Reasons for the Increase in Spot-Checks

Regulatory Compliance

In recent times, both the Philippines and Malaysia have introduced new e-commerce regulations. These regulations aim to raise the bar for product safety and quality standards. For instance, the Philippines has implemented the Internet Transaction Act (ITA), which took effect on June 5, 2025. This law is comprehensive, covering various aspects of e-commerce transactions. It mandates that sellers provide government-issued business registration documents such as DTI/SEC certificates, and for those dealing with regulated products like food and cosmetics, they must obtain specific sales licenses like FDA LTO and have PS/ICC numbers. This ensures that the products on the market meet the set national quality and safety benchmarks. Similarly, Malaysia has also updated its consumer protection laws to be more stringent for e-commerce products. With these new regulations in place, warehouses need to conduct more random inspections to ensure that the products they handle comply with the law. Sellers who fail to meet these standards may face severe penalties, including fines and the suspension of their business operations. Thus, to avoid legal issues and maintain a good standing in the market, businesses are compelled to ensure their products are compliant through increased spot-checks.

Read more about PS and ICC application requirements here.

Consumer Protection

Today's consumers in the Philippines and Malaysia are more informed and demanding than ever before. They expect the products they purchase, whether online or offline, to be of high quality and safe for use. For example, in Malaysia, with the growth of e-commerce, consumers have become more vocal about their experiences. If they receive a product that is defective, has incorrect labeling, or poses a safety risk, they are quick to voice their dissatisfaction on social media platforms or through official consumer complaint channels. These negative experiences can spread rapidly, causing damage to the reputation of both the seller and the e-commerce platform. To protect consumers from such issues, warehouses are stepping up random inspections. By doing so, they can identify and remove substandard products before they reach the consumers' hands. This not only safeguards the rights and safety of consumers but also helps build trust between consumers and e-commerce platforms. When consumers feel that their concerns are being addressed and that they are likely to receive quality products, they are more likely to continue shopping online, contributing to the growth of the e-commerce industry.

Market Competition

The e-commerce market in the Philippines and Malaysia is highly competitive, with numerous local and international players vying for a share of the market. In such a competitive environment, ensuring fair competition is crucial. Random inspections play a significant role in this regard. There have been cases where some unscrupulous sellers try to gain an unfair advantage by selling counterfeit or low-quality products at lower prices. For example, in the Philippines, some sellers have been found to sell fake branded items on e-commerce platforms, which not only cheats consumers but also undermines the business of legitimate sellers. These practices disrupt the market equilibrium and create an uneven playing field. Through increased random inspections, warehouses can detect such fraudulent activities and take appropriate action. This can involve removing the noncompliant products from the market, suspending the seller's account, or even reporting the matter to the relevant authorities. By doing so, it helps to maintain a fair and healthy market environment where businesses can compete based on the quality of their products and services rather than on unethical practices. This, in turn, encourages innovation and growth in the e-commerce sector as businesses strive to offer better products to attract customers.

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Impact on E-commerce Businesses

Positive Aspects

For e-commerce businesses, the increase in spot-checks in Philippine and Malaysian warehouses can have several positive implications. Firstly, it acts as a powerful incentive for businesses to enhance their product quality. With the looming threat of random inspections, sellers are more motivated than ever to source high-quality products, improve their manufacturing processes, and conduct more rigorous in-house quality control. For example, a local fashion brand in the Philippines that sells its products through e-commerce platforms has started to work with more reliable fabric suppliers and has increased the frequency of its internal quality checks. This not only reduces the risk of product rejection during warehouse spot-checks but also leads to higher customer satisfaction in the long run. Satisfied customers are more likely to become repeat customers, which is beneficial for the long-term development of the business.

Secondly, the market becomes more standardized. As non - compliant products are gradually removed from the market due to spot-checks, it creates a more level playing field for all e-commerce businesses. High-quality products and legitimate sellers can gain more opportunities to shine. In Malaysia, for instance, small and medium-sized enterprises (SMEs) that have always adhered to high-quality standards are now seeing an increase in their market share as consumers become more confident in their products. This encourages healthy competition based on product quality and innovation rather than price-cutting through the sale of low-quality goods.

Challenges

However, e-commerce businesses also face certain challenges due to these increased spot-checks. One of the most immediate challenges is the increase in costs. Conducting in-house quality control measures to meet the higher standards set by warehouse spot-checks can be expensive. Businesses may need to invest in better quality inspection equipment, hire more quality control staff, or work with more expensive but reliable suppliers. For example, an electronics seller in the Philippines had to purchase new testing equipment to ensure that the electronic products it sells meet the safety and quality standards required by the warehouses. These additional costs may eat into the profit margins of the business, especially for small-scale e-commerce operators.

Another significant challenge is the potential for penalties and reputation damage in case of noncompliance. If a business's products are found to be substandard during a spot-check, they may face penalties such as fines, product recalls, or even the suspension of their e-commerce accounts. In Malaysia, a beauty product seller had its account suspended for three months after its products failed a spot-check due to incorrect labeling and the presence of prohibited ingredients. This not only led to a direct loss of revenue during the suspension period but also severely damaged the brand's reputation. Customers may lose trust in the brand and switch to other competitors, which can be difficult to recover from in the highly competitive e-commerce market.