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Official Gazette

Friday, January 27, 2023

Trade promotion in Vietnam’s commercial law

Updated: 08:48’ - 26/09/2006

Pham Diem
State and Law Institute of Vietnam

Trade promotion activities in Vietnam are governed by the Commercial Law, the Advertisement Ordinance and a number of legal documents, which all dwell on the following principal issues:

- Rights of domestic and foreign traders concerning sales promotion, advertisement, participation in trade fairs and exhibitions.

- Sales promotion and advertising activities which can be freely conducted, and those which require prior permits of competent state agencies.

- State management agencies in charge of trade promotion.

- Contracts between traders who have goods or provide services and persons engaged in advertising or other trade promotion activities.

Under Vietnam’s commercial law, trade promotion means activities of seeking or promoting opportunities for goods sale and purchase or service provision, which cover:

- Sales promotion;

- Commercial advertising;

- Display and introduction of goods and services;

- Trade fairs and exhibitions.

The 1997 Commercial Law did not provide for trade promotion activities in a separate chapter. They could be found here and there with unspecific definitions in different chapters. This prompted the Government to issue on May 5, 1999, Decree No. 32/CP, guiding in detail sales promotion, commercial advertising, trade fairs and exhibitions. Yet, things became much better in the 2005 Commercial Law which devoted a whole chapter – Chapter IV – prescribing sales promotion, commercial advertising, display and introduction of goods and services, trade fairs and exhibitions with many new contents.

Sales promotion

Sales promotion means trade promotion activities conducted by traders to promote goods sale and purchase or service provision by offering certain benefits to customers. All such activities were wrapped up in only six articles of the 1997 Commercial Law but were dealt with as many as 14 articles of the 2005 Commercial Law with numerous amendments and supplements.

First, it was added with new specific provisions on traders’ rights to conduct sales promotion. Accordingly, all traders and their branches may conduct sales promotion by themselves or hire sales promotion service providers to do so. Meanwhile, their representative offices are not allowed to conduct sales promotion in Vietnam by themselves or by any hired sales promotion service providers.

Second, it saw nine forms of sales promotion as against only three in the 1997 Commercial Law, including price discount (sales), giving of goods as free presents or free service provision, provision of goods or services accompanied with prize offers; giving of sample goods or provision of sample services for free trial use by customers; sale of goods or provision of services accompanied with goods purchase or service use coupons for certain benefits to be enjoyed by customers; organization of participation by customers in cultural, art or entertainment shows as well as other events for sales promotion purpose.

Third, the 2005 Commercial Law specified sales promotion goods or services, and the discount rates for sales promotion, the maximum value of goods or services used for sales promotion and maximum discount rate of sales promotion goods or services, in order to prevent the abuse of sales promotion to dump goods or services. It was also added with a new provision forbidding the use of goods or services subject to business restriction for sales promotion

Fourth, it added a new obligation of traders to publicly notify information on their sales promotion activities and the modes of specification suitable to each form of sales promotion, aiming to raise traders’ responsibility in sales promotion and make sale promotion activities transparent, thus protecting customers’ interests.

Commercial advertising

Under Vietnam’s law, commercial advertising means trade promotion activities conducted by traders to introduce their goods trading and/or service providing activities to customers. The advertisement of goods could be found with amendments or supplements in 15 articles of the 2005 Commercial Law as compared with only 12 articles of the 1997 Commercial Law.

The 2005 Commercial Law affirms that commercial advertising constitutes a trade promotion activity as is the provision of commercial advertising services. It specifies the right to conduct commercial advertising as follows:

- Vietnamese traders and their branches, and Vietnam-based branches of foreign traders have the right to advertise their goods and/or service business activities or to hire goods advertising service providers to do so for them.

- Representative offices of traders are not allowed to directly conduct commercial advertising activities. When being authorized by traders, representative offices may sign contracts with commercial advertising service providers to conduct advertisements for traders they represent.

- Foreign traders who wish to commercially advertise their goods and/or services business activities in Vietnam shall have to hire Vietnamese traders providing commercial advertising services to do so.

In order to protect interests of consumers and other traders and to maintain a healthy competitive environment, the 2005 Commercial Law enumerated prohibited commercial advertisements, including: advertisements which reveal state secrets, are detrimental to national independence, sovereignty and security, or to social order and safety; advertisements with advertising products or means contrary to historic, cultural and ethical traditions and/or fine customs and practices of Vietnam and in contravention of law; advertisements for goods and services banned or restricted from business or banned from advertisement.

Display and introduction of goods and services

Display and introduction of goods and services means trade promotion activities conducted by traders that use goods and/or services and documents thereon to introduce such goods and/or service to customers. The 2005 Commercial Law specified goods and service display and introduction in 12 articles (as compared with 10 articles in the 1997 Commercial Law) with two eminent supplements.

First, it added the right to display and introduce goods and services of all traders and their branches. Under the Law, representative offices of traders shall not be allowed to directly conduct such activities, except for display and introduction at their offices, but can hire traders providing goods or service display and introduction services to do so when authorized by their traders.

Second, that is the prohibition of display and introduction of goods or services of other traders for comparison with one’s own goods or services, except where the goods for comparison are counterfeit goods or goods infringing upon intellectual property rights.

Trade fairs and exhibitions

Trade fairs and exhibitions are trade promotion activities conducted by traders at particular locations and for given periods of time to display or introduce their goods and/or services for the purpose of promoting them and seeking opportunities for entering into commercial contracts. 

With amendments and supplements, the 2005 Commercial Law no longer discriminated between trade fair and trade exhibition because it is very difficult to distinguish these two activities de facto and de jure.

The new law clearly provided for the right of traders and their branches or representative offices to organize or participate in trade fairs and exhibitions, adding a provision that foreign traders may directly participate trade fairs and exhibitions in Vietnam.

It also contained new provisions on management of organization of and participation in trade fairs and exhibitions in order to enhance the effectiveness of state management of these activities.

In general, from the 1997 Commercial Law to the 2005 Commercial Law, Vietnam has further heightened the role of trade promotion activities with a view to promoting the development of Vietnam’s market economy and making it healthier and more compatible with international practice and law.-

VNL_KH1 

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