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Rahmah Ismail
Che Norlia Mustafa
Fakulti Undang-undang
Universiti Kebangsaan Malaysia
04/03/2015
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OUTLINE OF PRESENTATION
1. INTRODUCTION
2. PROBLEM STATEMENT
3. PURPOSE OF STUDY
4. OBJECTIVES
5. RESEARCH QUESTIONS
6. RESEARCH METHODOLOGY
7. SIGNIFICANCE OF RESEARCH
8. FINDINGS AND SUGGESTIONS
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INTRODUCTION
 Whether or one realises it or not, direct sales, which is
one of the modes of selling, has gained its foothold in
Malaysia long before the Direct Sales Act 1993 (Act 500)
came into being
 Despite the ills that come along with this type of selling,
direct sales have made significant contributions to the
state’s economy (for e.g in 2008 alone, the direct sales
industry was worth RM5.6B)

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Source : The Direct Sales Association of Malaysia Report
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INTRODUCTION - CONT
 However, as direct sales become more popular
amongst business operators, it has on the other
hand, posed numerous problems to purchasers
(e.g intrusion with the privacy of purchasers,
concealing the actual purpose of visits to
purchasers’ home and et cetera).
 As a result, the Direct Sales Act 1993 was
enacted to curb with these problems while at
the same time regulate the direct sale industry.
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INTRODUCTION - CONT
 Later the 1993 Act was further improved vide the
Direct Sales Amendment (2010) Act (Act A1379) which
has expanded the definition of direct sale so as to
include sale by electronic transaction (distance
selling).
 Nonetheless there are still some loopholes and other
weaknesses in the Act that need to be remedied. Thus,
this research was conducted for the purpose of
plugging up those loopholes as well as remedying the
weaknesses.
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PROBLEM STATEMENT
 The Direct Sales Act as amended by
the 2010 Amendment Act and which
assumes a new name, that is the Direct
Sales and Anti-Pyramid Scheme Act
1993 (Act 500) is not comprehensive in
terms of protection provided for
purchasers in direct sales and distance
selling transactions.
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DIRECT SALES ACT 1993
LOOPHOLES &
WEAKNESSES
1. PRELIMINARY
Definitional problem:
a. direct sale;
b. distance selling; and
c. Cooling off period limited to pre-delivery of
goods or services only.
2.
LICENSING
REQUIREMENT
Not all types of
business entities are
allowed to operate
direct sale business disadvantage to the
Country’s economy
5. PROTECTION OF
VENDORS
No provision
on
exceptions to the right of
purchasers to rescind
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3.
RIGHTS
OF
PURCHASERS
TO
RESCIND
a. Absence of post
delivery cooling off
period;
b. No right to rescind
after delivery of goods
or services
4. OBLIGATIONS OF
VENDORS
a. No provision on
obligation to collect
goods once delivered
b. No provision on
refund of payments
received under the
contract
6. METHOD OF RESCISSION
Failure to take into account
advancement of technology
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Direct Sales Amendment (2010) Act (Act
A1379)
Miscategorisation
of type of sale
Does not address the
aforementioned
loopholes/weaknesses
in the Act
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Does not provide
a specific part on
distance selling
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PURPOSE OF THE STUDY
To study the Direct Sales and AntiPyramid Scheme Act 19993 with a view to
proposing some amendments that would
enhance the level of protection of
purchasers as well as to better regulate
the direct sales industry.
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OBJECTIVES
1.
2.
3.
4.
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To
critically
examine
certain
selected
provisions in the Direct Sales and Anti- Pyramid
Scheme Act 1993 (Act 500);
To identify the weaknesses of the Direct Sales
and Anti-Pyramid Scheme Act 1993
(Act
500);
To compare provisions in the Direct Sales and
Anti-Pyramid Scheme Act 1993 (Act 500) with
statutes of some other selected jurisdictions;
and
To propose amendments to the Direct Sales
and Anti-Pyramid Scheme Act 1993 (Act 500).
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RESEARCH QUESTIONS
 What are the relevant provisions relating to
protection of purchasers in the Direct Sales
and Anti-Pyramid Scheme Act 1993 (Act 500)?;
 What are the weaknesses of the relevant
existing provisions?;
 How would and should the weaknesses in the
existing provisions be remedied?; and
 What lessons may be drawn from other
jurisdictions with regard to legal protection
afforded to purchasers, without jeopardizing
the direct sales industry, by their relevant
statutes?.
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RESEARCH METHODOLOGY
 This is a qualitative doctrinal legal research which
employs the comparative content-analytic – positivist
approach to examine and analyze the relevant provisions
in the Act.
 It also has some elements of macro comparative research
whereby the provisions of certain legislation of other
countries are studied for the purpose of drawing some
lessons which may be useful to this research.
 This research deliberately omits all empirical methods of
collecting data in view of the limitations that exist, such
as, time and financial constraints.
 Method of collecting data is therefore solely based on
library research, where acts, journal articles and other
relevant documents are resorted to as a source of
information.
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SIGNIFICANCE OF RESEARCH
This research will help to improve the quality of the Act
governing the direct and distance selling industries. It will
benefit the purchasers in terms that their rights will be
better protected. Whilst the industry may gain in the long
run, as the purchasers will have more confidence in
dealing with the vendors and as such the industry will be
able to further expand. Apart from that the Ministry of
Domestic Trade, Cooperatives and Consumerism will be in
a better position to make an informed decision before
amending the Act in future.
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PROBLEMS AND SUGGESTIONS
NO.
1.
2.
PROBLEMS
SUGGESTIONS
a. Direct sale – does not differentiate between direct
sale and distance selling
b. Cooling off period
a. There should be separate definitions for direct
and distance selling.
b. The ‘cooling-off period’ should be redefined
so as to include the period after delivery of
goods and services
Definition
Licensing requirement
Only companies are allowed to operate direct sales
business – disadvantage to the country’s economy
3.
Rights of purchasers to rescind
No cooling-off period after delivery of goods or
services, thus leading to deprivation of purchasers’
right to rescind the contract
4.
Section 24(1) relating to contents of direct sale
should be amended in order to cater for the
rights of purchasers to rescind the contract after
goods or services are delivered
Obligations of vendors
a. Absence of obligations of vendors to collect
goods once delivered
b. Absence of obligation to refund payments
received from the purchasers under the contract
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Liberalize the provisions by allowing other
business entities to operate the direct sale
business
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a. To create new provision providing for the
said obligation
b. To create a new provision providing for the
said obligation
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PROBLEMS AND SUGGESTIONS – CONT.
NO.
5.
PROBLEMS
Protection of vendors
Absence of provision excepting the right of purchasers to rescind
6.
7.
To create a new provision for such
exception
Method of rescission
Failure to take into account non-conventional methods of
rescission, such as electronic method
To broaden the scope of method of
rescission
Distance selling
A new PART should be provided
which contains the followings:
a. Definition of distance selling
and its cooling-off period;
b. Contents of advertisement;
c. Requirements of contract;
d. Contents of contract
e. Method of rescission;
f. Effect of rescission;
g. Refunds of payments;
h. Obligations to collect goods by
vendor; and
i. Exceptions to the right to
rescind.
Specific PART on distance selling is not provided
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SUGGESTIONS
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RESTRUCTURING THE ACT
PARTS TO BE RESTRUCTURED
NO.
EXISTING PART
PROPOSED AMENDMENT
RATIONALE
a.
PART I - PRELIMINARY
PART I - PRELIMINARY
b.
PART II - REQUIREMENT FOR A
LICENCE TO CARRY ON DIRECT
SALE BUSINESSES
PART II - REQUIREMENT FOR A LICENCE
TO CARRY ON DIRECT
SALE AND
DISTANCE SELLING BUSINESSES
It is necessary that the
heading of the Part be
amended by including the
word
‘distance
selling
business’ for the purpose of
clarity and certainty
c.
PART III – DOOR TO DOOR SALES
AND MAIL ORDER SALES AND
SALES THROUGH ELECTRONIC
TRANSACTIONS
PART III – DIRECT SALE:
i.
Definition of ‘direct sale’, ‘cooling-off
period’ and ‘fixed place of business’;
ii. Visiting hours;
iii. Production of relevant cards when
negotiating direct sale;
iv. Requirements of direct sale contract;
v. Contents of direct sale contract;
vi. Rights and obligations during predelivery cooling-off period;
vii. Method of rescission;
viii. Effect of rescission
ix. Refund of payments received under the
contract;
x. Obligation to collect the goods
delivered
xi. Exception to the right to rescind the
contract
There must be a specific part
on direct sale in order to
avoid confusion regarding the
applicability of the provisions
in the act
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RESTRUCTURING THE ACT – CONT.
NO
EXISTING PART
PROPOSED AMENDMENT
RATIONALE
There must be a specific part
on distance selling since the
nature of distance selling is
distinct from direct sale
d.
Part IV - DIRECT SALES CONTRACT
PART IV – DISTANCE SELLING:
i. Definition of ‘distance selling’ and its
‘cooling-off period’;
ii. Contents of advertisement;
iii. Requirements of contract;
iv. Contents of contract;
v. Method of rescission;
vi. Effect of rescission;
vii. Refunds of payments;
viii. Obligations to collect goods by
vendor; and
ix. Exceptions to the right to rescind.
e.
PART V – COOLING OFF PERIOD AND
RESCISSION
PART V – PROHIBITION OF PYRAMID
SCHEME
f
PART VA – PROHIBITION OF PYRAMID
SCHEME
MOVED TO THE NEW PART V
g.
PART VI - ENFORCEMENT
PART VI - ENFORCEMENT
h.
PART VII - MISCELLANEOUS
PART VII - MISCELLANEOUS
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THANK YOU
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