Decree 18/2023/ND-CP amending regulations on conditions for multi-level marketing business in Vietnam

On April 28, 2023, the government issued Decree 18/2023/ND-CP amending Decree 40/2018/ND-CP on managing multi-level business. Full text of Decree 18/2023/ND-CP amending Decree 40/2018/ND-CP on managing business activities by multi-level method issued by the government.

In addition to the amended and supplemented regulations presented in the article Decree 18/2023/ND-CP amending regulations on registration of multi-level marketing business, the new regulations on conditions for multi-level marketing business are presented in the article below.

Basic information of Decree 18/2023/ND-CP amending regulations on conditions for multi-level marketing business in Vietnam

• Symbol number: 18/2023/ND-CP
• Document type: Decree
• Date of issue: April 28, 2023
• Effective date: June 20, 2023
• Issuing agency: Government
• Signed by: Le Minh Khai

Procedure on registration and termination of multi-level marketing business

Regarding registration procedures

According to the provisions of Decree 18/2023/ND-CP, in the application file for a multi-level marketing registration certificate, in addition to providing an application for a sales registration certificate, Multilevel; 01 copy of business registration certificate; 01 list with copies of valid personal identification documents of the people mentioned in Point c, Clause 1, Article 7 (for foreigners residing in Vietnam, must use legal residence documents issued by competent Vietnamese authorities to foreigners permanently residing in Vietnam instead of temporary residences as before), the organization requester must also provide 01 additional copy of legal documents on the establishment of the organization to ensure that that organization is legally established and operates under the provisions of law. At the same time, the requester must also submit technical explanation documents regarding the information technology system managing the network of multi-level marketing participants, which must include the following information: server IP address and physical server location, system operating mechanism, and other information in Article 44 of the Decree.

Decree 18/2023/ND-CP adding regulations on registration procedures for multi-level marketing businesses will make the management of these businesses easier, as well as ensure allowing multi-level business activities to take place transparently, limiting the situation of “distorted” multi-level business activities.

Regarding termination procedures

Decree 18/2023/ND-CP has added several regulations on procedures for terminating multi-level business activities, specifically as follows:

• Supplementing regulations on the time limit for notification of amendments and supplements to documents in case the documents requesting termination of multi-level business activities do not meet the provisions of law (10 working days from the date of receipt) as well as adding regulations on the deadline for supplementing documents for those businesses (15 days from the date of receiving the notice).
• Additional regulations are added in case the enterprise does not amend or supplement documents. Accordingly, if the enterprise does not amend or supplement the dossier, the Ministry of Industry and Trade shall notify the return of the dossier to the enterprise in writing, clearly stating the reason for returning the dossier.
• Report on termination of multi-level business activities must comply with the new form in Decree 18/2023/ND-CP (Form No. 6a)

Announcement of organizing conferences, seminars, and training on multi-level marketing

Decree 18/2023/ND-CP has added regulations on the organization of conferences, seminars, and training on multi-level marketing to tighten the organization of these conferences and seminars to ensure that the conference was held transparently, publicly, effectively, and legally, specifically as follows:

• Amend regulations on notification of organizing conferences, seminars, and training on multi-level marketing in cases with the participation of 10 or more multi-level marketing participants. At the same time, the decree also adds two cases where businesses must notify on organizing conferences and seminars online:
  • In case a conference or seminar has the participation of 10 or more people but it is an internal meeting or event, notification is not required;
  • In case a conference, seminar, or training on multi-level marketing is organized online with the participation of multi-level marketing participants in a province or centrally run city, the enterprise shall notify the provincial Department of Industry and Trade.
  • In case a conference, seminar, or training on multi-level marketing is organized online with the participation of multi-level marketing participants in many provinces and centrally-run cities, the enterprise shall notify the Department of Industry and Trade where the enterprise is headquartered.
• Amending and supplementing regulations on conference organization notification documents:
  • In case the business organizes online, the profile must include account information or access links to conferences, seminars, and training in case of online organization.
  • Additional time limit in case of notification of the organization of multiple conferences, seminars, and training on multi-level marketing in the same written notification, the time limit will not exceed 03 months.
  • The time limit for the Department of Industry and Trade to send notification in case the dossier does not fully meet the regulations has been changed to 7 working days instead of 5 days as before.

The above amendments and supplements are completely consistent with the actual situation, avoiding the case of businesses taking advantage of organizing seminars and meetings online without being registered with the authorities.

Deposits of multi-level marketing businesses

For multi-level marketing business to be transparent and effective, Decree 18/2023/ND-CP has added several regulations on deposits, specifically as follows.

Expand the scope of using deposits

• In case a multi-level marketing enterprise terminates multi-level marketing business according to the provisions of Clause 1, Article 17 of this Decree but does not fully fulfill the obligations related to multi-level marketing business for participants multi-level marketing and have legally effective court judgments on resolving disputes related to those obligations.
• In case an enterprise terminates multi-level marketing business but does not comply with the effective decision on sanctioning violations in multi-level marketing business of the competent authority.

The new regulations further specify the order and procedures for using deposits

• Multi-level marketing participants submit a written request to use deposits and certified copies of judgments and decisions related to the termination of multi-level marketing business and obligations related to this activity to the Ministry of Industry and Trade.
• The Ministry of Industry and Trade checks the validity of these documents and notifies them of amendments or supplements if necessary. The time limit for amendments and supplements is no more than 15 working days from the date of notification from the Ministry of Industry and Trade.
• If the documents are guaranteed to be valid, the Ministry of Industry and Trade will request the bank where the enterprise deposits to deduct the deposit to fulfill the request of the multi-level marketing participant.

Guaranteed revenue rate

Decree 18/2023/ND-CP supplements regulations on revenue for multi-level marketing businesses. Accordingly, enterprises conducting multi-level marketing must ensure that at least 20% of multi-level marketing revenue within a fiscal year is revenue from customers who are not participants in multi-level marketing for that company.

This regulation was added to prevent businesses from abusing and over-reliance on members participating in multi-level marketing, while also encouraging businesses to focus on customer service. customers outside their multi-level network. Furthermore, this regulation also aims to promote businesses to focus on research, development, and upgrading of products and services. At the same time, that regulation also helps consumers have the opportunity to access and use services transparently and reliably.

Limit providing false information, do not use images of doctors and pharmacists for multi-level marketing

Decree 18/2023/ND-CP also adds regulations on providing information for businesses as well as restricting the practice of using images of doctors and pharmacists for multi-level marketing, to ensure business operations. Sales activities are conducted transparently and clearly, specifically as follows:

• Limit the provision of false information: The Decree prohibits multi-level marketing businesses from using forms such as images, equipment, costumes, names, correspondence of units, medical facilities, doctors, pharmacists, medical staff, letters, notes from patients, articles by doctors, pharmacists, medical staff to advertise or introduce food. This helps prevent misuse of medical information and protects consumer rights.
• Preventing false information about disease treatment: The Decree also prohibits multi-level marketing businesses from providing food information that posts, quotes, or states opinions of patients describing foods that have therapeutic effects. This is intended to prevent the use of inaccurate or misleading information for advertising and to protect the health of consumers.

This regulation is intended to prevent false and misleading advertising practices regarding the product’s effectiveness in treating diseases. By limiting the use of images, names, and information of medical units and medical staff, patients will avoid being deceived and misled into thinking that foods are endorsed or recommended by healthcare providers medical facilities, and medical professionals.

At the same time, not publishing patient comments describing foods as having therapeutic effects also helps avoid abuse or falsehoods in advertising products, while preserving the reputation and credibility trust of medical facilities and the health sector in general.

Above is the notable content of Decree 18/2023/ND-CP amending regulations on conditions for multi-level marketing business in Vietnam. Clients who need advice on corporate law, investment law, and multi-level business law, please contact Viet An Law Firm for the best support.