Key updates on Malaysia’s Franchise Laws

By Foong Cheng Leong & Hee Pau Ling

The Franchise (Amendment) Bill 2019 (“Bill”) has been passed by the Dewan Rakyat (House of Representatives) on 3 December 2019 [Postscript: The Bill received its Royal Assent on 20 February 2020 and published in the Gazette on 6 March 2020].

The Bill seeks to amend the Franchise Act 1998 (“Act”) to be in line with the current developments of the franchise business in Malaysia. The following are some of the key proposed amendments of the Bill-

(i) Double Registration of Franchise by Foreign Franchisor
Under the present section 54(1) of the Act, a foreign franchisor who wishes to sell a franchise in Malaysia to a Malaysian citizen is required to submit an application to the Registrar of Franchise. Section 6 of the Act also requires a franchisor to register his franchise before he can operate a franchise business or make an offer to sell the franchise of any party.

As the documents and information required under an application under section 54 are almost identical to section 6, the current practice by the Franchise Registry is that they will automatically register the application under section 6(1) of the Act upon approval of the application under section 54.  

The proposed section 6(1) of the Act will require a foreign franchisor to register himself under sections 6 and 54(1) of the Act separately. It is unclear if the applications can be done simultaneously or consecutively.

(ii) Offence for Failing to Register Franchise by a Franchisee
The current section 6B(1) of the Act requires a franchisee of a local franchisor who has been granted a franchise from a local franchisor or local master franchisee to register the franchise with the Registrar of Franchise within fourteen (14) days from the date of signing of the franchise agreement.

With the proposed amendment, it will be an offence for any franchisee who fails to do so.

(iii) Renewal of Franchise Registration
A franchisor will soon need to renew their registered franchise in Malaysia. The validity period of a franchise registration will be provided by the Franchise Registry and subject to terms and conditions and payment of renewal fees (if any). However, this provision is unlikely to affect franchises that are registered before the enforcement of the amendments.

(iv) Requirements of a Franchise Agreement  
Under the proposed section 18(2)(l) of the Act, a franchise agreement shall state the terms of renewal and extension. However, such terms are not prescribed by the Bill.

Additionally, the Bill proposes to delete section 18(3) of the Act which provides that a franchise agreement that does not comply with the requirements of section 18(2) of the Act (basics terms and conditions of a franchise agreement) will not render a franchise agreement null and void.

However, it should be noted that complainants can still seek legal recourse under the proposed section 18(6) of the Act which seeks to make the failure of compliance with section 18 of the Act an offence. Such offence is punishable with a fine up to RM50,000 for body corporates. Non-body corporates face a lesser fine of up to RM25,000 and/or imprisonment for a term not exceeding six months. Increased penalties apply for subsequent offences. Upon sentencing, the Court may also declare that the franchise agreement to be null and void. Overall, this would be subject to the discretion of the Attorney General of Malaysia to prosecute the franchisor. To date, there is no reported case of any franchisor being prosecuted under the Franchise Act 1998.

(v) Introduction of the definitions of “subfranchise” and “subfranchisee” into the Act
“subfranchise” is now defined as a franchise granted by a master franchisee to a subfranchisee for business purposes under the Act, while “subfranchisee” is defined as a subfranchise holder. However, there is no specific provision introduced for subfranchise and subfranchisee. 

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A new report by Amnesty International has warned that Facebook and Google’s omnipresent surveillance of billions of people poses a systemic threat to human rights. Is it time for a radical transformation of the tech giants’ core business model?

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LexisNexis Malaysia – The Lawsome Profession

I was featured in LexisNexis Malaysia’s Lawsome Profession series. This series features interviews of Malaysian lawyers in their respective professions.




Interested to know more about #IntellectualProperty and #Cyberlaw ?

Foong Cheng Leong is the Partner at Foong Cheng Leong & Co. He focuses in the areas of Intellectual Property and Information Technology, Cyberlaw, Franchising, Data Privacy and Gaming Law. Cheng Leong is also a registered trademark, industrial design and patent agent. He is the Chairman of the Kuala Lumpur Bar Information Technology Committee and a member of the Malaysian Bar Intellectual Property Committee. He regularly assists the KL Bar and the Malaysian Bar on matters regarding Intellectual Property, Internet Law and Data Protection.



“When I first joined Lee Hishammuddin and Allen & Gledhill as a pupil, I was assigned to the Intellectual Property (IP) department and I got retained in the department after my pupillage. I didn’t have the opportunity to try other practice areas although I wanted to do litigation. However, IP was interesting to me because I got the opportunity to do corporate IP involving trademark, copyright, trade secrets, patents, and other intangible rights for many services and products, as well as IP litigation where it involves dispute matters. A senior partner once reviewed my CV and saw that I could build websites and suggested that I try out Information Technology and Cyber Law. I did and I’ve not looked back since. He also encouraged me to start writing articles on it and contribute them to the Bar website.

IP is my bread and butter. In my firm, we do a lot of IP and trademark registration, patent, industrial design and copyright matters. Our work includes protecting clients who get sued for infringement, registering and protecting their IP overseas, franchising and licensing. To practice IP, you need to understand the nature of a commercial transaction, intangible rights and basic contract law. IP has a lot of aspects to it: you can be a corporate IP lawyer, litigator, criminal where you represent people who are charged with counterfeiting, and even an administrator where you ensure the IP is registered. It is a very established area; we have IP cases dating to the 1800s. Even in China, there are trademark cases dating 300-400 years back. There are many materials that you can read.

IT and Cyber Law is a new area of law and it’s very interesting because it comes with all sort of issues. For example, we have been asked to file court action to discover identity of a person behind a social media account, advise client on how to take down private photos of themselves, how to block a website or close it, and even getting Facebook to share information of a deceased person.

For you to excel at IT and Cyber Law, it’s important to understand technology. You need to understand how computers and networks work, how the technology works, what is an IP address, what is a timestamp, you need to understand all the tech jargons, and these are the things that you don’t get to read in a law book. You also have to be tech-savvy. I had a case where the client was charged for deleting the database of his company. He said he didn’t do it, but evidence indicated that he did. I managed to figure out that his IP address at the time was dynamic, and that anyone could access his account from anywhere. From there, we cross-examined and the internet service provider and they confirmed that to be true. We also found that his computer was stored by a third party at that point of time, so he couldn’t have done it.

From young, I was interested in how electronics worked and how things connected to one another. I used to take my CPU apart and install it again. I even took apart my parents’ video cassette recorder and alarm clock, I also learnt how to build a computer network. It helped me to understand how electronics work, for example, why there is a chip, transistor, or power supply. From there I understand that if I want to connect to the internet, I need a modem. If I want to build a network, I need a hub, and if I want to store data outside the hub, I need a server. Back then, we didn’t even have Google to search for all these!

I think the law should catch up with technology. For example, how do you get information of people who defame you online? People are using all sort of avenue to hide themselves and they use servers and providers outside of Malaysia. How do we ensure we can make it easier to get information? One thing we can do for this is to get a Treaty signed by all countries. For example, if the legal system requires a citizen of a certain country to provide information, the government should be able to release it based on certain safeguards. So far, we don’t have such law and it’s very difficult and expensive to get data because everyone is very protective of their data. Only the rich could afford to get the information.

I think it’s important for young lawyers to write a lot of articles, participate in talks and be out there to show their skills. Personally, I like to share my knowledge and information through articles. As a lawyer, we should share information with our peers, we shouldn’t be stingy because the more you share the information, the more we will push for law reforms, then more people will know about it and it allows more people to seek compensation if they are the victims or aggrieved parties.”

More: Video Interview

Cops can’t simply check your phones, says ex-IGP

I was quoted by FreeMalaysiaToday regarding newspaper reports about the Deputy Home Minister Azis Jamman’s answer in Parliament regarding police powers to inspect public’s mobile phone. He was reported to have said that police personnel are allowed to inspect public’s mobile phone at any time and on what reasonable ground that allows such action.

For clarity, the Honourable Deputy Minister’s answer is reproduced in full below (see Hansard 18 November 2019):-

Pihak PDRM menggunakan peruntukan di bawah Seksyen 233, Akta Komunikasi dan Multimedia Tahun 1998, Akta 588 bagi memeriksa telefon bimbit seseorang semasa menjalankan siasatan dan semasa melaksanakan tugas menjaga ketenteraman awam.

Menerusi seksyen ini adalah menjadi satu kesalahan sekiranya seseorang menyalahgunakan kemudahan rangkaian atau perkhidmatan rangkaian telekomunikasi bagi tujuan seperti menghantar komunikasi yang lucah, sumbang, palsu, mengancam atau jelik sifatnya dengan niat untuk menyakitkan hati, menganiaya, mengugut atau mengganggu orang lain.

Melalui seksyen ini, mana-mana pegawai polis boleh mengambil tindakan dengan menyemak apa-apa kemudahan rangkaian atau perkhidmatan rangkaian termasuklah telefon bimbit milik orang yang disyaki melakukan kesalahan di bawah seksyen ini. Selain itu, mana-mana pegawai polis juga boleh mengambil tindakan bagi maksud pemeriksaan apa-apa kemudahan rangkaian atau perkhidmatan rangkaian termasuklah telefon bimbit mengikut peruntukan Seksyen 103, 104 dan 106, Kanun Tatacara Jenayah Akta 593 – di bawah 12 – Tindakan Pencegahan Oleh Polis.

In response to the newspaper reports, I said in FreeMalaysiaToday’s article-

Lawyer Foong Cheng Leong acknowledged that the CMA (Communications and Multimedia Act 1998) allows for searches without warrants, but said this can only be done by an officer above the rank of inspector.

He said a search without a warrant could be done if the officer had reasonable cause to believe that a delay in obtaining a search warrant would adversely affect the investigation or that evidence would be tampered with, removed, damaged or destroyed*.

In such cases, he said, the police could have the phone taken away and inspected later, and refusal to cooperate could see a person being charged with obstruction**.

“A person found guilty is liable to a fine not exceeding RM20,000, imprisonment for a term not exceeding six months or both.”

But he, too, said the power to confiscate or check a person’s phone must be tied to an investigation, and that the police cannot randomly ask for an individual’s phone and check it.

* S. 248 of the Communications and Multimedia Act 1998
** S. 253 of the Communications and Multimedia Act 1998

The Deputy Minister later clarified that the police’s power to request or seize a person’s mobile phone if he is a suspect and involved in any pending investigation, and not the the general public randomly.

BFM Podcast: I DUNNO, I’M JUST FORWARDING

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BFM Takeaway 2019 – Brainstorming F&B Matters

I will be speaking at the BFM Takeaway 2019 on 4 November 2019 together with Derek Cheong, Managing Director of Xing Fu Tang Malaysia and Catherine Goh, General Manager of Santan & T&Co under the topic “License to Feed”

Maybe you’ve perfected a family recipe, innovated your very own signature snack or you’re running a restaurant and it’s thriving. Now it’s time to share your business with the rest of Malaysia, perhaps even the world! In this session, we’ll hear from entrepreneurs who have successfully transformed humble home-grown businesses into internationally recognised brands that have put Malaysia on the map. You’ll gain insights into how to master a method of doing business that can be scaled for success and we’ll explore the advantages to licensing your brand or product. We’ll even have a licensing lawyer on board to help you through the nuances of expanding your business.

Wong Shou Ning of BFM will be moderating the Session.

Links
– Download the Agenda here.
– Get your tickets here

We are looking for interns!

As an intern, you will be exposed to matters relating to cyberlaw, intellectual property, franchise and data protection laws.

Law students and graduates are encouraged to apply.

Please send your CV to mail@fcl-co [dot] com.

Malindo Air’s Data Breach

I was asked to comment on Malindo Air’s latest data breach incident by South China Morning Post, Malaysian Reserves and Global Data Review.

Malindo Air, a subsidiary of low-cost airline Lion Air, has suffered a massive data breach, resulting in the information of millions of passengers – including passport details, home addresses and phone numbers – being leaked onto data exchange forums last month.

In South China Morning Post’s article title ” Malindo Air confirms data breach, exposing millions of passengers’ personal data“, it was reported-

Cyber law and technology lawyer Foong Cheng Leong said that companies in breach of Malaysia’s Personal Data Protection Act are not under any legal obligation to notify the authorities, the public, or the victim of the leak, although this lacuna is being reviewed.

There is no data breach notification rule in Malaysia under this Act. However, there is of course a moral obligation on the part of the company to notify the subject and the public,” said Foong.

Unfortunately in Malaysia these data breaches happen often, but if nobody knows about it nothing happens. During past breaches, there were some investigations but no prosecutions and no repercussions.

In the Malaysian Reserve’s article titled “Experts call for tougher law on data breach as Malindo Air becomes latest victim“, I said-

“There should be a data breach notification law. Data subjects have the right to know that their information has been compromised and take steps to secure the data,” Bar Council’s information technology and cyber laws committee deputy chairman Foong Cheng Leong told The Malaysian Reserve in an earlier report.

He added that the Personal Data Protection Commissioner had introduced a consultative paper to propose the mandatory disclosure, but the progress has been muted so far.

Currently, parties suffering from a data leak in Malaysia are not obliged to notify the authorities or the victims.

“In Europe, under the general data protection regulation, any companies including foreign firms with an office and/or serve the European region are required to lodge a report of any data breach within 72 hours.

“Organisations face the risk of a fine up to 4% of global revenue in the event of a data breach,” Foong said.

Lastly, in Global Data Review’s article titled “Lion Air Group data breach affects more than 30 million customers“, it was reported-

Foong Cheng Leong, a partner at Foong Cheng Leong & Co in Kuala Lumpur, said Malindo Air may have fallen foul of the country’s Personal Data Protection Act. This can attract criminal sanctions: a fine up to 300,000 ringgit (€65,000) and prison sentences of up to two years.

In spite of this, Leong said enforcement may not be forthcoming. He said that the government has yet to make a prosecution under the law for a data breach in spite of “numerous high-profile data breaches” in Malaysia since the law came into force.

….

Leong said Malindo Air might be liable under other data protection laws in the region. “However, it is not known if the data protection authorities will take or have the power to take any action against Malindo Air”, he said.

Leong said that the issue has drawn attention to the absence of notification requirements in Malaysia’s data protection law.

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I was interviewed by BFM Radio over a statement by Parti Sosialis Malaysia Chief Dr Jeyakumar Devaraj regarding a warning notice by Biotropics Malaysia Berhad which has taken out a patent for the bioactive component of Tongkat Ali (Patent No. MY-134867-A – corresponding patent can be seen here). In gist, Dr Jeyakumar said that patent laws have been misused to create monopolies over a natural product like Tongkat Ali which has been used for its medicinal properties “for centuries”.

I was asked to explain what this patent is about and the scope of it.

MESTECC and Massachusetts Institute of Technology (MIT) have joint ownership of a Tongkat Ali extract- what does that mean and will this impact communities that harvested the traditional herb for centuries? We speak to an IP lawyer.

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