RECENT concerns over e-commerce return and refund policies, and their impact on sellers, have drawn the attention of the Entrepreneur and Cooperatives Development Minister.
To understand the issue, we must first examine the relationship between platforms and sellers, and the role these platforms play in the digital economy.
E-commerce platforms act as intermediaries, connecting sellers and consumers while generating revenue through commissions, advertising, transaction fees and subscription models.
For many micro, small and medium enterprises (MSMEs), these platforms are not optional marketplaces, but essential infrastructure. They provide access to logistics networks, payment systems, marketing tools and, most importantly, network effects that individual businesses cannot replicate on their own.
This dependency creates a structural imbalance. MSMEs are effectively “locked in” to platform ecosystems, with little room to negotiate terms.
As a result, platforms wield disproportionate power, functioning as “private regulators”. They set and enforce marketplace rules, from ranking systems and delivery standards to account suspension, complaint handling, and refund and return policies.
Despite MSMEs accounting for more than 97% of business establishments in Malaysia and contributing close to 40% of GDP, individual sellers have virtually no bargaining power against global platforms such as Shopee, Lazada and TikTok Shop.
In practice, policies such as unconditional or “no-reason” refunds are imposed on a take-it-or-leave-it basis.
While these policies are often framed as consumer-friendly, they come at a cost. Platforms themselves do not bear production or inventory risks. Instead, these risks are transferred to sellers.
When refunds or returns occur, the financial burden falls on MSMEs, even though the platform sets the policies. In this way, platforms expand market share and maintain profitability while seller margins are steadily eroded.
This raises an important question: should consumers be blamed for taking advantage of such policies?
The answer is no. The issue lies not with individual consumer behaviour, but with the structural design of the digital marketplace. Platforms actively incentivise buyer-friendly practices to drive growth, often using seller resources to absorb the cost.
What we are seeing is not misuse by consumers, but a misalignment of incentives within the system itself.
In essence, operational risks are being shifted from dominant digital intermediaries to smaller, more vulnerable businesses. Left unchecked, this dynamic can undermine the sustainability of MSMEs, even as platforms continue to grow.
From a legal perspective, Malaysia already has frameworks addressing misleading conduct and unfair practices.
Under the Trade Descriptions Act 2011, the use of false trade descriptions is prohibited, with significant penalties for both individuals and corporate entities.
Similarly, the Consumer Protection Act 1999 (CPA 1999) governs misleading and deceptive conduct, false representations and unfair practices in the marketplace.
Importantly, the CPA 1999 extends liability beyond direct sellers. Where misleading representations are made through advertisements, responsibility may also fall on those who facilitate or enable their dissemination.
This raises important questions about the role of platforms, particularly when they function as enablers of transactions and promotions within their ecosystems.
The law also provides a structured approach to remedies for faulty goods. Under the CPA 1999, consumers are protected by implied guarantees relating to quality, fitness for purpose and compliance with description. However, remedies are not immediate or automatic. There is a clear hierarchy.
For defects that can be remedied, suppliers must first be allowed to repair, replace or otherwise address the issue within a reasonable time.
Only in cases of substantial failure, such as goods that are unsafe, significantly different from their description, or unfit for purpose, can consumers reject them outright and demand a refund or replacement.
In other words, the law does not support automatic or unconditional refunds in all circumstances. It recognises the need for a balanced approach—one that protects consumers while allowing suppliers a fair opportunity to remedy defects.
This is where the tension lies. Platform policies that mandate “no-reason” refunds may go beyond what is required under existing legal frameworks, effectively overriding the balance embedded in the law.
When such policies are enforced unilaterally, they risk creating a parallel system of governance that operates independently of, or even in conflict with, statutory protections.
The broader concern is the emergence of a regulatory vacuum. While the law is clear, enforcement in platform-to-business (P2B) relationships remains limited.
As a result, financial risks associated with refund and return policies continue to be absorbed by MSMEs, with little recourse.
Addressing this issue requires more than consumer awareness. It calls for targeted regulatory intervention that recognises the unique position of platforms in the digital economy.
Clearer rules governing P2B relationships, along with stronger enforcement mechanisms, are needed to ensure risks are distributed more equitably.
E-commerce platforms have undoubtedly expanded opportunities for businesses and consumers alike.
But as they continue to shape the rules of engagement, there is a growing need to ensure these rules do not come at the expense of those who depend on them most.
Dr Ong Tze Chin is a senior lecturer at the Faculty of Law, Universiti Malaya.
The views expressed are solely of the author and do not necessarily reflect those of MMKtT.
- Focus Malaysia.
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