By Rashaad Ali, Co-Founder & Managing Director, Social & Economic Research Initiative (SERI)
At a glance
- Malaysia’s rapidly growing digital economy has outpaced existing regulatory frameworks, driving reforms to strengthen e-commerce governance, consumer protection, and market accountability.
- Current policy efforts focus on balancing economic growth with stronger safeguards, including tighter platform oversight, competition law reforms, and improved consumer redress mechanisms such as the proposed “lemon law.”
- Broader structural challenges, including cybersecurity risks, uneven market access, and cross-border regulatory gaps, highlight the need for more inclusive policies and greater ASEAN regulatory alignment.
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A digital economy that has outpaced regulation
As Malaysia’s digital landscape continues to accelerate in the post-COVID era, regulation has struggled to keep pace—a familiar global challenge, particularly in fast-evolving sectors like e-commerce. The industry has expanded rapidly, with revenue reaching RM1.18 trillion in 2023 and continuing to grow into 2025, delivering benefits across local and regional economies while also creating new opportunities for small and medium enterprises (SMEs).
However, this rapid growth has also exposed gaps in both practice and regulation. While it is essential not to stifle creativity and entrepreneurial activity, appropriate safeguards are needed to protect consumers and ensure fair market outcomes. Much of the public discourse has focused on the influx of foreign competition and its impact on the domestic landscape. Yet the more pressing question is what best serves the public interest. Today, the digital economy—including e-commerce—accounts for 23.4% of Malaysia’s GDP (RM451.3 billion in 2024), underscoring its structural importance. As the landscape evolves, regulation must evolve with it.
Balancing growth with consumer protection
The influx of foreign companies has been a key driver of market transformation, with increased capital flows creating new pressures for local micro, small, and medium enterprises (MSMEs) and consumers. In some instances, this shift has contributed to market imbalances: certain firms may benefit from regulatory gaps in areas such as taxation, while platform fee structures can affect local profitability. At the same time, consumers may face risks from substandard or counterfeit goods, with limited avenues for redress in some cases when foreign companies are concerned.
The challenge, therefore, lies in striking a balance between enabling economic dynamism and safeguarding consumers, particularly as digital transactions and cross-border commerce continue to expand. Recent reform efforts signal a shift towards closing gaps in consumer redress, strengthening dispute resolution mechanisms, and improving accountability across platforms and industries. While this direction is welcome, care must be taken to ensure that vulnerable groups are not inadvertently excluded from economic participation.
At the regional level, these challenges underscore the need for greater regulatory harmonisation across ASEAN, where the digital economy is estimated to have surpassed US$300 billion in gross merchandise value in 2025, driven by rapid growth in e-commerce, digital payments, and online services. As e-commerce, digital services, and circular economy supply chains increasingly operate across borders, regulatory standards remain uneven. Greater alignment in consumer protection standards, competition policy, digital governance, and product quality requirements can help reduce friction for businesses while ensuring more consistent safeguards for consumers. However, such harmonisation must remain sensitive to differing levels of development across ASEAN member states, balancing flexibility with the gradual establishment of shared minimum standards.
Malaysia’s emerging e-commerce regulatory framework
The Malaysian landscape
Currently, e-commerce falls under two primary laws: the Electronic Commerce Act 2006 (ECA 2006) and the Consumer Protection Act 1999 (CPA 1999). In recent months, the Malaysian government has announced plans to introduce a dedicated e-commerce law alongside amendments to existing regulations, expected to be tabled in Parliament later this year. This need is driven by Malaysia’s existing framework being outpaced by the rapid growth and complexity of the digital economy. Gaps around consumer protection, platform accountability, dispute resolution, competition, and cybersecurity have become more obvious, necessitating a legal update.
Deputy Minister Datuk Dr Fuziah Salleh of the Ministry of Domestic Trade and Cost of Living (KPDN) stated that the Ministry is nearing completion of proposed revisions to the Electronic Commerce Act 2006, highlighting the need to balance MSME competitiveness with fair market conditions. She further emphasised that “we should not close the market but instead encourage healthy competition to safeguard consumers”. The new act will likely cover:
- Platform Accountability: Strengthening accountability requirements for large-scale online platforms, including greater oversight of commission fees imposed on sellers.
- Fairness Across the Ecosystem: Promoting fair practices and balanced market conditions for sellers, consumers, and platform operators.
- Consumer Protection: Enhancing product safety standards, improving safeguards against substandard goods, and ensuring safer online transactions.
- Cross-Border Regulation: Increasing oversight of foreign platforms and cross-border e-commerce transactions operating within the Malaysian market.
- Algorithm Transparency: Addressing concerns surrounding platform algorithms that influence product visibility, online search rankings, and marketplace access.
- Enforcement Powers: Expanding the authority of the Ministry of Domestic Trade and Cost of Living (KPDN) to take direct enforcement action against unfair or anti-competitive practices.
A new e-commerce law goes beyond tighter regulation to include creating a fairer and more inclusive digital marketplace. Better governance builds trust and participation, while positioning Malaysia better within an increasingly integrated ASEAN economy.
Strengthening consumer protection and competition policy
Malaysia’s existing regulatory framework is increasingly strained by the rapid evolution of its digital economy. Built for an earlier commercial context, current laws are struggling to address cross-border e-commerce, platform-based business models, online fraud, and emerging consumer risks. Gaps in platform accountability, competition enforcement, and dispute resolution highlight the need for a more cohesive and modernised approach.
In response, the government’s proposed reforms aim to strengthen interconnected parts of the e-commerce and consumer protection ecosystem. Together, they seek to enhance market fairness, improve consumer confidence, and ensure more effective enforcement, while keeping the digital economy competitive and inclusive.
A key element of this agenda is the proposed “lemon law”, which would provide clearer remedies for defective goods through repair, replacement, or refund. Alongside this, amendments to the Competition Act 2010 and Competition Commission Act 2010 aim to strengthen action against cartels and monopolies. These efforts are complemented by reforms to the Electronic Commerce Act 2006 and the introduction of a new e-commerce law, which together address platform accountability, algorithm transparency, cross-border oversight, and fairer market practices. The Direct Sales and Anti-Pyramid Scheme Act 1993 continues to support efforts against fraudulent activity.
These reforms are anchored in the Ministry of Domestic Trade and Cost of Living’s broader policy framework introduced in 2024, which emphasises agile enforcement, domestic economic strengthening, consumer empowerment, and whole-of-nation coordination through the National Cost of Living Action Council (NACCOL). Looking ahead, the focus is on translating policy into implementation, with progress measured through outcomes such as price stability, enforcement effectiveness, and public participation.
Ultimately, the success of these reforms will depend on execution. Effective implementation must combine stronger enforcement with accessible dispute resolution systems, proportional regulation that supports MSMEs, and continued efforts to embed trust through cybersecurity and data protection. Together, these measures will be critical to ensuring that Malaysia’s digital economy remains fair, resilient, and inclusive as it continues to expand.
Implementing reform in practice
Ultimately, the effectiveness of these reforms will depend on how well they translate into real-world outcomes. This includes not only price stability and fair competition, but also accessible dispute mechanisms, secure digital environments, and meaningful consumer empowerment. Without effective implementation, well-intentioned policies may fail to reach those who need them most, undermining both economic resilience and social cohesion.
Consumer protection measures, such as the proposed lemon law and enhanced e-commerce regulations, should be complemented by accessible and effective enforcement mechanisms. This includes investment in online dispute resolution (ODR) systems that use digital platforms to provide fast, low-cost avenues for consumer redress.
Grievance mechanisms should be user-friendly and non-intimidating, ensuring processes are approachable, efficient, and effective across income groups.
Regulatory design should prioritise inclusivity and proportionality. Frameworks for adoption should be people-centric, particularly for lower-income groups, ensuring that compliance requirements do not create undue barriers to entry.
Proportional regulation can help lower costs for micro, small, and medium enterprises (MSMEs) and informal actors while maintaining essential consumer protections. Enabling universal economic participation is not only equitable but also economically beneficial, particularly in Malaysia where segments of the population remain underserved.
Efforts to strengthen fair competition should continue, with a focus on curbing anti-competitive behaviour without stifling smaller players. Alongside enforcement, targeted support may be needed to help MSMEs meet evolving standards in areas such as product quality, platform accountability, and digital operations.
As digital transactions expand, cybersecurity and data protection must be embedded within the broader consumer protection agenda. Strengthening platform responsibility, improving fraud detection, and raising public awareness will be key to maintaining trust in digital markets, especially among vulnerable users.
Circular economy policies should be designed to be broadly accessible and economically viable across income groups. Without deliberate inclusion, sustainability initiatives risk becoming exclusionary.
Incentives, pricing structures, and regulatory frameworks should ensure participation in circular systems such as reuse, repair, and resale markets is feasible for both consumers and small businesses.
There is also a strong case for incremental regulatory harmonisation across ASEAN. Rather than pursuing overly ambitious alignment, existing frameworks such as the ASEAN Digital Economy Framework Agreement (DEFA) can serve as practical starting points.
Greater consistency in e-commerce standards, consumer protection, and dispute resolution can reduce cross-border friction while supporting MSME growth and ensuring more uniform safeguards for consumers across the region.
Building a balanced digital future
Malaysia’s current slate of reforms reflects a broader shift towards a more balanced and responsive regulatory environment—one that seeks to keep pace with rapid digitalisation while safeguarding consumer interests. The focus on strengthening accountability, enhancing competition, and closing regulatory gaps is timely, particularly as e-commerce and cross-border trade expand.
However, success will depend on execution. Policies must be inclusive, effectively enforced, and responsive to emerging risks. At the same time, aligning national reforms with broader ASEAN dynamics will help position Malaysia within a more integrated and resilient regional economy.
Legislation lagging behind innovation is a familiar challenge, and there is limited scope to accelerate government machinery. Instead, as we continue into the next digital gold rush, we must ensure that the most vulnerable are not left behind.
The views and recommendations expressed in this article published in May 2026 are solely of the author and do not necessarily reflect the views and position of the Tech for Good Institute.
