third-party items, duplicate them under private-label brands, and manipulate search algorithms to rank certain products/services higher.
Algorithmic bias, as algorithm design is created and set by the platforms, platform’s search and recommendation is deliberately coded or trained to favour certain products, brands, or behaviours over others, rather than showing truly neutral, fair, or best-matching results.
Data asymmetry, platforms systematically aggregate granular transaction, pricing, and consumers’ behaviour history from sellers to optimise their own/related proprietary retail strategies.
Algorithmic repricing pressure, platforms’ automated pricing software frequently sparks hyper-reactive margin compression wars, forcing smaller sellers into thin profit thresholds they cannot sustain.
Fee exploitation, as platforms lock in consumer bases mandatory advertising spend, and high fulfilment fees just to maintain visibility
Platform-based vertical restraint – when a platform leverages algorithmic penalties to enforce recommended price on certain products, to pair the sellers’ price with others, and mandatory discount brackets during campaigns and events, it effectively eliminates price competition among sellers.
Sellers lose the operational agility to price items based on their own cost structures, inventory levels or local overhead.
Platforms offered exclusive dealing to businesses on “single-homing”, where platforms restrict sellers to list their products exclusively on their marketplace, penalising them if they cross-list on competing platforms.
While a statutory limit of exclusive dealing for 2 years under the competition law, platforms’ 6 months exclusive dealing faces the risks of automatic continuation resulting in a cumulative foreclosure effect ultimately dilutes competitive constraints on existing retail chains, blocking traditional distributors from accessing key sellers and leaving consumers with fewer retails choice.
Tied logistics services (exclusionary bundling) – Platforms used to allow consumers to choose from various independent third-party delivery services.
To leverage their competitive advantage, platforms used their algorithms to automatically select their own fulfilment services or contracting partners.
This forces businesses to use platform-assigned logistics.
For sellers that already have their own established logistics systems, this adds extra, unnecessary costs; this exclusionary behaviour destroys competition by driving independent delivery companies out of their ecosystem, while harming consumers who are left with fewer delivery options.
Due to the power imbalance and the locked-in of both dependent businesses and consumers, the “take-it-or-leave-it” standard form contracts of the platforms render unfair contract terms on both sides of the market.
For businesses, platforms use restrictive price-parity or Most-Favored-Nation (MFN) clauses as vertical restraints, preventing businesses from selling their goods at cheaper prices on competing platforms or their own websites.
Uniformity changes of terms affecting both businesses and consumers acts as a mechanism of dual-sided exploitation, enabling platforms to lock in both businesses and consumers while exposing both downstream businesses against sudden policy changes while harming consumers by limiting platform liabilities, restrict consumer claims, and outright denying the operation of consumer protection law in Malaysia.
Another serious concern of e-commerce is cross-border factory dumping integration.
Depending on their business model, platforms that have special contract or arrangement with manufacturers maintained an advantage against the local manufacturers, retailers and sellers due to the algorithmic bias.
For example, SHEIN business model that operate on a multi-tiered network of thousands of small-to-medium garment manufacturers, centered in southern China.
These factories do not operate independently; they are plugged directly into SHEIN’s proprietary Manufacturing Execution System (MES) software.
The platform tracks workshop raw materials, sewing machine capacity, and labour workflows in real-time.
The algorithm dictates exactly what to make, when to make it and how much to charge.
The cross-border factory dumping integration bypass traditional import taxes due to de minimis loophole and regulatory oversight, allowing cheap and unsafe products in the Malaysian’s market.
Due to platforms power and control over data, algorithms, and the supply channels that allow products imported into Malaysia market, platforms cannot shield themselves on product safety and liability, as a mere intermediary that only connect sellers and consumers.
Based on the empirical data collected by the research project, algorithm-driven grooming and copying appear to be another serious concern.
Armed with this intelligence, white-label factories produce identical replicas that the platform pushes to the top of consumer feeds, sidelining the original local creator.
There are two instances where local merchants whose established their brand nameer their IP in China as it’s already been registered multiple times in China, undermining expansion efforts abroad
In the 2019 US Third Circuit Court of Appeals, No 18-1041, 7/3/19, Oberdorf v Amazon case, the court held that Amazon is deemed as a ‘seller’ that held liable for defective products sold by third-party vendors, specifically following injuries caused by a product purchased on Amazon.
The reasoning of the case is that despite Amazon as a platform but the advertising for the product isy vendors and the product is send
When consumer face a problem, their redress mechanism isits active role in facilitating the sale and distribution of defective products
Besides that, EU taking a public enforcement under the EU Digital Services Act 2022, issued record-breaking fines on AliExpress for €550 million and Temu for €200 million for failing to curb the sale of illegal, unsafe, and counterfeit products.
Closer to home, Thailand enacted Operation of Digital Platform Service Businesses that are Subject to Prior Notification B.E. 2565 (2022) introduced strict regulations, competition guidelines, and tax changes to crack down on illegal goods, foreign platform dominance, and unfair trade practices.
Philippines enacted Internet Transactions Act 2023 to regulate e-commerce.
In 2024, Vietnam’s Trade Ministry ordered Temu and Shein to suspend operations in the country due to registration non-compliance.
Subsequently, Vietnam also enacted Law on E-Commerce (Law No. 122/2025/QH15) to regulated e-commerce platforms.
Similarly, Indonesia ban Temu and requested Google and Apple to block Temu App due to the concerns of large volume of cheap Chinese goods entering Indonesia that could impact its manufacturing sector and MSMEs.
While Malaysia prepares its upcoming e-commerce bill, regulatory frameworks must directly address these structural algorithmic, competitive and consumer harms.
Only by establishing robust legal boundaries can Malaysia restore e-commerce trust, protect consumers and prevent the threat of its domestic retail and manufacturing sectors.
** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
