“Dear lawyer, I have recently seen in newspapers and social networks that there are many cases related to multi-level selling, or articles that reflect scams and seduce buyers of the multi-level business. I don’t know if all forms of multi-level business are bad and violate the law.” Thanks for your question. Currently, the form of multi-level business is quite popular. However, a lot of people do not accurately grasp the information about multi-level selling. To clarify this, today, LSX Lawfirm will give you an article about “Is multi-level selling illegal in Vietnam?“, as follows:
Legal grounds
Decree No. 40/2018/ND-CP on the management of business activities by the multi-level method.
What is MultiLevel Marketing?
Accordingly to the provisions of Clause 1, Article 3 of Decree No. 40/2018/ND-CP, “Multi-level business is a business activity using a network of participants including many levels and branches, in which participants are entitled to enjoy benefits. commissions, bonuses, and other economic benefits from their own business results and those of others in the network”
Accordingly to Article 4 of Decree No. 40/2018/ND-CP, business activities under the multi-level method can only be carried out for goods. All business activities by multi-level mode with non-commodity subjects are prohibited unless otherwise provided for by law.
Goods that cannot be traded by the multi-level method include:
Firstly, Goods are drugs; medical equipment, veterinary drugs (including aquatic veterinary drugs);
Secondly, Plant protection products; chemicals, and preparations for insecticidal and germicidal use are restricted and banned from use in the household and medical fields, and dangerous chemicals; Digital information content products.
Is multi-level selling illegal?
Multi-level selling is not illegal according to current regulations. Multi-level marketing is actually not bad, because some individuals and organizations have taken advantage of loopholes in the law to distort multi-level marketing activities in order to defraud and redeem illicit profits.
For a multi-level business, the business object must be goods, so if an enterprise opens in the form of a multi-level business but the object of business is services or other business types, If you have to trade in goods, this is not a multi-level business model.
Not all goods allow to do multi-level business, according to which Article 4 of Decree 40/2018/ND-CP provides the following:
Article 4. Objects of business by multi-level mode
1. Business activities in the multi-level model may only carry out with respect to goods. All business activities by multi-level mode with non-commodity subjects prohibit unless otherwise provided for by law.
2. The following goods may not traded by the multi-level method.
a) Firstly, The goods are drugs; Medical equipment; veterinary drugs (including aquatic veterinary drugs); Plant protection products; chemicals and preparations for insecticidal and germicidal use restricted and banned from use in the household and medical fields and dangerous chemicals;
b) Secondly, Digital information content products.
Thus, if the above characteristics and conditions satisfied, the act of multi-level selling is legal. For a multi-level business, the business object must be goods, so if an enterprise opens in the form of a multi-level business but the object of business is services or other business types, If you have to trade in goods, this is not a multi-level business model.
Regulations on illegal multi-level selling
In order to protect the interests of consumers and genuine multi-level enterprises, prohibited acts in multi-level business activities have strictly stated in Article 5 of Decree No. 40/2018/ND- Specific CPs are as follows:
Article 5. Prohibited acts in multi-level business activities
1. Prohibit multi-level sales enterprises from performing the following acts:
a) Requiring other people to make a deposit or pay a certain amount of money in order to sign a contract to participate in multi-level selling;
b) Requiring other people to buy a certain quantity of goods in order to sign a contract to participate in multi-level selling;
c) Allowing multi-level sale participants to receive money or other economic benefits from referring other people to participate in multi-level selling activities, but not from the purchase and sale of goods by that referent.
d) Refuse to pay without justifiable reasons commissions, bonuses, or other economic benefits to which multi-level sale participants entitle.
And
đ) Providing false information about the reward plan, about the benefits of joining the multi-level sales network;
e) Providing false or misleading information about the features and uses of goods or the enterprise’s activities through reporters, trainers at conferences, seminars, training, or through documents. of the enterprise.
g) Maintain more than one multi-level sale participation contract, multi-level business location, multi-level business code, or other equivalent forms for the same multi-level sale participant;
h) Conduct promotions using a network of many levels and branches in which the participants of the promotion program have more than one position, code, or other equivalent forms;
i) Organize commercial intermediary activities in accordance with the commercial law in order to serve the maintenance, expansion, and development of the multi-level sales network;
k) Receive or accept the application or any other form of document from the multi-level sale participant, in which the multi-level sale participant declares to waive part or all of his or her rights under provisions of this Decree or permit enterprises not to perform obligations towards multi-level sale participants according to the provisions of this Decree.
l) Doing business by the multi-level method for entities; that not allowed as prescribed in Article 4 of this Decree;
m) Failing to use the multi-level sale participant management system; registered with the multi-level sale registration certificate-issuing agency to manage multi-level sale participants;
n) Buying, selling, or transferring the network of multi-level sale participants; to another enterprise, except for the case of acquisition, consolidation, or merger of enterprises.
In addition
2. Prohibit multi-level sale participants from performing the following acts:
a) Acts specified at Point a, Clause 1 of this Article;
b) Providing false or misleading information about the benefits of participating in multi-level selling, features, and uses of goods, and operations of the multi-level selling enterprise;
c) Organizing seminars, conferences, and training on business by multi-level method without authorized in writing by the multi-level selling enterprise.
d) Enticing, enticing, and bribing multi-level sale participants of other enterprises to join the network of the enterprise to which they are participating;
đ) Taking advantage of their positions, powers, and social and professional positions to encourage, request, entice, or entice others to participate in the multi-level selling network or purchase goods for business by the multi-level marketing method. grant;
e) Carry out multi-level sale activities in the locality where the enterprise has not yet granted a certificate of registration of multi-level sale activities in the locality.
3. Organizations and individuals prohibit from doing business by the multi-level model, from holding conferences, seminars, training, and introducing their own multi-level business activities or that of other organizations or individuals when The certificate of registration of multi-level sale activities has not granted unless otherwise provided for by law.
4. Prohibit individuals from participating in activities of organizations and individuals doing business by multi-level mode without having granted a certificate of registration of multi-level sale activities, unless otherwise provided for by law.
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Related questions
In Vietnam, multi-level selling is a new concept and was first officially recognized in the 2004 Competition Law. Before that, this business type was often referred to as “multi-level marketing”, or “business”. network marketing”, “multi-tier marketing”.
Accordingly to Clause 2, Article 4 of Decree 40/2018/ND-CP on the management of multi-level business activities, the following goods cannot be traded by the multi-level method:
– Goods are drugs;
– Medical equipment;
– Veterinary drugs (including aquatic veterinary drugs) then;
– Plant protection products;
– Insecticidal and germicidal chemicals and preparations restricted and banned from use in household and medical fields and dangerous chemicals then;
– Digital information content products then;
In fact, the multi-level selling model is not only not bad but also recognized as a highly effective business method.
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