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Official Gazette

Monday, April 12, 2021

Foreign multilevel marketing businesses face stricter conditions

Updated: 14:39’ - 04/01/2021
Foreign-invested enterprises would be allowed to register for doing business in the form of multilevel marketing (MLM) in Vietnam if they have at least three years’ experience of operating in MLM in another country.

Such proposal of the Ministry of Industry and Trade (MOIT) is expected to provide licensing agencies with a tool for assessing creditworthiness of players in the MLM sector which is vulnerable to abuse for swindling purposes.

The draft decree revising Decree 40 of 2018 suggests that changes should be made to regulations on conditions for use of MLM businesses’ deposits to secure benefits of MLM participants when the former stop operation but fail to fulfill obligations toward the latter.

Under current regulations, an MLM firm is required to make a deposit equaling 5 percent of its charter capital, which, however, must not be lower than VND 10 billion (USD 432,900), at a commercial bank or foreign bank branch in Vietnam. The deposit might be used when there is a competent court legally effective judgment or ruling on the settlement of disputes between the firm and its participants over such obligations.

However, Decree 40 fails to specify what are “enterprises’ obligations related to MLM activities toward MLM participants”. To make it clear, the MOIT proposes in this draft that MLM firms would have to fulfill all obligations related to MLM activities, including the obligations to pay commission, compensation and bonus to MLM participants and to redeem goods returned by MLM participants under regulations. Other obligations arising out of contracts or compensation plans would be considered not related to MLM activities.

To facilitate the management and supervision of MLM businesses, the draft suggests banning international patronage in MLM activities, including the patronage of MLM participants in Vietnam for other persons in foreign countries and vice versa. Such suggestion aims to prevent MLM enterprises from outbound remittance in the form of paying commissions or using profits from overseas business activities to raise unreasonably high commissions for domestic MLM participants.- (VLLF)

 

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