Tighten multi-level marketing activities

MLM chaos

According to statistics from the Nghe An Department of Industry and Trade, after Siberian Health International Co., Ltd. (with about 8,000 salespeople in Nghe An) was terminated, there were 14 multi-level marketing enterprises licensed to operate in the province, with more than 27,500 participants. Of which, the largest is still Herbalife LLC, with nearly 12,000 participants. Meanwhile, the whole country has 20 enterprises participating in multi-level marketing with a total of about 725,000 participants. In 2022, 2 enterprises terminated multi-level marketing activities in Vietnam, namely Siberian Health International Co., Ltd. and Homeway Vietnam Co., Ltd.

Those are just the licensed MLM companies; there are many more.Businesses taking advantage of the multi-level marketing model, not for the main purpose of selling goods, encouraging participants to get rich by calling for investment through buying shares, buying business rights, then mobilizing financial investment, virtual currency, foreign exchange, binary options, investing in raw material area projects... Along with that is the exploitation of e-commerce such as cashback shopping, social networks, selling online courses... to profit, defraud to appropriate people's property, affecting the social community, which has been investigated and handled by authorities.

According to the leader of Nghe An Department of Industry and Trade, this group of unlicensed multi-level business entities poses many potential risks to society, even showing signs of violating many different regulations. Therefore, handling these entities requires a combination of greater strength from other relevant agencies, especially the police agency, to enter the system and collect decimal information.

Meanwhile, the inspection and supervision of multi-level marketing activities in Nghe An still faces many difficulties because multi-level marketing enterprises do not have their headquarters in the province (by the end of 2022, only 3/14 enterprises had representative offices and branches operating in Nghe An). The characteristic of multi-level marketing business activities is that the location of operation is flexible and not fixed (multi-level marketing participants can communicate and meet with customers at home, at the customer's workplace or anywhere). Therefore, in cases where enterprises have registered representative offices and branches operating locally, the inspection and supervision work also faces many difficulties.

Therefore, it is often difficult to handle administrative violations against multi-level marketing enterprises. The system of 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. 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.

Faced with that situation, from 2022, Nghe An Department of Industry and Trade has proposed to amend and supplement Decree No. 40/2018/ND-CP dated March 12, 2018: Supplementing more specific regulations for local representatives of multi-level marketing enterprises: Must be a person with knowledge and basic training in multi-level marketing to represent the enterprise to work with state management agencies in that locality.

More new rules

With these shortcomings, the Ministry of Industry and Trade has just issued Circular No. 12/2023/TT-BCT amending and supplementing a number of articles on the management of multi-level marketing business activities. The provisions of the amended circular will take effect from July 21, 2023.

Notable new regulations include: The Circular supplements regulations on the inspection process, inspection forms, evaluation of inspection results and the process of granting and revoking knowledge confirmation for local contacts. Similar to the test of knowledge on multi-level marketing law in Circular No. 10/2018/TT-BCT; the knowledge test for local contacts is organized by the National Competition Commission or authorized in writing to a multi-level marketing law training facility.

The knowledge test can be conducted in the form of essay or multiple choice questions in a minimum of 60 minutes. The assessment criteria for participants in the multi-level marketing legal knowledge test and the assessment criteria for participants in the local contact person knowledge test are on a 100-point scale. To be eligible to become a trainer for a multi-level marketing enterprise, the test taker must score 80 points or more for the multiple choice test and 65 points or more for the essay test. To be able to become a local contact person for a multi-level marketing enterprise, the test taker must score 70 points or more for the multiple choice test and 50 points or more for the essay test.

These additional regulations aim to improve the conditions for local business contacts. Accordingly, in cases where a business does not have a headquarters, branch, representative office or business location in the locality, it must appoint a local contact, and this contact must be trained, pass a knowledge test and be certified by the Ministry of Industry and Trade to be able to act as a contact for the business. This regulation aims to overcome the situation where businesses appoint contact persons who are perfunctory, do not understand the law or understand the business's activities in the locality, causing difficulties for management work in the locality.

The Government has just issued Decree No. 18/2023/ND-CP dated April 28, 2023 amending and supplementing a number of articles of Decree No. 40/2018/ND-CP dated March 12, 2018 on the management of multi-level marketing business activities. Notably, it is necessary to supplement regulations on the responsibilities of multi-level marketing enterprises.

Accordingly, multi-level marketing enterprises must ensure that at least 20% of multi-level marketing revenue in a fiscal year is revenue from customers who are not multi-level marketing participants of that enterprise. Multi-level marketing enterprises shall not provide information about food by using images, equipment, costumes, names, correspondence of medical units, facilities, doctors, pharmacists, medical staff, thank-you letters, thank-you notes from patients, articles of doctors, pharmacists, medical staff; shall not provide information about food with content posted, quoted, quoted or expressing opinions of patients describing the food as having a therapeutic effect.