How is Vietnam’s state management of multi-level selling?

Currently, multi-level selling is a retail marketing method that businesses use a lot in business. This sales method has many advantages and brings good profits. This is a legal business model in Vietnam, subject to the management of Vietnamese law. Accordingly, the current law only prohibits illegal multi-level selling acts. To better understand this, today LSX Lawfirm will give you an article about “How is Vietnam’s state management of multi-level selling?“, as follows:

Legal grounds

Decree No. 40/2018/ND-CP on the management of business activities by a multi-level method

What is Multi-Level Business?

Pursuant 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 enjoy commissions, bonuses and other economic benefits from their business results. and 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.

Firstly, Goods that cannot be traded by the multi-level method include: 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;

Thirdly, Digital information content products.

Features of multi-level selling business

• Firstly, Multi-level selling is a form of retailing of goods: A multi-level marketing company can be a company that directly manufactures and markets, retails, or distributes goods produced by other companies. A multi-level company that retails goods through a marketing network.
• Secondly, The sale done by a network of participants with many levels and different branches: Businesses often sell through agents, shops, or supermarkets,… In multi-level marketing activities, there are no agents, stores, or supermarkets, but the goods used directly by distributors or introduced and sold to consumers.
• Thirdly, Participants in the multi-level selling network are entitled to commissions and bonuses from their own sales results and those of others in the network they organize.

Conditions for registration of multi-level selling activities

Accordingly, to Article 7 of Decree 40/2018/ND-CP, conditions for registration of multi-level selling activities are as follows:

“1. Organizations registering for multi-level sale activities must satisfy the following conditions:

a) an enterprise established in Vietnam in accordance with the law and has never had its certificate of registration of multi-level sale activities revoked;

b) Having a charter capital of 10 billion VND or more;

c) general partner, in the case of a partnership, the owner in the case of a private enterprise or one-member limited liability company, and one member in the case of a limited liability company with two or more members. , founding shareholders, in the case of a joint-stock company, the legal representative of the enterprise, excluding organizations or individuals who used to hold one of the above positions at the multi-level marketing enterprise, whose license has been revoked. certificate of registration of multi-level selling activities according to the provisions of Decree 42/2014/ND-CP dated May 14, 2014, of the Government on the management of multi-level selling activities and this Decree.

In addition

d) Depositing at a commercial bank or foreign bank branch in Vietnam as prescribed in Clause 2, Article 50 of this Decree;

đ) Having a sample contract for participation in multi-level sales, operating rules, reward plan, and basic training program that is clear, transparent, and consistent with the provisions of this Decree;

e) Having an information technology system to manage the network of multi-level sale participants, a website to provide information about the enterprise and its multi-level sale activities;

g) Having a contact information system to receive and settle questions and complaints of multi-level sale participants” Enterprises registering for multi-level selling activities must compile a dossier of application for a certificate of registration of multi-level sale activities in accordance with law and take responsibility for the legality of such dossiers.

State management of multi-level selling

Illegal multi-level selling acts

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 entitled;

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.

In addition

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.

And

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;

And

d) Enticing, enticing, and bribing multi-level sale participants of other enterprises; to join the network of the enterprise in 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 prohibited; from doing business by the multi-level model, from holding conferences, seminars, and 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 have granted a certificate of registration; of multi-level sale activities, unless otherwise provided for by law

Handling administrative violations against organizations that commit illegal multi-level sales

In order to strictly manage business activities; under the multi-level method, the law also sets out sanctions to handle violations when multi-level selling enterprises; commit illegal acts of multi-level selling as follows:

Article 36. Illegal multi-level selling acts

1. A fine ranging from VND 80,000,000 to VND 100,000,000 shall impose on organizations that commit one of the following violations:

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 then;

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 introducing other people to participate in multi-level selling activities; but not from the purchase or sale of goods by such introduced persons;

d) Refuse to pay without justifiable reasons commissions, bonuses, or other economic benefits to which multi-level sale participants entitled then;

In addition

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 then;

g) Failure to perform or improper performance of the obligation to buy back goods as prescribed by law.

2. A fine twice the fine level for violations specified in Clause 1 of this Article in cases where the violations committed in two or more provinces or centrally-run cities then.

3. In addition to being fined as prescribed in Clauses 1 and 2 of this Article, organizations that commit violations may also subject to one or several additional sanctioning forms and the following remedial measures:

a) Forcing public correction of the acts specified at Points dd and e, Clause 1 of this Article then;

b) Confiscation of material evidence and means used to violate the competition law, including confiscation of profits from the commission of violations, for the acts specified in Clause 1 of this Article then.

4. Persons with sanctioning competence when imposing penalties for the acts specified in Clause 1 of this Article are responsible for notifying the multi-level sale registration certificate-issuing agency for consideration and application of measures. revoke the certificate of registration of multi-level sale activities in accordance with the law then.

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