This article first appeared in The Edge Malaysia Weekly on February 9, 2026 - February 15, 2026

THE digital economy is more deeply embedded in our daily lives than many realise. Not only has the internet-enabled smartphone changed the way society shops, interacts and consumes information, the digital economy sector has also become a prominent employer — already employing 1.2 million people, or 7.8% of the total working population, in 2023.

From making up 23.5% of gross domestic product, the digital economy is projected to contribute 25.5% to GDP by 2025, according to data from the Department of Statistics Malaysia.

Lulled, perhaps, by the newfound convenience, what happens behind the scenes largely goes unnoticed or is shrugged off by most consumers. That is despite a significant increase in public complaints related to the digital sector, specifically on unfair trading conditions, which affect both suppliers and customers.

“Complaints have piled up as people move into digitalised transactions. This has become more apparent after the Covid-19 pandemic,” Datuk Iskandar Ismail, CEO of the Malaysia Competition Commission (MyCC), tells The Edge in a recent interview.

The issues often brought up, he says, include the inability to choose courier providers for the e-commerce sector, unreasonable withholding or release of payments and unfair operational policies. Comments on social media community groups for online merchants provide some colour on the grouses.

On the flipside, a common thread among merchants’ conversations is how profit margins are razor-thin due to fees charged and policies implemented by various platforms.

A small business owner who runs a stationery store says he is considering closing shop and retiring as he does not see the benefit of running the business both physically and online.

“It is great to have a wider audience to sell products to, but the fees charged by the platform can amount to a big sum and margins have become razor-thin. It is also not possible to just rely on customers at my physical store — traffic has slowed considerably since everyone is buying online these days. If it goes on like this, I’m better off retiring,” he says.

The fast-growing digital economy coupled with the increasing number of public complaints on unfair trading conditions has prompted MyCC to undertake an extensive market review of four subsectors of the digital economy — mobile operating and payment systems, e-commerce retail marketplaces, digital advertising services and online travel agencies — which are dominated by large multinational technology companies.

The report, which totals more than 1,500 pages over four volumes, one for each segment, took 18 months to complete.

MyCC found competition in the four subsectors to be concentrated, primarily driven by network effects, vertical integration and data-driven advantages. The commission highlighted that efforts are being made to amend certain laws to strengthen the governance of certain subsectors of the digital economy and increase regulatory oversight.

“This review was about ensuring Malaysia’s regulatory framework does not lag behind global standards, which would otherwise create a regulatory arbitrage risk for our digital markets,” Iskandar explains.

“In a rapidly digitising world, the rules of the game have changed. Traditional enforcement is no longer enough to manage emerging technologies and novel business paradigms.”

In the report, MyCC identified 34 critical issues across market structures, competition and regulation which, if left unchecked, will compromise Malaysia’s economic resilience, he says.

On top of that, the independent commission also unravelled issues in the supply chain, detailing the market practices and main players along with the data practices of the four subsectors, with the intention to make clear to regulators, businesses and consumers how the digital economy functions.

Iskandar describes the exercise as “opening Pandora’s box” to highlight information on market structure and practices of the digital economy. “After this [report is published], businesses can change their policy on how they conduct business according to the market structure,” he says.

Following the market review of these subsectors, MyCC is likely to increase scrutiny, especially of e-commerce and online travel agencies (OTAs), because these subsectors affect the public the most, says Iskandar.

“One of the recommendations that can be implemented is for MyCC to investigate the use of price parity clauses in the OTA subsector. In simple terms, these clauses have been standard practice requiring hotels to offer the same room rates on OTA platforms as they do on their own websites or other booking channels,” says Iskandar.

MyCC’s findings show that the widespread use of this price parity clause poses harm to the competition, particularly impacting smaller hotels with limited resources to compete effectively compared with larger or chain hotels.

Iskandar says several of MyCC’s international peers have already initiated action against major OTA platforms on this issue, further underscoring the competition concerns these clauses present. He adds that this will require close collaboration with the Ministry of Tourism, Arts and Culture, especially to gain access to industry data and facilitate engagement with stakeholders.

For the e-commerce retail marketplace subsector, MyCC has recommended enhancing operational transparency, requiring the Ministry of Domestic Trade and Cost of Living to operationalise its upcoming amendments to the Electronic Commerce Act 2006.

These amendments are particularly relevant to strengthening platform governance, accountability, fairness and operational practices, while introducing measures that support fair trading for merchants, says Iskandar. He also points out that data privacy laws in Malaysia are insufficient at this juncture.

“While the data protection laws are there, privacy issues are a different thing altogether. Let’s say in the e-commerce space, where they are vertically integrated with different businesses, from e-wallets to financing, and also last-mile delivery services,” he notes.

“Although they are ultimately owned by the same company, they should not be able to share consumer information across their other businesses. It is not fair for businesses when these e-commerce platforms use consumer data for their own growth.”

Sceptics reckon that these multinational companies are beyond the regulatory control of any single country and steps to regulate them may not bring about any real changes, but MyCC begs to differ.

“Our mandate is to protect the Malaysian market. We have the legislative teeth to do so regardless of where a company is headquartered. If a commercial activity has an effect on competition in Malaysia, we have the jurisdiction,” says Iskandar, pointing to MyCC’s scope under the Competition Act 2010.

He is quick to add that the commission is not “anti-big tech” and is actually “pro-business” — unlike what detractors may claim.

“We understand that Malaysia is a small market, with a population of only 35 million. The big tech companies may have more revenue than our country. [And] 75% of the mobile users in Malaysia depend on the Android platform. So, there is a delicate balance to this,” says Iskandar.

“So, our current priority for the big companies, including the big tech ones, is to take the soft approach. It’s better to talk than to go aggressive. We have a road map whereby we want to first strengthen our laws and policies and get all the ministries and local businesses aligned. This strengthens our domestic ecosystem and creates a unified Malaysian stance.”

The next step is to go regional, he adds, basically elevating this framework to the Asean level. “I’m sure there are similarities with other countries in Asean [facing the same issues]. If we unite in dealing with these digital economy players, there will be a bigger positive outcome.”

But should push come to shove, MyCC is willing to use a “stricter” approach if it is unable to get cooperation from the companies, says Iskandar. He adds that Malaysia would not be the first country to strengthen its regulations on the digital economy. Places like Australia, Singapore and the European Union (EU) undertook such studies much earlier.

Globally, there is a growing number of anti-competition cases in the digital economy as regulators begin scrutinising the players involved in the sector to safeguard consumers and businesses.

The European Commission appears to be leading the charge in its crackdown on major technology companies, deploying new digital laws to curb their power and protect consumers.

In 2025, the EU slapped an antitrust fine of €2.95 billion on Google, marking the fourth penalty its competition regulator had levied against the tech giant in a decade. It also issued a €797.72 million fine on Meta for breaching EU antitrust rules by tying its online classified ad service Facebook Marketplace to its personal social network Facebook and by imposing unfair trading conditions on other online classified ad service providers.

For Malaysia, Iskandar stresses the importance of the market review undertaken by the commission. He says it ensures that MyCC is not in the dark whenever issues related to the digital economy arise.

“We already understand how these markets work, where the risks lie and where to focus our intervention by conducting this study. So, we hope that if any issues or complaints arise in the subsectors examined, we will already have a clear understanding of their supply chains and have a head start with the investigation,” he adds.

This knowledge can also serve as a reference for other agencies and ministries in the future if they wish to formulate policies concerning these subsectors. “Competitive pricing must be understood by all the relevant parties, and not just the consumers,” notes Iskandar.

MyCC hopes that the report on the market review, which will be unveiled on Feb 10, will be well received by not just the players in the ecosystem, but also the government and consumers.

How the various agencies and regulators overseeing different aspects of the digital economy come together to formulate workable solutions to build a resilient sector will be imperative in determining just how much tangible benefit reaches local businesses and consumers.

Also see "Digital economy ecosystem unpacked for you"  

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