5 Considerations Before Launching an Online Business

[Photo by Negative Space from Pexels]

By Bryan Boo

The COVID-19 pandemic has forced many companies and businesses to rethink their business models. One trend resulting from the COVID-19 pandemic is that more and more businesses are moving towards digital and online platforms. With social distancing being the ‘new normal’, it is no wonder that consumers prefer purchasing online as compared to taking the risk by physically going to the shop. However, there are a number of considerations that a company or business must consider before launching their online store. This article explores 5 such considerations.

#1: Have clear and well-thought-out terms and conditions

The terms and conditions of an e-commerce website usually set out the contractual relationship between the company or business with the end-user. This includes terms of use, terms of sale, return or refund of goods, delivery policies, warranties and dispute resolution.

Unfortunately, the terms and conditions of a website are often overlooked. It bears mentioning that the terms and conditions of one website might not be appropriate or applicable to another. As such, it is prudent to purposefully draft each and every clause of the terms and conditions to avoid uncertainties, ambiguities, disputes and ultimately, losses.

#2: Be clear and accurate in your description of the product

It is important that the description of the product offered is clear and accurate. Any false or inaccurate description of the product may be an offence under Section 5 of the Trade Descriptions Act 2011.

Section 5 Trade Description Act 2011

Prohibition of false trade description

5. (1) Any person who –

       (a) applies a false trade description to any goods;
       (b) supplies or offers to supply any goods to which a false trade description is applied; or
       (c) exposes for supply or has in his possession, custody or control for supply any goods to which a false trade description is applied,

commits an offence and shall, on conviction, be liable –

       (A) if such person is a body corporate, to a fine not exceeding two hundred and fifty thousand ringgit, and for a second or subsequent offence, to a fine not exceeding five hundred thousand ringgit; or
       (B) if such person is not a body corporate, to a fine not exceeding one hundred thousand ringgit or to imprisonment for a term not exceeding three years or to both, and for a second or subsequent offence, to a fine not exceeding two hundred and fifty thousand ringgit or to imprisonment for a term not exceeding five years or to both.


As to what is a ‘trade description’, Section 6 of the Trade Descriptions Act 2011 provides that a trade description is an indication, whether direct or indirect and by any means given, of any of the following matters with respect to any goods or parts of goods:

  1. Nature or design;
  2. Quantity, length, width, height, area, volume, capacity, weight, size or gauge;
  3. Method of manufacture, production, processing or reconditioning;
  4. Composition;
  5. Fitness for purpose, strength, performance, behaviour or accuracy;
  6. The standard of fineness of articles made of precious metal;
  7. Any physical or technological characteristics not included in the preceding paragraphs;
  8. Date of expiration of goods;
  9. Testing by any person and results thereof;
  10. Quality otherwise than as specified in the preceding paragraphs;
  11. Approval by any person or conformity with a type approved by any person;
  12. Place or date of manufacture, production, processing or reconditioning;
  13. Person who manufactured, produced, processed or reconditioned the goods;
  14. Other history, including previous ownership or use.

There are also Regulations (such as the Trade Descriptions (Cheap Sale Price) Regulations 1997) and Orders (such as the Trade Descriptions (Marking of Safety Glass for Motor Vehicles) Order 2017) that may provide for additional regulations of specific trade descriptions.

As to what amounts to a ‘false trade description’, Section 7 of the Trade Descriptions Act 2011 provides that a description of goods that is false or misleading to a material degree is a false trade description.

Section 7 Trade Description Act 2011

False trade description

7. (1) A false trade description is a trade description which is false to a material degree.

   (2) A trade description which, though not false, is misleading, that is to say, likely to be taken for an indication of any of the matters specified in section 6 as would be false to a material degree, is deemed to be a false trade description.

   (3) Anything which, though not a trade description, that is to say, likely to be taken for an indication of any of the matters specified in section 6 as would be false to a material degree, is deemed to be a false trade description.

   (4) A false indication, or anything likely to be taken as an indication which would be false, that any goods comply with a standard specified or recognized by any person or implied by the approval of any person is deemed to be a false trade description, if there is no such person or no standard so specified, recognized or implied.


#3: Consider the copyright of the images used

It is undeniable that a website with captivating visuals leave a deeper impression. There have been numerous studies on how consumers may be influenced by visuals. As such, it is only natural that a company or a business intending to launch an online business would want the website to be as visually appealing as possible. Inevitably, this will involve the use of images.

While it may be easy to search for an image online and use it in a website, the issue of copyright (which is often overlooked) must be considered.

Section 9 of the Copyright Act 1987 reads as follows:

Copyright in published edition of works

9. (1) Copyright shall subsist, subject to the provisions of this Act, in every published edition of any one or more literary, artistic or musical work in the case of which either —


(a) the first publication of the edition took place in Malaysia; or

(b) the publisher of the edition was a qualified person at the date of the first publication thereof;


Provided that this subsection does not apply to an edition which reproduces the typographical arrangement of a previous edition of the same work or works.

This means that copyright protection is not limited by geographical limitations per se and the use of an image, although not created in Malaysia, may still be accorded the same protection as if it was created in Malaysia. It must be noted that Malaysia is also a signatory to the Berne Convention for the Protection of Literary and Artistic Works, which strengthens and/or reinforces such protection.

As such, using images without first ensuring that one has the proper rights or licence to do so may be an infringement of copyright.

#4: Consider the contents of your marketing campaign

As more and more businesses turn to adopt an online platform or establish an online presence, the competitiveness of online businesses is increased as well. As such, businesses might feel a need to invest in marketing campaigns.

Consideration must be given to the contents of the marketing campaign. Sufficient research should be conducted to ensure that the contents of the marketing campaign not only achieves the intended outcome but also that it is not insensitive, offensive or distasteful, of which would have severe repercussions including a negative image of the brand.

In fact, the Communications and Multimedia Act 1998 (“CMA 1998“) does have statutory prohibitions regarding contents that are published online. Section 211(1) of the CMA 1998 reads:

Prohibition on provision of offensive content

211. (1) No content applications service provider, or other person using a content applications service, shall provide content which is indecent, obscene, false, menacing, or offensive in character with intent to annoy, abuse, threaten or harass any person.

Contravention of Section 211(1) CMA 1998 is an offence punishable with a fine not exceeding RM50,000.00 or imprisonment for a term not more than 1 year or to both and may also be liable to a further fine of RM1,000.00 for every day or part of a day during which the offence is continued after conviction.

#5: Bear in mind the obligations under the Personal Data Protection Act 2010

An e-commerce website or an online business will inevitably involve some collection of data, including personal data. The collection, handling and use of personal data is governed by the Personal Data Protection Act 2010 (“PDPA 2010“).

Definition of “personal data”

“personal data” means any information in respect of commercial transactions, which—

(a) is being processed wholly or partly by means of equipment operating automatically in response to instructions given for that purpose;

(b) is recorded with the intention that it should wholly or partly be processed by means of such equipment; or

(c) is recorded as part of a relevant filing system or with the intention that it should form part of a relevant filing system,

that relates directly or indirectly to a data subject, who is identified or identifiable from that information or from that and other information in the possession of a data user, including any sensitive personal data and expression of opinion about the data subject; but does not include any information that is processed for the purpose of a credit reporting business carried on by a credit reporting agency under the Credit Reporting Agencies Act 2010


Definition of “processing” of personal data

“processing”, in relation to personal data, means collecting, recording, holding or storing the personal data or carrying out any operation or set of operations on the personal data, including—

(a) the organisation, adaptation or alteration of personal data;

(b) the retrieval, consultation or use of personal data;

(c) the disclosure of personal data by transmission, transfer, dissemination or otherwise making available; or

(d) the alignment, combination, correction, erasure or destruction of personal data


Businesses that process such personal data is referred to under the PDPA 2010 as a “data user”. Data users must comply with the Personal Data Protection Principles. This is provided for under Section 5(1) PDPA 2010 as follows:

Personal Data Protection Principles

5. (1) The processing of personal data by a data user shall be in compliance with the following Personal Data Protection Principles, namely—


(a) the General Principle;
(b) the Notice and Choice Principle;
(c) the Disclosure Principle;
(d) the Security Principle;
(e) the Retention Principle;
(f) the Data Integrity Principle; and
(g) the Access Principle,


as set out in sections 6, 7, 8, 9, 10, 11 and 12.

Personal Data Protection Principles in brief

The General Principle
Provides that, unless falling within the exceptions under Section 6(2) PDPA, a data user shall not process personal data about a data subject (which is the person who is the subject of the personal data) unless with the consent of the data subject.

The Notice and Choice Principle
Provides that data users must inform the data subjects in writing of the type of data being collected, the purpose the data is being collected for, its sources and the right to request access and correction, among other things.

The Disclosure Principle
Provides that no personal data shall be disclosed for any purpose other than that which the data was disclosed at the time of collection, or to any person other than that notified to the data user unless with the consent of the data subject.

The Security Principle
A data user shall, when processing personal data, take practical steps to protect the personal data from any loss, misuse, modification, unauthorized or accidental access or disclosure, alteration or destruction.

The Retention Principle
The personal data processed for any purpose shall not be kept longer than is necessary for the fulfilment of that purpose and that it shall be the duty of a data user to take all reasonable steps to ensure that all personal data is destroyed or permanently deleted if it is no longer required for the purpose for which it was to be processed.

The Data Integrity Principle
A data user shall take reasonable steps to ensure that the personal data is accurate, complete, not misleading and kept up-to-date by having regard to the purpose.

The Access Principle
A data subject shall be given access to his personal data held by a data user and be able to correct that personal data where the personal data is inaccurate, incomplete, misleading or not up-to-date unless disallowed to under the PDPA. A data user who contravenes Section 5 of the PDPA shall, on conviction, be liable to a fine not exceeding three hundred thousand ringgit or to imprisonment for a term not exceeding two years or to both unless the personal data falls under the exception of Section 45 or Section 46 PDPA.


Conclusion

While it may seem easy and straightforward to start an online business or migrate a business to an online platform, there are legal issues that need to be given due thought and consideration so as to ensure compliance with the applicable laws and avoid unnecessary legal problems.