Decree No. 110/2005/ND-CP dated August 24, 2005 of the Government on management of multi-level sale of goods

DECREE

ON MANAGEMENT OF MULTI-LEVEL SALE OF GOODS

THE GOVERNMENT

Pursuant to the December 25, 2001 Law on Organization of the Government;

Pursuant to the December 3, 2004 Competition Law;

At the proposal of the Trade Minister,

DECREES:

Chapter I

GENERAL PROVISIONS

Article 1: Governing scope

This Decree provides for activities of multi-level sale of goods and management of such activities in the territory of the Socialist Republic of Vietnam.

Article 2: Subjects of application

This Decree shall apply to enterprises engaged in multi-level sale of goods and participants in the multi-level sale of network.

Article 3: Multi-level sale of goods

1. Multi-level sale of goods means an approach of marketing to retail goods which meets the conditions specified in Clause 11, Article 3 of the Competition Law.

2. Enterprises shall be allowed to organize multi-level sale of goods only after being granted multi-level sale registration papers according to the provisions of Article 16 of this Decree.

Article 4: Participants in multi-level sale of goods

1. Participants in multi-level sale of goods (hereinafter referred collectively to as participants) are individuals who have full civil act capacity and have entered into contracts for participation in multi-level sale of goods with multi-level sale enterprises, except for individuals defined in Clause 2 of this Article.

2. The following individuals must not participate in multi-level sale of goods:

a. Those who are serving imprisonment sentences or former convicts for crimes of manufacturing and trading in fake goods, making false advertisements, illegally conducting business, evading taxes, deceiving customers, appropriating property through swindling, abusing trust in order to appropriate property, illegally holding property;

b. Foreigners and overseas Vietnamese without permits to work in Vietnam granted by competent agencies.

Article 5: Goods traded by mode of multi-level sale

1. All goods may be traded by mode of multi-level sale, except for the following case:

a. Goods on the list of goods banned from circulation or the list of goods subject to restricted business, fake goods and illegally imported goods according to provisions of law;

b. Goods being preventive and curative medicines for human use; vaccines and immuno-biologicals; medical equipment and instruments; assorted veterinary drugs (including veterinary drugs for aquatic animals), plant protection drugs; insecticidal and germicidal chemicals and preparations for domestic and medical use; raw materials for manufacture of curative medicines; toxic chemicals and products containing toxic chemicals and products containing toxic chemicals specified by law.

2. Goods traded by mode of multi-level sale must satisfy the following conditions:

a. Being up to the food quality, safety and hygiene standards provided for by law;

b. Having clear and lawful origins, properties and utilities;

c. Having labels according to provisions of law.

Chapter II

MULTI-LEVEL SALE ACTIVITIES

Article 6: Responsibilities of multi-level sale enterprises

1. Multi-level sale enterprises shall have to formulate and publicly announce the rules of activities of enterprises and participants in multi-level sale activities;

2. Multi-level sale enterprises shall have to supply the persons who wish to join their multi-level sale networks with documents regarding the following contents:

a. Sale programs, covering modes of bonus payment; model contracts which enterprises would enter into with participants and all other agreements on the rights and obligations of participants; information on quality standards or quality certificates (if any), prices, utilities and use instructions for goods sold; regulations on warranty, return or buy-back of goods sold.

b. Programs on training of participants, covering training contents; training duration; order and procedures for granting training certificates; duration and contents of periodical training courses for participants;

c. Operation rules containing guidance on transaction modes and regulations concerning multi-level sale;

d. Responsibilities of participants;

e. Economic benefits which participants may enjoy through activities of marketing or directly selling goods, as well as conditions for obtaining such economic benefits;

f. Conditions for termination of contracts by participants as well as rights and obligations arising from such contract termination;

g. Other matters stipulated by competent state agencies.

3. Apart from the responsibilities defined in Clause 2 of this Article, multi-level sale enterprises shall also have the following responsibilities:

a. To ensure truthfulness and accuracy of information supplied to participants;

b. To ensure quality of goods sold by mode of multi-level sale;

c. To settle complaints of participants and consumers;

d. To withhold and remit personal income tax amounts of participants into the state budget before paying commissions, bonuses or other economic benefits to participants;

e. To provide professional training in multi-level sale and law on multi-level sale to participants;

f. To manage participants through the system of multi-level sale network member cards made according to a form set by the Trade Ministry;

g. To notify participants of goods not to be bought back by enterprises before they buy such goods.

Article 7: Prohibited acts of multi-level sale enterprises

Multi-level sale enterprises are forbidden to perform the following acts:

1. Requesting want-to-be participants to make deposits in order to be entitled to participate in their respective multi-level sale networks.

2. Requesting want-to-be participants to buy an initial quantity of goods in order to be entitled to participate in their multi-level sale networks.

3. Requesting want-to-be participants to pay money or any charges for study courses, training courses, seminars, social activities or other similar activities in order to be entitled to participate in their respective multi-level sale networks, except for expenses for purchase of documents specified in Clause 2, Article 6 of this Decree.

4. Failing to commit to permit participants to return goods and receive back money amounts already remitted to enterprises according to the provisions of Article 11 of this Decree.

5. Obstructing participants in returning goods as a result of termination of contracts on participation in multi-level sale.

6. Permitting participants to receive commissions, bonuses or other economic into participating in multi-level sale.

7. Refusing to pay, without plausible reasons, commissions, bonuses or other economic benefits enjoyable by participants.

8. Supplying deceitful information on benefits from participation in the multi-level sale networks in order to entice other persons to participate in multi-level sale.

9. Supplying untruthful information on characteristics and utilities of goods in order to lure other persons into participating in multi-level sale.

Article 8: Responsibilities and prohibited acts of participants

1. When participating in multi-level sale activities, the participants shall have the following responsibilities:

a. To produce their multi-level sale network member cards before introducing goods or marketing for sale of goods;

b. To notify all contents specified in Clause 2, Article 6 of this Decree to other persons under their sponsorship for participation in multi-level sale networks;

c. To supply truthful and accurate information on type, quality, prices, and usage of goods for sale;

d. To comply with regulations in operation rules and sale programs of enterprises.

2. Participants are forbidden to take the following acts:

a. Requesting persons under their sponsorship for participation in multi-level sale networks to pay any charges for study course, training courses, seminars, social activities or other similar activities;

b. Supplying deceitful information on benefits from the participation in multi-level sale, untruthful information on characteristics and utilities of goods, activities of multi-level sale enterprises in order to entice other persons to participate in multi-level sale.

Article 9: Contracts on participation in multi-level sale

1. Multi-level sale enterprises must enter into written participation contracts with participants in their respective multi-level sale networks.

2. The Trade Ministry shall have to guide the basic contents of model contract for multi-level sale activities.

Article 10: Termination of contracts on participation in multi-level sale

1. Participants have the right to terminate participation contracts by sending written notices to multi-level sale enterprises at least 7 working days before terminating the contracts.

2. Multi-level sale enterprises have the right to terminate contracts with participants when the latter violate the provisions of Article 8 of this Decree and shall have to notify such in writing to the participants at least 7 working days before terminating contracts.

3. Within 15 working days after the termination of contracts, multi-level sale enterprises shall have the following responsibilities:

a. To buy back goods already sold to the participants according to the provisions of Article 11 of this Decree;

b. To pay the participants commissions, bonuses and economic benefits enjoyable by participants in the course of participating in the multi-level sale networks.

Article 11: Buying back goods from participants upon termination of multi-level sale participation contracts

1. Multi-level sale enterprises must buy back goods already sold to participants when such goods satisfy the following conditions:

a. They can be re-sold for their initial use purposes;

b. They are returned within 30 days after the participants receive them.

2. In cases where they must buy back goods under the provisions of Clause 1 of this Article, multi-level sale enterprises shall have to:

a. Refund the total money amount already paid by participants to receive such goods, if there is no ground for deduction under the provisions of Point b of this Clause;

b. In cases where enterprises must bear management and re-warehousing expenses as well as other administrative expenses, they shall have to refund a total sum which is nor smaller than 90% of the amount already paid by participants to receive such goods.

3. When refunding money according to the provisions of Clause 2 of this Article, multi-level sale enterprises may deduct commissions, bonuses and/or other economic benefits which have been enjoyed by participants form the receipt of such goods.

4. The provisions of Clauses 1 and 2 of this Article shall not apply to goods which are not subject to buy-back, including goods which are expired upon return, seasonal goods or goods for sale promotion.

Article 12: Responsibilities binding between multi-level sale enterprises and participants

1. Multi-level sale enterprises shall have to pay damages to consumers or participants in the following cases:

a. Participants cause damage to consumers or other participants while strictly observing operation rules and sale programs of enterprises;

b. Participants have not been supplied with adequate information on goods according to the provisions of Clause 2, Article 6 of this Decree.

2. Multi-level sale enterprises shall have to regularly supervise activities of participants in order to ensure that the latter strictly observe their operation rules and sale programs.

3. In cases where they fail to comply with the provisions of Article 8 of this Decree, thus causing damage to consumers or other participants, multi-level sale participants shall have to pay level sale participants shall have to pay compensations for such damage.

Article 13: Information on benefits from participation in multi-level sale

In cases where an individual participates in a multi-level sale network to introduce sale activities, the multi-level sale enterprise or the participant must clearly state his/her name, age, address, participation duration and profit earned in each period, certified by tax payment receipts issued by the tax office which collects tax from such individual.

Chapter III

MANAGEMENT OF MULTI-LEVEL SALE ACTIVITIES

Article 14: Conditions for granting multi-level sale registration papers

Enterprises shall be granted multi-level sale registration papers when fully satisfying the following conditions:

1. Having paid deposits according to the provisions of Article 17 of this Decree.

2. Trading in goods in accordance with business lines and trades stated in their business registration certificates.

3. Satisfying all business conditions or being granted certificates of satisfaction of business conditions as provided for by law in cases where they trade in goods on the list of goods subject to conditional business.

4. Having transparent sale programs which are not contrary to law.

5. Having clear programs on training of participants.

Article 15: Dossiers of request for multi-level sale registration papers

Dossiers of request for multi-level sale registration papers shall be filed with provincial-level Trade Service or Trade-Tourism Services where enterprises have made their business registrations. Such a dossier comprises:

1. A written request for multi-level sale registration paper, made according to a form set by the Trade Ministry.

2. Notarized copies of the business registration certificate.

3. A banks written certification of the deposit amount according to the provisions of Clause 1, Article 17 of this Decree.

4. Notarized copies of the certificate of satisfaction of business conditions in cases where the enterprise trades in goods on the list of goods subject to conditional business.

5. The list and curricula vitae of leaders of the enterprise with their photos and certifications by police offices of communes or wards where they reside. For foreigners, certifications by Vietnam-based embassies or consulates of foreign countries of which such persons are citizens are required.

6. The sale program which has the contents specified at Point a, Clause 2, Article 6 of this Decree.

7. The program on training of participants, with the contents specified at Point b, Clause 2, Article 6 of this Decree.

Article 16: Procedures for granting and supplementing multi-level sale registration papers

1. Within 15 working days after receiving complete and valid dossiers, provincial-level Trade Services or Trade-Tourism Services where enterprises have made their business registrations shall have to such enterprises, provided that their dossiers fully satisfy the conditions specified in Article 14 of this Decree.

In case of refusal to grant the multi-level sale registration papers, provincial-level Trade Services or Trade-Tourism Services must issue written replies clearly stating the reasons therefor.

2. Enterprises requesting the grant of multi-level sale registration papers must pay grant fees. The fee levels and the regime of fee management and use shall be specified by the Finance Ministry.

3. In case of any changes relating to contents of their sale programs, enterprises shall have to carry out procedures for requesting shall have to of multi-level sale registration papers shall comply with the provisions of Clauses 1 and 2 of this Article.

The order and time limit for additional grant of multi-level sale registration papers shall comply with the provisions of Clauses 1 and 2 of this Article.

4. Within 15 working days after the grant or additional grant of multi-level sale registration papers, provincial-level Trade Services or Trade-Tourism Services shall have to report such in writing to the competition-managing office of the Trade Ministry.

5. When multi-level sale enterprises develop their sale networks to provinces or centrally-run cities other than those where they are headquartered, they shall have to notify such development to Trade Services or Trade- Tourism Services of such provinces or centrally-run cities.

6. The Trade Ministry shall set the forms of multi-level sale registration papers and multi-level sale organization notices.

Article 17: Deposits

1. A multi-level sale enterprise must pay a deposit which is equal to 5% of its charter capital and must not be lower than VND one billion at a commercial bank operating in Vietnam.

2. Upon receiving notices on cessation of multi-level sale activities, multi-level sale enterprises may use deposits to pay commissions, bonuses or sums for buying back goods from participants.

3. Upon termination of multi-level sale activities, multi-level sale enterprises may withdraw the whole deposit amount only in cases where there is no complaint or lawsuit initiated by multi-level sale participants concerning the payment of commissions, bonuses or sums for buying back goods.

Article 18: Withdrawal of multi-level sale registration papers

1. Provincial-level Trade Services or Trade-Tourism Services shall withdraw multi-level sale registration papers in the following cases:

a. Enterprises have their business registration certificates withdrawn;

b. Enterprises have their certificates of satisfaction of business conditions withdraw in cases where they trade in goods on the list of goods subject to conditional business;

c. Enterprises intentionally include in their dossiers of request for multi-level sale registration papers untruthful information;

d. Enterprises commit serious law-breaking acts in multi-level sale activities.

2. In cases where multi-level sale enterprises have their multi-level sale registration papers withdrawn under the provisions of Clause 1 of this Article, they shall have to immediately stop the multi-level sale and the recruitment of new participants, and fulfill their responsibilities toward participants according to the provisions of Article 11 of this Decree, or compensate consumers or participants for cases or matters arising from previous transactions before the withdrawal of multi-level sale registration papers.

3. Decisions on withdrawal of multi-level sale registration papers shall be sent by provincial-level Trade Services or Trade-Tourism Services to the competition-managing office of the Trade Ministry and publicized on the mass media.

Article 19: Suspension or termination of multi-level sale activities

1. When wishing to suspend or terminate multi-level sale activities, multi-level sale enterprises shall have the following obligations:

a. To abide by registrations on suspension or termination of business activities according to the provisions of law on enterprises;

b. To notify such to provincial-level Trade Services or Trade-Tourism Services where they have made their business registrations; and at the same time, to post up the suspension or termination at their headquarters and notify participants thereof within 30 working days before the suspension or termination of activities.

2. In case of suspension or termination of multi-level sale activities, multi-level sale activities, multi-level sale enterprises shall have to liquidate multi-level sale participation contracts with participants according to the provisions of Article 10 of this Decree within 30 working days after multi-level sale activities are suspended or terminated.

Article 20: Period reports of multi-level sale enterprises

Once every six months, multi-level sale enterprises shall have to report to provincial-level Trade Services or Trade -Tourism Services where they have made their business registrations on the number of participants, their turnovers and paid tax amounts as well as personal income tax amounts of participants they have paid on the latters behalf.

Article 21: Responsibilities of the Trade Ministry

1. The Trade Ministry shall be answerable to the Government for performing the function of state management over multi-level sale activities throughout the country.

2. The competition-managing office of the Trade Ministry shall have to assist the Trade Minister in the following specific management contents:

a. Guiding provincial-level Trade Services or Trade-Tourism Services in granting multi-level sale registration papers; inspecting the management of multi-level sale activities by provincial-level Trade Services or Trade-Tourism Services;

b. Directly inspecting or examining multi-level sale activities when deeming it necessary; handling according to its competence acts of violating the provisions of law on multi-level sale activities;

c. Proposing the Government to promulgate or amend legal documents on assurance of order on organizing multi-level sale activities, protection of benefits of participants in the multi-level sale networks, consumers, and maintenance of socio-economic stability.

Article 22: Responsibilities of provincial/municipal Peoples Committees

1. Provincial/municipal Peoples Committees shall have to perform the state management over the mode of multi-level sale according to their respective competence and the Trade Ministrys directions and instructions under the provisions of this Decree and other relevant provisions of this Decree and other relevant provisions of law.

2. Provincial-level Trade Services or Trade-Tourism Services shall assist provincial/municipal Peoples Committees in granting multi-level sale registration papers; regularly inspect and supervise multi-level sale activities in their localities and periodically report to the competition managing office of the Trade Ministry on such inspection or supervision.

Article 23: Handling of violations committed by multi-level sale enterprises or participants

1. Multi-level sale enterprises or participants that commit the following acts of violation shall, depending on the nature and seriousness of their violations, be administratively sanctioned according to the provisions of law on handling of administrative violations:

a. Organizing multi-level sale while the specified conditions therefore are not fully satisfied;

b. Violating the regulations on subjects eligible for participating in multi-level sale;

c. Violating the regulations on goods permitted to be traded by mode of multi-level sale;

d. Failing to fully notify the required information to new sale network participants under their sponsorship;

e. Taking acts which multi-level sale enterprises and participants are forbidden to take;

f. Failing to enter into written contracts with participants;

g. Violating the regulations on termination of multi-level sale participation contracts;

h. Failing to comply with the reporting regime provided for in Article 20 of this Decree;

i. Altering contents of sale programs without carrying out procedures of request for additional grant of multi-level sale registration papers;

j. Violating the regulations on deposits and payments made from deposits in the course of operation;

k. Failing to pay taxes according to the provisions of law;

l. Failing to abide by the requests of competent state agencies conducting inspections or examinations;

m. Violating other provisions of this Decree

2. In cases where violations by multi-level sale enterprises or participants cause damage to material benefits of concerned organizations or individuals, they shall have to pay damages according to the provisions of law.

Article 24: Competence and procedures for handling and administrative violations

1. Competence for handling acts of administrative violation specified in Article 23 of this Decree shall comply with the provisions of the Competition Law and the Ordinance on Handling of Administrative Violations.

2. Procedures for handling acts of administrative violation specified in Article 23 of this Decree shall comply with the provisions of law on handling of administrative violations.

Chapter IV

IMPLEMENTATION PROVISIONS

Article 25: Implementation effect

1. This Decree takes effect 15 days after its publication in CONG BAO . Multi-level sale enterprises which make business registrations before the effective date of this Decree shall have to carry out procedures of request for multi-level sale registration papers at provincial-level Trade Services or Trade-Tourism Services where they have made business registrations within 3 months as from the effective date of this Decree.

2. Ministers, heads of ministerial-level agencies, heads of Government-attached agencies and presidents of Peoples Committees of provinces or centrally-run cities shall have to implement this Decree.