Aggressive expansion of foreign F&B brands risks displacing Malaysian SMEs, raising concerns over fair competition, consumer choice, and market stability.
PETALING JAYA: The surge of foreign F&B brands is raising concerns over market concentration and the gradual displacement of local operators, the Federation of Malaysian Consumer Associations (Fomca) has warned.
Its CEO Saravanan Thambirajah said micro and small local F&B businesses are particularly vulnerable, operating on thin margins with limited access to capital.
“Many foreign brands, especially those backed by large corporations or venture capital, could enter the market aggressively, securing prime locations, expanding outlets rapidly and absorbing losses over extended periods.
“These structural advantages mean local SME cannot compete on equal terms, not due to weaker products or services, but because of higher rental costs, smaller marketing budgets and lack of scale.
“Over time, this leads to market concentration and the gradual displacement of local brands, which are vital for employment, cultural identity and local supply chains.”
While consumers may initially enjoy low prices, heavy discounts and frequent promotions, Saravanan cautioned that such short-term benefits could be misleading.
“When prices are kept artificially low through subsidies or cross-financing, they do not reflect real market costs.
“If local competitors are forced out, consumers may eventually face fewer choices, reduced innovation and higher prices once competition diminishes.”
He also highlighted challenges in online transactions with foreign sellers.
“Consumers face unclear promotional terms, misleading ‘limited-time’ offers and a lack of transparency over who is responsible when disputes arise, particularly on digital platforms.”
Saravanan said the 2020 guidelines on foreign participation in distributive trade services are no longer adequate to protect SME.
“The guidelines were developed in a very different market environment and do not adequately address platform-based pricing strategies, algorithm-driven promotions or sustained below-cost selling.
“What is missing is stronger regulatory coverage for e-commerce, clearer obligations on platforms, and more effective monitoring and penalties.”
Fomca has proposed measures for upcoming legislative amendments or new laws to fill the gaps.
“We want legislation focused on fairness and transparency, not protectionism.
“This includes clear rules against sustained predatory pricing, stronger accountability for e-commerce platforms and mandatory local representation for foreign brands so consumers and regulators have a responsible party to engage with.”
He also urged greater transparency from foreign brands on pricing, promotions and seller identity, adding that enforcement agencies must coordinate to avoid regulatory gaps.
“Rules without meaningful penalties will not change market behaviour. Enforcement must be robust and deterrent enough to ensure compliance.”
Saravanan said a balanced approach benefits both consumers and local businesses.
“Consumers benefit most when competition is fair and sustainable. Protecting local SME helps maintain diverse offerings, preserves local jobs and strengthens the domestic economy, all of which ultimately support consumer welfare.”
He emphasised that the aim is not to limit choice, but to ensure it remains meaningful.
“Fair regulation of foreign brands ensures better transparency, clearer accountability and stronger consumer protection, particularly in online transactions.
“When competition is balanced, consumers enjoy variety, innovation and reasonable prices without sacrificing long-term choice or market stability.”
