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Dinh Vu

Economic Sector

Last updated: Wednesday, May 23, 2018


Multi-level Marketing Needs Increased Inspection by State Authorities

Posted: Wednesday, January 11, 2017

The Ministry of Industry and Trade of Vietnam coordinated with other related agencies and organisations to draft a decree in place of Decree 42/2014/ND-CP on multi-level marketing management. The draft aims to enhance transparency and better management of multi-level marketing, also known as pyramid selling and network marketing.

According to the Ministry of Industry and Trade, although Decree 42/2014/ND-CP has tightened state management over pyramid selling, some companies are taking advantage of multi-level marketing to mobilise illegal funds or commit wrongdoings.

Fraudulence in multi-level marketing adversely affects local socio-economic order. The draft decree aims to perfect the legal framework, increase control and improve efficiency of State management and handling of multi-level marketing violations. Besides, illegal fundraising in the form of multi-level marketing must be nipped in the bud.

The draft regulation supplements regulations on the guarantee of inspection competency of State management agencies over multi-level marketing. Businesses are required to build and operate distributor management information technology systems enabling distributors to access and retrieve information relating to their multi-level marketing. Administration servers must be placed in Vietnam and grant access to administrator accounts at the request of competent authorities.

Enterprises are required to build and operate websites to provide information about their profiles, products, compensation plans, operating rules and basic training programmes. They must publish, update selling prices of products, clearly stating that companies announce selling prices on their own and take responsibility rather than evaluation and validation of competent authorities. They must publicise information about their multi-level marketing (MLM), transaction processes and settlements of MLM employee contract terminations.

They must give sales invoices to each and every distributor and customer. This requirement aims to guarantee the rights and interests of distributors and customers in the event that the latter wants to take back their goods and return cash.

To protect the rights and interests of MLM participants, the draft decree advocates increasing deposit value to at least VND10 billion and companies are required to pay deposits.

A draft decree disallows multi-level marketing businesses to organise trade intermediary activities to serve their multi-level marketing.

In reality, some multi-level marketing companies employed commercial intermediaries (agents, brokers, trustees and agents) to develop and expand their networks. However, upon the dispute with multi-level marketing agents, some blamed responsibility on intermediaries. Authorities cannot blame responsibility on multi-level marketing companies but intermediaries, thus reducing the power of law enforcement. To improve accountability of multi-level marketing businesses, the draft decree regulates that companies cannot organise commercial intermediary activities to maintain, develop and expand their multi-level marketing networks.

In addition to improving the responsibility of multi-level marketing businesses, the draft decree advocates barring MLM participants who used to be sanctioned for non-compliance with regulations on multi-level marketing management from engaging in multi-level marketing.

The draft regulation also adds regulations on enhanced efficiency of supervisory management of multi-level marketing in localities. Many regulations pertaining to MLM sellers and sellers are also introduced.

Bao Chau

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