What is Multi-level Marketing (MLM)? Eligibility requirements to be satisfied by a participant of MLM in Vietnam

What is Multi-level Marketing (MLM)? Eligibility requirements to be satisfied by a participant of MLM in Vietnam (Source: internet)

1. What is Multi-level Marketing (MLM)?

According to Clause 1, Article 3 of Decree 40/2018/ND-CP, “multi-level marketing (MLM)” means a business model that utilizes the network of participants at different levels wherein commissions, bonuses and other economic benefits are or may be paid to participants based on their personal sales and the sales made by other distributors below the participants, also known as downline distributors.

2. Eligibility requirements to be satisfied by a participant of Multi-level Marketing in Vietnam

Eligibility requirements to be satisfied by a participant of Multi-level Marketing in Vietnam are specified in Article 28 of Decree 40/2018/ND-CP, including:

(1) A person wishing to participate in the MLM network must have full legal capacity as prescribed by law.

(2) The following persons are not allowed to participate in the MLM network:

- A person who is serving a prison sentence or has previous convictions for manufacturing and trading of counterfeit or banned products, false advertising, deceiving consumers, obtaining property by fraud, abuse of trust to appropriate property, illegal impoundment of property or any violations against regulations on MLM;

- A foreigner who fails to possess a valid work permit granted by a competent authority of Vietnam, except for cases of work permit exemption as regulated by the labour law;

- A person who has participated in the MLM and is faced with administrative penalties for committing violations against regulations in Clause 2, Clause 3 and Clause 4 of Article 5 of Decree 40/2018/ND-CP but the sanctioning duration has not ended;

+ Requesting a prospective participant to deposit or pay a certain amount of money in any way to be eligible to enter into a MLM contract;

+ Providing false or misleading information about benefits of a participant, features or uses of products, or operations of the MLM company;

+ Failing to obtain a written authorization from the MLM company before organizing MLM conferences, meetings or training courses;

+ Luring, enticing or bribing participants of another MLM company to participate in the network of the MLM company in which he/she participates;

+ Taking advantage of his/her position, power or social position to encourage, request, lure or entice other persons to participate in MLM network or buy products through the MLM model;

+ Performing MLM activities in a province in which the MLM company does not yet carry out registration of MLM activities.

+ Organizations and individuals are prohibited from selling products through the MLM, or organizing conferences, meetings, training courses or introduction of their MLM activities or the MLM of the others without obtaining the MLM registration certificate, unless otherwise prescribed by law.

+  Individuals are prohibited from participating in the MLM network of an organization or individual that is not granted the MLM registration certificate, unless otherwise prescribed by law.

- The partners, if the MLM company is a partnership, the proprietor, if the MLM company is a private enterprise or a single-member limited liability company, the members, if the MLM company is a limited liability company of two or more members, the founders, if the MLM company is a joint-stock company, or the legal representative of the MLM company must have never held one of the said positions at a MLM company whose MLM registration certificate has been revoked in accordance with regulations of the Decree 42/2014/ND-CP and Decree 40/2018/ND-CP;

- Officials and public employees as regulated in the law on officials and public employees;

Diem My

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