Nghe An has more than 35,000 multi-level marketers

More than 35,000 people participate in multi-level marketing

Nghe An Department of Industry and Trade has just issued a notice to terminate multi-level marketing activities of Siberian Health International Co., Ltd. This is the second largest multi-level marketing company in Nghe An, with about 8,000 participants.

In mid-October, Siberian Health International Co., Ltd. was fined VND815 million by the Department of Competition and Consumer Protection (Ministry of Industry and Trade) and had its license revoked. Through inspection, the company committed 10 violations including: Not properly implementing the procedures to amend and supplement the multi-level marketing registration certificate with the competent authority when there was a change in information related to the enterprise; Changing the multi-level marketing participation contract form but not implementing the procedures to amend and supplement the multi-level marketing registration certificate.

Before being shut down, Siberian Health International Co., Ltd. had 8,000 employees in Nghe An. Photo: Contributor

This company also operates an information technology system to manage multi-level sales participants that is not consistent with the technical explanation documents for registering multi-level sales activities; Multi-level sales activities have not been certified by the Department of Industry and Trade of the province to register multi-level sales activities in the locality; Requiring others to purchase a set of start-up documents to sign a multi-level sales participation contract; Signing a multi-level sales participation contract with a multi-level sales participant with a font size smaller than prescribed; Not complying with the operating rules and registered reward plan; Providing basic training before signing a multi-level sales participation contract, not retraining after signing a multi-level sales participation contract; Providing false and confusing information about the features and uses of the product at the Company's headquarters through the product documentation; Maintaining more than 1 multi-level sales business code for the same multi-level sales participant.

After Siberian Health was shut down, Nghe An province still had 14 multi-level marketing businesses allowed to operate, with more than 27,500 participants. The largest of these was Herbalife LLC, with nearly 12,000 participants. Meanwhile, the whole country had 22 businesses participating in multi-level marketing with a total of about 725,000 participants.

Compared to other localities in the North Central region, Nghe An has a larger number of multi-level marketing distributors. (Thanh Hoa has 25,000 participants with 15 registered businesses, Ha Tinh has 9,200 participants with 13 registered businesses).

There are still many shortcomings in management.

In the report on the management of multi-level marketing activities, Mr. Cao Minh Tu - Deputy Director of Nghe An Department of Industry and Trade, said that multi-level marketing activities are increasingly widespread, especially in rural, remote and isolated areas, but management work still has many shortcomings. Coordination between levels and sectors in the management of multi-level marketing activities in the locality is still limited, making it very difficult to inspect and supervise.

“The development of e-commerce and information technology has led to the emergence of other multi-level marketing methods in addition to traditional multi-level marketing activities such as: financial investment, virtual currency, education and training services, especially activities that take advantage of the multi-level marketing model on the internet to carry out illegal financial activities, fraud, and property appropriation, while the majority of local officials are part-time and do not have the expertise to inspect and supervise,” said Mr. Tu.

An illegal multi-level marketing conference was held in Vinh City with thousands of participants. Photo: TH

Not to mention, the inspection and examination of enterprises with multi-level marketing activities in Nghe An province is difficult because the multi-level marketing enterprises are enterprises from other provinces, registered to operate in Nghe An in the form of representative offices (representing the company to introduce products, promote trade, not directly selling goods, not generating revenue). According to the list of multi-level marketing enterprises provided by the Department of Industry and Trade, only 3/14 enterprises have established representative offices in Nghe An (of which 1 unit has closed its tax code). The authorities also have difficulty in checking the quality of goods because there is no place of operation, no warehouse of goods; or the place of operation only displays a few labels or images introducing the goods.

Also according to Mr. Cao Minh Tu, the provisions in Clause 2, Article 20, Decree No. 40/2018/ND-CP dated March 12, 2018 of the Government state: "In case there is no headquarters, branch, or representative office in the locality, the multi-level marketing enterprise is responsible for authorizing an individual residing in the locality to act as a local representative to work on behalf of the enterprise with state management agencies in that locality". Due to the provisions on authorizing an individual residing in the locality, there have been cases where the multi-level marketing enterprise registered information of the local representative as a person with poor working capacity, who did not know how to handle the work, or registered a person who had no connection with the multi-level marketing enterprise and did not understand multi-level marketing business activities; therefore, it was ineffective and wasted time for the state management agency when working with the local representative of the enterprise.

The management of multi-level marketing activities still has many shortcomings, which has led to many illegal multi-level marketing seminars being held in large numbers to attract customers. Photo: TH

The number of people participating in multi-level marketing is very large while the human resources of local management agencies are limited, so the implementation of inspection, supervision and handling of violations at the facility is not really guaranteed. As for the participants in multi-level marketing activities, many are ignorant and blind to the amount of money that some multi-level marketing enterprises promise to pay as rewards, so they have not voluntarily denounced the fraudulent acts of multi-level marketing enterprises.

The leaders of the Nghe An Department of Industry and Trade said that it is necessary to soon amend and supplement Decree No. 40/2018/ND-CP dated March 12, 2018. In particular, more specific regulations for local representatives of multi-level marketing enterprises must be added: They must be knowledgeable and have basic training in multi-level marketing to represent the enterprise in working with state management agencies in that locality. In addition, the Ministry of Industry and Trade also needs to regularly organize training activities, fostering and coaching knowledge, laws, skills and qualifications for officials and civil servants (including the Tax sector) to carry out state management of multi-level marketing business activities in Nghe An.

Tien Hung