What is Multi-level Marketing? Which Practices are Prohibited for Multi-level Marketing Organizations?
What is multi-level marketing? What actions are prohibited for multi-level marketing organizations? What responsibilities do multi-level marketing organizations have?
What is Multi-level Marketing?
According to Clause 7 Article 3 of the Law on Consumer Protection 2023, it is stipulated as follows:
Article 3. Interpretation of Terms
In this Law, the following terms are construed as follows:
[...]
- Direct sales are the activities by which businesses or individuals proactively approach consumers, introduce products, goods, or services for sale, including the following forms:
a) Door-to-door sales are activities of selling products, goods, or providing services at consumers' residences or workplaces;
b) Multi-level marketing is the activity of selling goods through a network of participating individuals consisting of many levels and branches, whereby participating individuals receive commissions, bonuses, and other economic benefits from their own sales results and those of other individuals in the network;
c) Off-premises sales are activities of introducing, selling products, goods, or providing services at locations that are not fixed retail premises;
[...]
Thus, multi-level marketing is the activity of selling goods through a network of participating individuals consisting of many levels and branches, whereby participating individuals receive commissions, bonuses, and other economic benefits from their own sales results and those of other individuals in the network.
What is Multi-level Marketing? Which practices are prohibited for multi-level marketing organizations? (Image from the Internet)
Which Practices are Prohibited for Multi-level Marketing Organizations?
According to Clause 2 Article 10 of the Law on Consumer Protection 2023, multi-level marketing organizations are prohibited from performing the following acts:
- Requiring others to deposit, pay an amount of money or purchase a certain quantity of goods to participate in multi-level marketing.
- Providing fraudulent or misleading information to consumers, or individuals participating in multi-level marketing.
- Conducting multi-level marketing without a registration certificate for multi-level marketing activities; organizing business introduction activities in the form of multi-level marketing without a registration certificate for multi-level marketing activities.
- Conducting multi-level marketing for services or other forms not involving the purchase and sale of goods, except where otherwise provided by law.
- Expanding the multi-level marketing network not based on the transaction of buying and selling goods.
- Deceiving or misleading consumers by providing false, incomplete, or inaccurate information regarding the following: products, goods, services sold, or provided by business organizations or individuals; business reputation, business capability, or service provision capability of business organizations or individuals; or information about transactions between consumers and business organizations or individuals.
- Harassing consumers through direct or indirect contact against their will to introduce products, goods, services, business organizations, or individuals, propose contract agreements, or perform other acts that obstruct the normal work or daily activities of consumers.
- Coercing consumers to buy products, goods, or services against their will by using force, threatening to use force, or other similar actions.
- Coercing consumers to pay for products, goods, or services that have been provided without prior agreement.
- Failing to compensate, refund, or exchange products, goods, or services for consumers due to errors made by the business organization or individual.
- Failing to compensate, refund, or exchange products, goods, or services if the products, goods, or services do not match the registration, notification, publication, listing, advertising, introduction, agreement, or commitment of the business organization or individual.
- Tampering with or fraudulent handling of products, goods, or services when delivering products, providing services to consumers.
- Failing to inform in advance, failing to publicly announce sponsorships for influencers in any form to use their image, advise, or recommend to promote commerce or encourage consumers to purchase or use products, goods, or services.
- Preventing consumers from inspecting the products, goods, or services, except as otherwise provided by law.
- Requiring consumers to purchase additional products, goods, or services as a mandatory condition to enter a contract against their will.
- Including unauthorized clauses in contracts with consumers, standardized contracts, or general transaction conditions.
- Collecting, storing, using, modifying, updating, or disposing of consumer information contrary to the law.
What Responsibilities do Multi-level Marketing Organizations Have?
According to Clause 1 Article 45 of the Law on Consumer Protection 2023, multi-level marketing organizations have the following responsibilities:
- Publicly listing operation documents at the headquarters, branches, representative offices, business locations, websites, and application software (if any) of the multi-level marketing organization.
- Complying with operational rules and reward plans.
- Issuing invoices for each sales transaction.
- Reclaiming goods and refunding money upon the request of individuals participating in multi-level marketing or consumers if the request is made within 30 days from the receipt of goods, provided that the goods remain in their original packaging, seals, labels, and within the expiration date.
- Being responsible for the multi-level marketing activities of individuals participating in multi-level marketing within the headquarters, branches, representative offices, business locations, or at conferences, seminars, or training sessions organized by the multi-level marketing organization.
