Stricter Requirements For Multiple-Level Marketing Activities

In March 2018, the Government issued a new Decree (Decree 40/2018) on multiple level marketing (MLM) activities. Decree 40/2018 takes effect from 2 May 2018 replacing Decree 42/2014. In general, Decree 40 inherits many regulations of Decree 42/2014 and its implementing Circular (Circular 24/2014). That said, Decree 40/2018 introduces various new and stricter requirement on MLM activities. In particular,

  • A MLM enterprise must now register its activities with provincial competent authorities, where there are MLM activities conducted by its consultants. A MLM enterprise must appoint an individual representative in each province where it does not have branch or representative office. Under Decree 42, a MLM enterprise only needs to notify provincial competent authorities where there are MLM activities conducted by its consultants.
  • A MLM company must now make an escrow deposit of VND 10 billion or 5% of the charter capital, whichever is higher instead of VND 5 billion with a local bank or a foreign bank branch in Vietnam. The deposit is to secure for the MLM company’s obligations with respect to the members of the MLM network.
  • A MLM enterprise must have (1) system using informative technology to manage consultant networks, (2) website to provide information of the MLM enterprise and its MLM activities; and (3) communication system to receive, handle inquiries and claims of consultants to meet the new conditions of MLM activities under the new decree.
  • Digital products are now prohibited from being sold by MLM method.
  • The list of individuals prohibited from conducting MLM activities is enlarged to comprise (1) individuals who have received certain administrative sanctions; (2) individuals unqualified to hold certain positions in the MLM enterprises due to a revocation of MLM license; and (3) public officers and civil servants (cán bộ, công chức).
  • MLM trainer of the MLM enterprises must receive a confirmation on legal knowledge of MLM adopted by the MOIT. It means that the trainer certificate will be terminated after a certain period as of the effective date of Decree 40.
  • Before 2 February 2019, existing MLM enterprises must meet new requirements under Decree 40 including: (1) minimum deposit amount; (2) requirements on technology and communication systems; and (3) new MOIT confirmations on legal knowledge of MLM for companies’ MLM trainer. For the requirement to register with local authorities, existing MLM enterprises have until 2 May 2019 to comply with such requirement.

This post is contributed by Ha Kieu Anh, a trainee at Venture North Law.