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Ministry tightens control on multi-level marketing firms

Sunday, August 18, 2013, 15:00 GMT+7
Ministry tightens control on multi-level marketing firms
Herbalife, a US-based MLM firm, has established branches worldwide.

The Ministry of Industry and Trade has completed a draft decree on multi-level marketing (MLM) to replace an old one dating back to 2005.

According to a report submitted to the government compiled by the ministry, the old decree had many shortcomings and failed to take into account some specific areas typical of Vietnam’s market.

“The new draft decree on multi-level marketing companies is a step forward in managing the complex development of MLM firms in Vietnam,” said the ministry.

According to the draft of the new law, the principle is not to prohibit MLM operations, but to tighten operating conditions to limit possible frauds which will adversely affect the community.

The new draft decree prohibits many acts defined in multi-level marketing, including running MLM businesses with additional services (unless otherwise permitted by law), signing many contracts with one person, and inciting employees to perform unlawful behaviors.

In addition, the ministry has also proposed the government to stop allowing municipal departments of industry and trade to license MLM firms. Every MLM company that wants to join the market must gain approval from the Ministry of Industry and Trade.

“This aims at preventing MLM firms from attaining a license from local authorities with little management experience; or at fixing the fact that many cannot establish their branches or expand further.”

The MLM companies will have time-limited licenses and have to re-register every 5 years.

In particular, MLM companies will have a minimum chartered capital of VND10 billion (US$470,000). Besides, they will have to deposit VND5 billion at authorized state agencies instead of the current rate of VND3 billion to increase their accountability.

The multi-level marketing companies will also have to regularly submit the reports on their operations to the local authorities.

The new draft decree also requires MLM companies to notify the local departments of trade and industry about the time and venue of their workshops, conferences, and sales training sessions, as most MLM firms often take advantage of those events to expand their networks.

The draft regulation also requires MLM companies not to charge the participants for basic training sessions, except for a reasonable expense on training materials.

Tuoi Tre

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