Malaysia's CPA & E-consumers: Guarantees, Misleading Ads, Unfair Contracts, Assignments of Corporate Finance

Download Malaysia's CPA & E-consumers: Guarantees, Misleading Ads, Unfair Contracts and more Assignments Corporate Finance in PDF only on Docsity! 5. E-consumer Protection under the Consumer Protection Act The CPA is the first legislation that provides specifically for consumer protection in relation to the supply of goods and services (Wu Min Aun, 2001). This is expressly stated in the preamble of the purpose of the Act “to provide for the protection of consumers, the establishment of the National Consumer Advisory Council and the Tribunal for Consumer Claims, and for matters connected therewith”. Section 2(2(g) of the CPA initially provided expressly that the Act does not apply “to any trade transactions affected by electronic means unless otherwise prescribed by the Minister”. Fortunately, the exclusion has been changed through the amendment of the CPA in year 2007 to include “any trade transactions conducted through electronic means” in order to protect the rights of the e-consumers. Therefore, it is understood that the CPA is the law governing the supply of goods and services either offline or online. It means that protection under the CPA applies to all consumers regardless of the nature or method of their transactions. The CPA has made a major change in legal concept by setting aside the privity rule, where a mere user of goods can have a claim under the guarantees and a manufacturer can be made liable. All protections provided by the CPA cannot be contracted out and this to some extents solves the problem of exemption clauses in consumer contracts. The CPA provides for the protection of e-consumers against misleading and deceptive conduct, false representations and unfair practices. This is contained in Part 11 of the CPA which mainly concerns with providing sufficient and correct information to the consumer since many of consumers’ problem are actually caused by lack of information and awareness of products and suppliers. This is particularly crucial for econsumers who rely totally on the information given on the webpage. Unfair trade practices in online shopping may include misleading price indication and deceptive advertising technique such as ‘bait and switch’. It involves the advertisement of product or services by traders at an extraordinary low price to allure consumers to offer to buy the product. Consumers will then be informed that the product offered was out of stock or not available for various reasons but they have other products (higher-priced one) to be offered (A.Shuhaiza, Izawati Wook, 2010). Obviously their real intention is to sale the higher-priced product and the low price offer is just a ‘bait’. Section 13 of the CPA protects e-consumers from this kind of deceptive advertising technique. Another technique frequently used by e-traders is giving gifts, prizes or free offers. Section 14 lays down the rules to be complied with if this method of sale promotion is used. Non-compliance with the regulations under Part 11 is an offence. Another important aspect of the protection under the CPA includes guarantees as to the quality of goods and services. In this respect the CPA has significantly improved the law on supply of goods by introducing a new concept of implied guarantees especially a guarantee as to acceptable quality (section 32) and a guarantees as to the availability of spare part and repair facilities (section 37). The concept of ‘acceptable quality’ is undoubtedly more favourable to consumers compared to the concept of ‘merchantable quality’ under the SOGA. It covers all aspects of goods, not only their quality and suitability but also their safety. The CPA allows the claims for breach of implied guarantees to be enforced against both the supplier and manufacturer. The claim can also be made by a third party or mere user of the goods since the CPA uses the term a ‘consumer’ who is not necessarily a buyer. However non- contracting consumers may be faced with practical difficulties in enforcing their rights. For example, they may not be able to produce any proof of e- transaction which the e-trader requires before entertaining any claims. The CPA provides an entirely different remedial scheme for breach of the guarantees which depends on whether the failure in the good is remedial or substantial. In a case of a failure that can be remedied, the supplier may remedy the failure by repairing or replacing the goods or providing a refund where repair or replacement cannot reasonably be carried out (section 42). However, the choice of remedy is not left to the consumer since it needs to be exercised sequentially. The right to reject the good and claim for refund or replacement is only available in cases of substantial failure. The ‘substantial defect’ has been interpreted by the court to include a defect that either exist as a latent defect at the time of purchase or it might result because of an accumulation of more minor defects which appear one after another continuously over a period of time [16]. In a later case the consumer is only entitled to reject the good at the point where he could be said to have lost confidence in its usability or reliability. It may be seen as favourable and practical remedy for consumers who opt for face-to-face transactions but it might not be the case for e-consumers. In cases of unsafe product which caused injury or loss to consumers due to a defect in the product, the victims are protected by the scheme of strict liability similar to the protection available in developed countries such as the USA, European Union and Japan (N.Amin, 2007). Part X of the CPA imposes the primary liability of losses caused by defective products on the ‘producer’ (manufacturer, importer and own-brander). Unlike liability in negligence which is based on the conduct of the producer, the main focus of the strict liability rule is the defect in the product. The liability may be imposed by reason of the existence of a defect alone. However to succeed in a product liability claim, the plaintiff has to prove that the product was defective and his injury was caused by the defect. Sometimes this may not be easy for consumers especially in cases which involve complicated or sophisticated products such as drugs. In the CPA (Amendment) Act 2010, a new Part 111A which deals with unfair contract terms has been inserted into the Act. It is particularly