Tightly control multi-level marketing

According to the draft, when organising a workshops for 200 people or more, the enterprise have to invite the Department of Trade to participate and supervision. Source: internet

Disguised multi-level marketing: It’s deceptive and predatory

Currently, multi-level marketing (MLM) activities are prescribed and managed in Decree No. 42/2014/NĐ-CP and other documents. Although, according to the evaluation of the Ministry of Industry and Trade, Decree No. 42 and other documents have tightened State management for multi-level marketing activities, some enterprises still take advantage of the business model of multi-level marketing for raising funds in order to gain illegal profits as well as conduct new violations. It causes many serious consequences to the economy and society.

In the question period on November 15^th 2016, Mr. Trần Tuấn Anh, Minister of Industry and Trade has acknowledged that, through the process of implementing legal provisions from 2014 to 2016, it has revealed a number of problems in the State administration and sanctions for multi-level marketing activities.

Accordingly, the existence of this type of business from the legal framework is incomplete and unfinished. The management of multi-level marketing activities has no realassignment and no clear-cut and effective guarantee of the level. Currently, multi-level marketing management as prescribed by Decrees and Circulars guidance is decentralized by local authorities and the Department of Industry and Trade in the provinces for directly managing activities of multi-level marketing enterprises.

Notably, MLM has great appeal when directed to the super profit to attract a very large amount of people to participate in multi-level marketing. Disguised multi-level marketing has become a form of unauthorized financial business as well as virtual business that causes risk of huge loss of property in society.

With these shortcomings, in the previous time, the Ministry of Industry and Trade has strengthened inspection and supervision of multi-level marketing activities in the locality. Till now, the Ministry of Industry and Trade has withdrawn the licenses of 25 multi-level marketing businesses which had signs of violating law, illicit profits and deceptive behavior, profiteers.

"The Ministry of Industry and Trade has recognized their responsibility in continuing to study and report to the Government, proposed amendments to Decree 42 circulars and guidance to overcome the shortcomings and inadequacies that the administration has, particularly in the local hierarchy, "said Trần Tuấn Anh said. Because, Decree 42 has revealed a number of uncertainties and problems, which no longer meet regulatory requirements.

Enterprises will be "squeezed" tight

The opinions and proposals of the Department of Industry and Trade and the business community showed that, there are many difficulties and problems for both the authorities and enterprisers in matters relating to multi-level marketing that are: the object is not goods, management systems of distributors network, compensation models, notification of activities, the activities of participants in multi-level marketing, deposit, organizing conferences, seminars, training, etc.

Thus, the draft decree which replaces Decree 42 issued by the Ministry of Industry and Trade will focus on these contents. Comparing to Decree 42, this draft has greatly changed.

Accordingly, the new draft to expand the scope of regulation and subjects of application to all agencies, organizations and individuals related to business activities in the form of multi-level marketing, at the same time, supplementing provisions to ensure the inspection ability of the State authorities for the operation of multi-level marketing enterprises.

Furthermore, to protect the interests of participants in multi-level marketing, the draft supplements the regulations to the information transparency of multi-level marketing enterprises.

Specifically, enterprises are required to establish and operate information technology systems to manage distribution. So they can access and retrieve the information which is related to the enterprise’s activities.

Moreover, enterprises must have a hotline to answer questions or complaints from distributors and consumers; to issue an invoice for each distributor and customer to ensure their interests in case of a business are required to repurchase, return money, payment of commissions, bonuses through bank transfer, etc.

To protect participants’ interests in MLM when in dispute, the draft increases the minimum deposit to 10 billion VND and enterprises are required to deposit with the corresponding level of network size or their revenue annually.

In fact, multi-level marketing activities in the recent time showed some MLM enterprises have used the form of commercial intermediaries (agents, brokers, and delegators, agents) to develop and expand its network. However, upon the occurrence of a dispute with the participants of multi-level marketing, some enterprises push the responsibility to the intermediaries. Hence, the authorities cannot blame MLM enterprises; they just only handle the intermediaries so it will reduce the efficiency of law enforcement.

On the other hand, in order to meet the requirements of enforcement and improve the efficiency of State management, the Draft Decree has improved the conditions for the operation of multi-level marketing enterprises; enhance corporate responsibility, the participants and management agencies. However, this draft also simplifies some administrative procedures in order to ease the burden on the multi-level marketing enterprises in the operation.