Tightening the multi-level marketing activities

In order to highlight the transparency of multi-level marketing (the “MLM”) activities and improve the efficiency of the State management of MLM activities, the Government has just issued new regulations applicable to MLM enterprises, specifically:

1. Supplementing business conditions for conducting MLM activities 

Apart from the conditions already recorded in the previous regulations, the MLM enterprise must meet the following conditions:
 
(i) Depositing a sum equal to five percent (5%) of the charter capital but not less than VND 10, 000,000,000 (ten billion Vietnamese dongs)   at a commercial bank or branch of a foreign bank in Vietnam instead of a minimum of VND 6,000,000,000 (six billion Vietnamese dongs) as prescribed in previous regulations

 (ii) Having clear and transparent template for MLM contracts, operating rules, commission plans, basic training programs in compliance with the laws.

 (iii) Having an information technology system which manages the network of MLM participants and websites to provide information on enterprises and MLM activities of enterprises; and

 (iv) Having a communications system to receive, resolve complaints and complaints of MLM participants.

2. Management of MLM activities at the local scale 

The MLM enterprise is regarded as conducting its MLM activities at a locality and permitted to organize the MLM activities only after obtaining a written certification of registration of MLM activities by the provincial/municipal Department of Industry and Trade if the enterprise falls into one of the following cases:

 (i) The enterprise has its head office, branch or representative office has functions related to MLM activities in the locality.

 (ii) The enterprise organizes conferences, seminars and trainings on MLM in localities.

 (iii)The enterprise has persons participating in MLM residing (permanently or temporarily residing in the case of non-residents at their places of permanent residence) or conducting MLM activities in the locality.

The MLM enterprise without a branch, office or representative office in the locality is responsible to authorize a local resident to work with the local State body in that locality on its behalf.

The above are some highlights as stipulated in Decree No. 40/2018/ND-CP dated 12 March 12 2018 on management of business activities in the MLM mode ("Decree 40"). Decree 40 will replace Decree 42/2014/ND-CP issued by the Government on 14 May 2014 ("Decree 42") from 2 May 2015. The MLM enterprise operating under Decree 42 will have to satisfy the conditions for MLM activities according to the above-said new regulations within the time limit prescribed by law as from the date of Decree No. 40.

For more information about the new regulations on MLM, please contact us for assistance.