From Ong Tze Chin
Recent concerns about e-commerce return and refund policies, and their impact on sellers, have drawn significant public attention. These policies, while designed to protect consumers, often place disproportionate burdens on sellers, the business users of e-commerce platforms.
To address this problem, we need to understand the relationship between e-commerce platforms and the sellers utilising their services.
E-commerce platforms provide intermediation services that connect sellers and consumers. In return, these platforms extract revenue from sellers in various ways, such as advertising, infrastructure usage, sales commissions, transaction processing fees, and subscription-based service models.
Structural imbalance
A significant structural imbalance exists between e-commerce platforms and these sellers, largely made up of micro, small and medium enterprises (MSMEs).
Being entirely reliant on platform-provided essential services — such as network effects, logistics, payment gateways, and AI-driven marketing — these MSMEs face a technological “lock-in”.
As a result, a take-it-or-leave-it dynamic exists; MSMEs have no alternative but to accept platform policies and unilateral changes imposed from time to time to retain access to the digital marketplace.
That, in turn, gives e-commerce platforms the aura of “private regulators”, allowing them to unilaterally establish, manage and enforce rules that govern their vast ecosystems.
They design the business environment by setting standards for delivery, terms and conditions, ranking systems, restrictions, suspension and termination of users, refund and return policies, and complaint-handling systems.
As a result, micro, small, and medium enterprises (MSMEs) are left with virtually no bargaining power against global platforms such as Shopee, Lazada, or TikTok Shop. These platforms impose standardised policies — including unconditional or automatic refunds and returns — that sellers must accept without negotiation.
The platforms’ own revenue model remains largely insulated from any operational losses incurred by sellers. They neither bear the production nor inventory risks, allowing them to maintain profitability even as seller margins erode.
Should the consumer be blamed?
Certainly not! The issue rests on the structural misalignment of the digital economy, where platforms incentivise buyer behaviours using sellers’ resources. These platforms achieve market expansion by allowing highly-inventive consumer policies, including the introduction of no-reason refund and return, without bearing any financial burden.
In doing so, dominant tech entities are able to transfer operational risk to vulnerable entrepreneurs. This is a dynamic that can only be corrected through targeted government intervention in platform-to-business relations.
It is critical to understand the laws governing false trade descriptions and unfair consumer practices.
Under Section 5 of the Trade Descriptions Act 2011, false trade descriptions are prohibited. Anyone who applies, supplies or offers goods with false descriptions commits an offence. Offenders face fines of up to RM250,000, with repeat offences punishable by fines of up to RM500,000.
For individuals, the penalty can be a fine of up to RM100,000 or imprisonment of up to three years, with heavier penalties for repeat offences, including fines of up to RM250,000 or jail terms of up to five years.
E-commerce platforms that are shown to have disseminated false trade descriptions may also be held liable under the law.
Likewise, misleading and deceptive conduct, false representation and unfair practices are all criminalised under the Consumer Protection Act 1999 (CPA).
Under Section 18 of the CPA, advertisements are presumed to be made by the supplier or the party on whose behalf they are issued. This means platforms that enable such ads can also be held liable.
Section 25 of the CPA provides penalties of up to RM250,000 for offences, rising to RM500,000 for repeat cases, with additional daily fines possible.
The CPA also outlines the remedies available to consumers. Suppliers must repair or replace, or refund payments made for goods that fail to meet their description. Consumers may only reject goods outright if the failure is substantial and cannot be remedied.
The law itself does not provide for automatic refunds or returns. Instead, the supplier is given the opportunity to examine any failure of the goods to determine whether to repair or replace them, cure any defect in title, or issue a refund in the event the failure cannot be remedied.
Unchecked power
Presently, the unchecked power of e-commerce intermediaries allows these “private regulators” to dictate marketplace terms unilaterally, creating a regulatory vacuum where platform rules and policies may supersede or circumvent existing legal frameworks.
To date. there is nothing which will allow MSMEs to mitigate the financial losses they may suffer, as the authorities have yet to challenge the unilateral governance of these dominant e-commerce platforms.
It is imperative that the government addresses the platform-to-business relationship with regulations to ensure a more equitable digital ecosystem.
This will curb the unchecked power of intermediaries and providing MSMEs with the legal safeguards necessary to sustain their operational viability.
Ong Tze Chin is a senior lecturer at Universiti Malaya’s law faculty.
The views expressed are those of the writer and do not necessarily reflect those of FMT.