Consumer Protection (Electronic Trade Transactions) Regulations 2012

Netizens v the Government

2012 saw the intensified battle between netizens and the authorities. The former desires protection of their right to freedom of expression and anonymity whereas the latter desires control and governance. Through this battle, the authorities introduced many new legislations to govern the use of internet.

In July 2012, the Malaysian Government enforced s. 114A of the Evidence Act 1950 (114A). Under 114A, a person is deemed to be a publisher of a content if it originates from his or her website, registered networks or data processing device of an internet user unless he or she proves the contrary. This new law sparked a massive online protest dubbed the Malaysia Internet Black Out Day or also the Stop114A. Protesters replaced their Facebook and Twitter profile picture with the Stop114A banner whereas website operators displayed the Stop114A banner on their websites. Within two days, the Stop114A Facebook gained 43,000 likes from 400 likes (currently 49,000). It is probably one of Malaysia’s most successful online campaigns.

On the business side, the Association of the Computer and Multimedia Industry of Malaysia (Pikom), who represents the information and communications technology (ICT) industry in Malaysia, backed calls for a review of 114A whereas the Federation of Malaysian Manufacturers (FMM) has expressed concerns over the recent inclusion of 114A and its impact on businesses.

Interestingly, the Malaysian Government passed the Cyber Centre and Cyber Cafe (Federal Territory of Kuala Lumpur) Rules 2012 and Consumer Protection (Electronic Trade Transactions) Regulations 2012. The former requires any person operating a cybercafé and cyber centre to maintain a customer entry record and a record of computer usage for each computer whereas the latter requires online business owners and operators to provide their full details, terms of conditions of sale, rectification of errors and maintenance of records.

Philippines netizens also protested against their newly introduced cyberlaw. In October 2012, Philippines passed the Cybercrime Prevention Act of 2012 with the aim to prevent cybersex, online child pornography, identity theft and spamming. However, under the new act, a person found guilty of libellous comments online, including comments made on social networks such as Facebook and Twitter or blogs, could be fined or jailed. In protest against the new law, anonymous activists hacked into government websites, journalists have held rallies and many Facebook users have replaced their profile picture with a black screen. Protesters say the new law could be used to target government critics and crack down on freedom of speech.

Japan netizens on the other hand had milder protest against a new law that makes Japan-based internet users who download copyright infringing files. Violators will face up to two years in prison or fines of up to two million yen. In July 2012, about 80 masked people, calling themselves allies of the global hacker group Anonymous, picked up litter in Tokyo Saturday as a sign of protest.

In early 2012, China required users of the popular microblogging platform, Weibo, to register their real names. Subsequently, later in the year, China legalized the deletion of posts or pages which are deemed to contain “illegal” information and required service providers to hand over such information to the authorities for punishment.

On a brighter note, the South Korean Constitutional Court ruled that a law requiring South Koreans to use their real names on Internet forums was unconstitutional. The Court said that the requirement amounts to prior censorship and violated citizens’ privacy.

In the United States, a handful of US states, including Illinois, California and Maryland, passed laws making it illegal for employers to ask for potential employees’ Facebook or other social media passwords.

A person who retweets a defamatory tweet is potentially liable for defamation. In the UK, Lord McAlpine (Robert Alistair McAlpine) a former politician who worked for Margaret Thatcher, announced his intention to pursue action against 10,000 Twitter users for defamation including those who had retweeted the defamatory tweets. In this case, Lord Alphine was linked by some social media users after BBC News reported that a senior politician was involved child sex abuse. Interestingly, these users may apologize to Lord McAlphine by completing a form downloadable from his solicitors’ website!

In the UK, it is an offence to publish the identity of victims of certain offences which include rape. Footballer Ched Evans was convicted by the Court for rape of a 19 years old woman. The woman’s name was circulated on social networking sites, including Twitter and Facebook, after Evans’ conviction. 9 people were fined after admitting to revealing online the identity of the woman.

Meanwhile back home, the Kota Kinabalu High Court overturned Rutinin Bin Suhaimin’s acquittal for posting an “annoying” comment on the Sultan of Perak’s website. Rutinin was charged under s. 233 of the Communications and Multimedia Act 1998. The Sessions Court had earlier acquitted him without calling for his defence because, among others, the prosecution failed to prove that Rutinin was the person who posted the insulting comment. The Court held that, although 114A of the Evidence Act 1950 is not applicable because the alleged offending act was committed before the enforcement date of 114A, the circumstantial evidence is sufficiently strong to conclude that the accused had used the internet account that was registered in his name at the material time.

The developments in 2012 show the involvement of the authorities in clamping down the notion of the Internet being the Wild, Wild West. However, such clap down must be monitored by netizens.

In December 2012, the International Telecommunication Union (ITU) brought together regulators from around the world to re-negotiate a decades-old communications treaty. Google and 1000 over organizations around the world claimed that some governments want to use the closed-door meeting to increase censorship and regulate the Internet and had started an online campaign.

At the end of the closed-door meeting, 89 countries including Malaysia signed the treaty, while 55 countries said they would not sign or that additional review was needed.

With the new technology, websites and novel functions, all Governments will have to step out their game to protect the rights of netizens and businesses. New laws must not be onerous but in the same time protect victims of cybercrimes and preserve the right of freedom of expression.



This article was supposed to be published in the Putik Lada of The Star Newspaper. It was also supposed to be the 2013 installation of my yearly social media update articles. Unfortunately, The Star Newspaper discontinued the Putik Lada column before my article could be published.

BFM Podcast: New Regulations for Online Shopping

Online cheating and internet scams are on the rise in Malaysia. In 2011, police figures showed a total of 1,879 online cheating cases, compared to 551 in 2009.

New regulations are being implemented in July 2013 to help protect shoppers from being cheated, and Sharmila Sekaran and Mr. Foong Cheng Leong from Loyarburok talk to Meera Sivasothy to explain how the new regulations work, and how to be more aware of the dangers of being cheated online.

Bread & Kaya: Start-ups, get your house in order

My 4th Bread & Kaya’s column was published on Digital News Asia on 3 April 2013.

Bread & Kaya: Start-ups, get your house in order

– There are a number of things you need to get done before potential investors do due diligence on your start-up
– Seek advice from others, ensure any legal advice is professional, and do due diligence on your investor as well

Bread & Kaya by Foong Cheng Leong
3 April 2013

WHEN I was in high school, I invested a few thousand ringgit on a web-hosting company operated by a ‘friend.’ Unfortunately, the web-hosting company didn’t materialize and I never saw my money again, nor the ‘friend.’ In fact, there was no such web-hosting company!

That was my first failed investment. Looking back, I realized that the investment was purely done by trust. I did not do any background check on the company or even the ‘friend.’

But years later, I was approached by a stranger (at that time) to help his start-up by providing my services to him, in return for shares in his company. I did not invest a single ringgit. I am glad to report that the start-up is doing well, with offices around South-East Asia and other parts of the world.

Today’s column sets out some tips before opening your start-up for funding.

Before you think about attracting investors, you need to get your house in order. Prudent investors would usually do an in-depth due diligence of your company to see, among others, what assets and liabilities you have.

They will check your background, hence you need to make sure it’s squeaky clean. They will obtain a company search report from the Companies Commission of Malaysia to verify the details of your directors and shareholders, shareholding structure and financial reports – so make sure you file your reports on time.

They will also go through your memorandum of association and articles of association (documents that are required before incorporating a ‘Sdn Bhd’). Take some time to read them and amend if necessary. Board and shareholders minutes will also be part of due diligence exercise.

Investors usually come with high expectations. Thus, educate your investors of the nature of your business and industry, business plans, goal, competitors and obviously, monetizing strategy. Over-promising will create legal trouble for you.

When meeting your investors, appoint someone presentable who speaks well to deal with them. This raises investor confidence.

Other than your financial records and information, here are some common matters that should be addressed before the due diligence stage.

1) Intellectual property rights

Intellectual property rights generally refer to your trademarks, copyright, industrial designs, confidential information and patents.

Start-ups generally file their trademarks first as it is affordable. If you have a physical product and the design is new, do consider filing an industrial design to protect the design.

Patents are usually not filed due to budget constraints. A patent application (with the assistance of a patent attorney) costs at least RM5,000 and above. However, if the invention is novel and you think it’s worth protecting, do file it within one year otherwise it will not be afforded protection.

You can file for protection with the Intellectual Property Corporation of Malaysia (MyIPO), or if your business or operation extends to other countries (e.g. Singapore), you should register your rights there too.

A registered intellectual property right gives you the exclusivity over your product, thus you may stop others from using them. Also, the Income Tax (Deduction for Expenditure on Registration of Patent and Trade Mark) Rules 2009 provides tax deduction for the registration of trademarks and patents in Malaysia for certain start-ups.

2) Proper contracts

All terms and conditions between the founders, with merchants, customers, vendors and employers must be properly spelled out. For existing contracts, review them to see whether they are still applicable or have to be changed or terminated.

Here are a few tips:
– In your agreements with customers, investors will look on how revenue is generated and to find any unfavorable terms, etc. Do make sure your contracts (or invoice or receipt) with service providers (e.g. graphic designer, website, software) do not state that intellectual property rights (in particular, copyright) belong to them (by default, intellectual property rights belong to the person who commissioned the work, unless stated otherwise). Such contracts should describe the subject matter in detail and that the rights to the intellectual property are properly assigned to your company.
– If you are using a website or a software application to deal with your customers, put terms of use or services and a privacy policy in place as required by the Consumer Protection (Electronic Trade Transactions) Regulations 2012. Do not rip off terms of use or services and a privacy policy of others as those agreements are drafted specifically for their businesses.

3) Non-disclosure agreement

Before opening your door to investors, do get them to sign a non-disclosure agreement (commonly known as an NDA). This agreement is crucial in making sure that they do not misuse the information they gathered from the due diligence. Such information may include your finance information, source codes and customer data.

Your investors may also want to look into the source codes of your proprietary software. Although an NDA may be signed to protect it, you may want to take an extra step to request that the software due diligence is done by an independent third party.

Also, when dealing with your vendors or employees, get them to sign a NDA. Your information is your asset.

4) Employee matters

If you have employees, make sure that there are employment contracts. If you have promised the employees something (e.g. equity), make sure you state it in writing. Ensure that you have been contributing to statutory contributions such as the Employee Provident Fund (EPF) and Social Security Organization (Socso).

This guide is a non-exhaustive basic guide and merely an idea on what you need to do before attracting investors. Do seek out advisers or mentors for help and advice. Get an experienced lawyer when dealing with terms and conditions. Speak to other fellow entrepreneurs who have done it before for advice.

Most importantly, do due diligence on your investor as well!

Docudeer – Your source of sample legal agreements and documents!
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Bread & Kaya: Attention e-commerce businesses: Fraud, the law and you

My Bread & Kaya’s second column was published on Digital News Asia on 29 January 2013.


Attention e-commerce businesses: Fraud, the law and you
Jan 29, 2013

– A new law to protect users of online trading portals goes into effect July 1
– While it may cost them a bit, operators of such businesses will have to comply

Bread & Kaya by Foong Cheng Leong

E-COMMERCE is booming in Malaysia. Euromonitor International estimated that Internet retailing in Malaysia reached RM842 million (US$268.3 million) in 2011; Goldman Sachs forecasts that e-commerce in Malaysia is projected to hit RM3.4 billion (US$1.1 billion) this year with a 30% year-on-year growth.

Notwithstanding such growth, online fraud is rampant in Malaysia. If you scour our online auction or listing websites, you’ll find many dodgy sellers and buyers selling or offering to buy products and services.

But the long arm of the law recently caught Mohd Yunus Jan Muhammad for approaching six victims who had advertised to sell their gadgets through an Internet trading portal, by posing as a customer and setting up appointments. At these meetings, he would grab the merchandise and flee. He was sentenced to one year’s jail. The Court also fined and imposed a whipping on Mohd Yunud.

Sometime in 2011, the Ministry of Domestic Trade, Co-operatives and Consumerism proposed that the Electronic Commerce Act 2006, an act that regulates online commercial transactions, be amended to regulate the online market place industry. I am told that consultation was held with the industry and I understand that some industry players had taken steps to lobby against the amendment.

In April 2012, its minister Datuk Seri Ismail Sabri Yaakob announced that the amendment would ensure that electronic transactions could be done in a safer and secured environment.

The law came about in the form of the Consumer Protection (Electronic Trade Transactions) Regulations 2012 (“Regulation“), a regulation under the Consumer Protection Act 1999.

The Regulation will be in force on July 1, 2013. Under this Regulation, an online marketplace operator is required to, among others, provide their full details, terms of conditions of sale, rectification of errors and maintenance of records.

The new law applies to two (2) types of persons namely:

– A person who operates a business for the purpose of supply of goods or services through a website or in an online marketplace (“Online Business Owner“). “Online marketplace” means a website where goods or services are marketed by third parties for the purpose of trade. This may include your typical blog shops and sellers with accounts with eBay, Lelong and Mudah online stores.

– A person who provides an online marketplace (“>Online Marketplace Operator“). This may include group buying websites operators such as GroupOn, auction and listing websites such as eBay, Lelong and Mudah, and online shopping websites where third party products as sold such as Zalora.

Online business owners

Under the Regulation, Online Business Owners shall disclose on the website where the business is conducted and the following information, failing which the operator commits an offence.

  • The name of the person who operates a business for the purpose of supply of goods or services through a website or in an online marketplace, or the name of the business, or the name of the company.
  1. The registration number of the business or company, if applicable.
  2. The e-mail address and telephone number, or address of the person who operates a business for the purpose of supply of goods or services through a website or in an online marketplace.
  3. A description of the main characteristics of the goods or services.
  4. The full price of the goods or services including transportation costs, taxes and any other costs.
  5. The method of payment.
  6. The terms and conditions.
  7. The estimated time of delivery of the goods or services to the buyer.

Any person who discloses or provides the above information that he knows or has reason to believe is false or misleading, commits an offence.

Online Business Owners shall also:

  • – provide the appropriate means to enable the buyer to rectify any errors prior to the confirmation of the order made by the buyer; and
  • – shall acknowledge receipt of the order to the buyer without undue delay.

The order and the acknowledgement of receipt shall be deemed to have been received by the person who operates a business for the purpose of supply of goods or services through a website or in an online marketplace and the buyer, respectively, when the person and the buyer are able to access to such order and the acknowledgement of receipt.

The Online Marketplace Operator shall take reasonable steps to keep and maintain a record of the names, telephone numbers and the address of the person who supplies goods or services in the online marketplace, for a period of two years, failing which an offence is committed.

In addition to the terms and conditions, Online Business Owners and Online Marketplace Operators must comply with the Notice and Choice Principal provided by Personal Data Protection Act 2010 by inserting a privacy notice, in the National and English languages, on their website before the collection of any personal data.

Extra costs for businesses

Although this law seeks to protect consumers from unscrupulous traders, the introduction of this new law increases the startup costs and cost of operation of an e-commerce business.

Engaging lawyers to draft terms and conditions for e-commerce businesses can be expensive. But it is something any e-commerce business should invest in to protect themselves and their users.

The new law doesn’t specify in detail how the terms and conditions should be. Therefore, one can have a very simple set of terms and conditions.

Alternatively, one may opt to adopt the terms and conditions of other e-commerce businesses provided that one is well versed in drafting and amending agreements. But one should take note that every set of terms and conditions is customized for specific businesses.

It would be ideal if we have affordable online services to draft terms and conditions and privacy policies for SMEs (small and medium enterprises) like SnapTerms, which allows start-up companies the opportunity to customize their website’s terms and conditions without having to pay the fees typically associated with having the documents drafted by a lawyer.

But one must bear in mind that SnapTerms is a service provided by people who are well versed in the laws of their country and perhaps not Malaysia.

To digress a little, e-commerce businesses should also protect their intellectual property such as their trademarks, copyright and patents. These rights are registerable and one can protect these rights in Malaysia by filing them with the Intellectual Property Corporation of Malaysia or MyIPO.

Other than that, it is pertinent to protect your brand from being taken in well-known social media websites like Facebook and Twitter. You can use Knowem to check for the use of your brand, product, personal name or username instantly on over 550 popular and emerging social media websites.

Closing

The introduction of laws to track and record Internet transactions is nothing new. Last year, Section 114A of the Evidence Act 1950 and Cyber Centre and Cyber Cafe (Federal Territory of Kuala Lumpur) Rules 2012 were introduced to track and record such transactions.

These laws will not be the last. I foresee that many more such laws will be introduced in the near future.

Download:
Consumer Protection (Electronic Trade Transactions) Regulations 2012

Docudeer – Your source of sample legal agreements and documents!
1. General Terms of Services
2. Comprehensive e-Commerce Terms & Conditions
3. Simple e-Commerce Terms & Conditions (Free!)
4. General Privacy Policy

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