Decree to tighten multi-level marketing rules

The multi-level marketing model. (File Photo)

In the future, foreign investors who wish to register for multi-level marketing (MLM) activities in Vietnam may need three consecutive years of experience in multi-level marketing in another country.

The condition is part of a draft decree to amend some articles of Decree 40 on the management of MLM business activities, which has been developed by the Ministry of Industry and Trade.

The Vietnam Competition and Consumer Protection Authority (VCCA) under the Ministry of Industry and Trade said the draft would reduce the required basic training time and adjusted the training content to suit reality.

The draft also introduces regulations to improve transparency in the operation of MLM enterprises by adjusting the international patronage mechanism, preventing illegal activities or gaining illicit profits from the Vietnamese market.

Notably, the draft supplements regulations on the minimum commission rate on inpidual sales of participants to encourage businesses to promote participants' sales activities and limit the risk of disguised MLM business models, which only recruits sellers and consumes goods within the system.

In addition, the draft amends regulations and issues on administrative procedures to ensure consistency and convenience in implementation.

The VCCA is expected to finalise the draft before the Ministry of Industry and Trade submits it to the Government in December this year.

A VCCA report revealed that the number of enterprises registering for MLM business dropped in 2015-2020.

The country had 67 multi-level business enterprises in 2015, with 850,000 people participating in multi-level sales networks.

Multi-level sales networks attracted more than 1.2 million people in 2018. However, the number of MLM enterprises was only 22 last year, with the number of MLM sellers down to about 800,000.

However, revenue from multi-level sales increased sharply.

Total revenue from multi-level sales reached 8 trillion VND (348 million USD) in 2015, contributing 588 billion VND to the State budget, while the figure last year was more than 15.3 trillion VND, contributing 1.8 trillion VND to the State budget.

Thanks to the drastic actions of authorities, the market has purged disguised MLM enterprises in the past five years, said the VCCA.

With the participation of State management agencies from the central to local levels, multi-level sales activities have been gradually stabilised, it added.

The sector’s revenue has increased steadily and businesses have made contributions to the State budget, said a VCCA representative./.