What Malaysia Can Learn From the EU About Regulating E-Commerce Platforms
By Dr. Ong Tze Chin
Malaysia’s move to accelerate its e-commerce bill and consider registration requirements for e-commerce platforms is a welcome development. As online marketplaces continue to reshape how businesses reach consumers, regulation must evolve alongside them.
E-commerce platforms are no longer simply neutral intermediaries connecting sellers and buyers. They have developed into highly integrated digital ecosystems made up of interconnected businesses, sellers, manufacturers, retailers, logistics providers and consumers.
These ecosystems require significant upfront investment and generate revenue from businesses operating within them. While platforms may appear free to consumers, sellers often pay substantially through keyword advertising, commissions, voucher programmes and free-shipping campaigns simply to remain visible in an increasingly competitive digital marketplace.
The Growing Power of E-Commerce Platforms
The combination of network effects, massive data pools and control over digital transactions gives major platforms considerable influence over how businesses reach consumers.
In practice, platforms can function almost like private regulators. They establish the rules governing visibility, rankings, fees, advertising, data access and participation. As businesses build their reputations, rankings and customer histories on these platforms, they become increasingly dependent on the data and traffic generated there.
This creates a significant imbalance of power.
The problem is particularly acute because the data and reputation accumulated by sellers are often difficult, if not impossible, to replicate elsewhere. Once businesses become dependent on a platform’s ecosystem, moving to another marketplace can mean losing years of accumulated visibility, rankings and customer engagement.
Recent competition research conducted by the Faculty of Law at Universiti Malaya identified several areas of concern involving competition and consumer welfare in Malaysia’s e-commerce sector.
1. Control Over Market Access
Platforms control critical commercial levers such as search rankings, traffic distribution, fee structures and access to consumer data. This allows them to influence which businesses and products consumers see.
Over time, sellers can become locked into the ecosystem because their accumulated rankings, reputation and platform-generated data cannot easily be transferred elsewhere.
2. Data and Algorithmic Power
Platforms increasingly rely on artificial intelligence, data analytics and automated systems to determine pricing, advertising and product visibility.
While these technologies can improve efficiency, they can also create intense competitive pressure. Smaller sellers may be forced to sacrifice margins simply to remain visible, creating a difficult trade-off between affordability, profitability and product quality.
3. Predatory Pricing
One concern is predatory pricing, where products are sold below cost for sustained periods in an effort to drive weaker competitors from the market.
Voucher subsidies and free-shipping incentives can also distort competition when they are selectively offered to certain sellers or affiliated businesses. In some circumstances, the resulting transaction revenue may fall significantly below the actual logistics and fulfilment costs.
4. Self-Preferencing
Platforms can use their access to internal marketplace data to identify successful third-party products and categories.
That information can potentially be used to launch competing private-label products while simultaneously giving those products greater visibility through search and recommendation systems.
This creates a conflict of interest: the platform controls the marketplace while also potentially competing with the businesses that depend on it.
5. Algorithmic Bias
Search and recommendation algorithms are not necessarily neutral.
Because platforms design and control these systems, algorithms can potentially favour particular products, brands or behaviours. Even small changes in ranking systems can significantly affect a seller’s ability to reach customers.
6. Data Asymmetry
Platforms can collect highly detailed information about transactions, prices and consumer behaviour.
This creates a major information advantage. While sellers may know little about the platform’s broader strategies, the platform can potentially use seller data to understand market trends and develop its own or related retail strategies.
7. Algorithmic Repricing Pressure
Automated pricing tools can trigger rapid price adjustments across competing sellers.
This can create margin-compression cycles in which businesses continuously lower prices to remain competitive, eventually reaching profit levels that may be unsustainable for smaller operators.
8. Rising Platform Fees
As platforms build large consumer networks, businesses can become increasingly dependent on them for customer access.
That dependence may make sellers vulnerable to rising commission rates, mandatory advertising expenditure and fulfilment fees. Businesses may have little choice but to absorb these costs to maintain their visibility.
When Platforms Start Setting Prices
Another concern is platform based vertical restraint.
Platforms may use algorithmic systems or campaign rules to influence how sellers price their products, including recommended prices, price-matching requirements and mandatory discount brackets during major campaigns.
Such practices can reduce sellers’ ability to determine prices according to their own costs, inventory levels and operating conditions.
Exclusive Dealing and Seller Lock-In
Exclusive-dealing arrangements can create another competitive concern.
Platforms may encourage or require sellers to list products exclusively on one marketplace, potentially penalising businesses that also sell through competing platforms.
Although competition law provides a statutory limit for certain exclusive arrangements, shorter agreements can still create cumulative foreclosure effects when they are repeatedly renewed.
Over time, this could weaken competitive pressure on established retail chains, restrict traditional distributors’ access to sellers and ultimately leave consumers with fewer choices.
The Problem With Tied Logistics
Logistics is another area where platform power can have significant consequences.
Platforms may previously have allowed consumers and sellers to choose between independent delivery providers. However, when algorithms automatically favour a platform’s own fulfilment services or selected logistics partners, businesses may effectively be forced to use those services.
For sellers with established logistics networks, this can create unnecessary costs. At the same time, excluding independent delivery providers can weaken competition and reduce consumer choice.
Unfair Contract Terms
The growing dependence of sellers and consumers on major platforms also raises concerns about standard-form contracts.
Platforms can impose terms that users have little practical ability to negotiate. For businesses, price parity or Most Favoured-Nation clauses may prevent them from offering lower prices on competing marketplaces or their own websites.
For consumers, changes to platform terms can potentially restrict claims, limit platform liability or undermine the effectiveness of existing consumer protections.
The result can be a form of dual-sided dependence, where both sellers and consumers become increasingly locked into the same ecosystem.
Cross-Border Factory Integration
Another emerging concern is the relationship between major platforms and overseas manufacturing networks.
The business model used by SHEIN provides an example of how digital platforms can become deeply integrated with manufacturing operations. Its network involves thousands of small and medium sized garment manufacturers in southern China, connected through proprietary manufacturing systems.
These systems can track raw materials, production capacity and labour workflows in real time, allowing algorithms to influence what products are produced, when they are produced and how they are priced.
This level of integration gives platforms substantial control over both digital distribution and physical supply chains.
The De Minimis Loophole and Product Safety
Cross-border e-commerce can also create challenges for tax collection, product safety and regulatory enforcement.
The use of de minimis arrangements can allow large volumes of inexpensive products to enter markets while facing less traditional import oversight.
When platforms exercise substantial control over product discovery, transactions and supply channels, they should not necessarily be able to avoid responsibility simply by describing themselves as intermediaries.
The more active a platform becomes in advertising, payment, warehousing, fulfilment and distribution, the stronger the argument becomes for appropriate platform-level responsibility when consumers are harmed.
When Platforms Copy Successful Sellers
Algorithm-driven product discovery and copying present another serious concern.
By analysing seller dashboards and marketplace data, platforms can identify which product designs, categories and variations perform best.
That information can potentially be used to develop similar products and promote them more prominently, putting the original local businesses at a disadvantage.
The research also identified cases in which local merchants that had built brands through e-commerce platforms later encountered difficulties registering intellectual property in China because similar registrations had already been made there.
For Malaysian businesses hoping to expand internationally, such developments could create significant obstacles.
Lessons From the United States and Europe
The question of platform liability is not unique to Malaysia.
In the 2019 US Third Circuit Court of Appeals case Oberdorf v Amazon, the court considered whether Amazon could be treated as a seller and held liable for defective products sold by third party vendors.
The case highlighted the platform’s active role in facilitating transactions: consumers purchased through Amazon, products were advertised through the platform, fulfilment involved Amazon facilities, and consumers turned to Amazon when problems arose.
The broader lesson is that platforms that play an active role in transactions may face greater responsibility than businesses acting purely as passive intermediaries.
Europe has also taken a more aggressive approach.
Under the EU Digital Services Act, enforcement action has targeted major online marketplaces over concerns involving illegal, unsafe and counterfeit products. The EU’s approach demonstrates how governments can impose greater responsibilities on platforms rather than leaving enforcement entirely to individual sellers.
Lessons From Southeast Asia
Malaysia is not alone in strengthening e-commerce regulation.
Thailand introduced regulations governing certain digital platform service businesses, alongside competition and tax measures aimed at addressing illegal goods, foreign platform dominance and unfair trade practices.
The Philippines introduced the Internet Transactions Act in 2023 to regulate online commerce.
Vietnam has also taken action involving major platforms over registration compliance and subsequently enacted new e-commerce legislation.
Indonesia, meanwhile, moved to restrict Temu amid concerns about the large volume of inexpensive Chinese goods entering the country and the potential impact on domestic manufacturers and micro, small and medium-sized enterprises.
These developments show that governments across Southeast Asia are increasingly recognising that digital marketplaces can have consequences extending well beyond online transactions.
Malaysia’s Opportunity
As Malaysia prepares its upcoming e-commerce bill, the regulatory framework should go beyond simply registering platforms.
It should address the structural issues created by platform power, including algorithmic bias, self-preferencing, data asymmetry, unfair contractual terms, exclusive dealing, tied logistics, predatory pricing and product-safety responsibilities.
The central question is no longer whether e-commerce platforms should be regulated. It is how regulation can ensure that these powerful digital ecosystems remain competitive, transparent and accountable.
Strong rules can help restore trust in online commerce while protecting consumers, supporting local businesses and preventing Malaysia’s retail and manufacturing sectors from being weakened by unchecked platform power.
Malaysia now has an opportunity to learn from the EU and its regional neighbours and establish clear legal boundaries before the country’s dependence on major digital marketplaces becomes even deeper.
