Prohibited acts regarding multi-level marketing in Vietnam

Prohibited acts regarding multi-level marketing in Vietnam (Internet image)

1. What is a multi-level marketing?

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. Prohibited acts regarding multi-level marketing in Vietnam

2.1. For multi-level marketing company in Vietnam

Specifically, in Clause 1, Article 5 of Decree 40/2018/ND-CP, a MLM company is prohibited from:

- 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;

- Requesting a prospective participant to buy a certain quantity of products in any way to be eligible to enter into a MLM contract;

- Paying money or other economic benefits to a participant in compensation for his/her recruitment of new distributors without consideration of his/her sale of products to recruited distributors;

- Refusing to pay, without legitimate reasons, commissions, bonuses or other economic benefits to eligible participants;

- Providing false information concerning the compensation plan or benefits from participation in the MLM;

- Providing false or misleading information about features or uses of products or operations of the MLM company through speakers or trainers at conferences, meetings, training courses or training materials of the MLM company;

- Maintaining more than one MLM contract, position, identity number or others of equivalent validity for a participant;

- Implementing sales promotion program using multi-level network in which a participant has more than one position, identity number or others of equivalent validity;

- Providing commercial intermediary services as regulated by the Law on commerce with the aims of maintaining, expanding and developing its own MLM network;

- Receiving or accepting a participant's application or other document which states that the participant relinquishes a part or all of his/her rights as defined herein or says that the MLM company must not fulfill obligations towards to the participant as regulated herein;

- Using the MLM strategy to trade or sell a subject other than the one permitted in Article 4 herein;

- Failing to use the management system registered with the regulatory authority that issued the MLM registration certificate to manage its MLM participants; and

- Trading or transferring the network of MLM participants to another enterprise, except for acquisition, amalgamation or merger of enterprises.

2.2. For multi-level marketing participants in Vietnam

A MLM participant is prohibited from:

- committing the prohibited act specified in Point a Clause 1 of this Article;

- 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.

(Clause 2, Article 5 of Decree 40/2018/ND-CP)

2.3. Other prohibited acts

- 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.

(Clause 3, 4, Article 5 of Decree 40/2018/ND-CP)

Thanh Rin

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