Decree No. 141/2018/ND-CP dated October 08, 2018 of the Government on amending and supplementing a number of Articles of Decrees prescribing penalties for violations against regulations on multi-level marketing

THE GOVERNMENT

DecreeNo. 141/2018/ND-CP dated October 08, 2018 of the Government on amending and supplementing a number of Articles of Decrees prescribing penalties for violations against regulations on multi-level marketing

Pursuant to the Law on Government organization dated June 19, 2015;

Pursuant to the Law on Competition dated December 03, 2004;

Pursuant to the Law on Penalties for administrative violations dated June 20, 2012;

At the request of the Minister of Industry and Trade;

The Government promulgates a Decree amending and supplementing a number of articles of Decrees prescribing penalties for violations against regulations on multi-level marketing.

Article 1. To amendment a number of Articles of the Government’s Decree No. 71/2014/ND-CP dated July 21, 2014 detailing the Law on Competition on imposition of violation penalties against the Law on Competition (hereinafter referred to as " Decree No. 71/2014/ND-CP”) and the Government’s Decree No. 185/2013/ND-CP dated November 15, 2013 providing the penalties on administrative violations in commercial activities, production of, trading in counterfeit or banned goods and protection of consumer rights which is amended and supplemented by the Government’s Decree No. 124/2015/ND-CP dated November 19, 2015 on amending and supplementing a number of Articles of Decree No. 185/2013/ND-CP regulating penalties for administrative violations in commercial activities, production and trading in counterfeit and banned goods, and protection of consumer rights (hereinafter referred to as “Decree No. 185/2013/ND-CP”)

1. To amend Article 36 of the Decree No. 71/2014/ND-CP as follows:

“Article 36. Illegal acts in multi-level marketing

1. A fine ranging from VND 80,000,000 to VND 100,000,000 shall be imposed for one of the following violations:

a) Requesting a prospective participant to deposit or pay a certain amount of money in any way to be eligible to enter into a multi-level marketing contract;

b) Requesting a prospective participant to buy a certain quantity of products in any way to be eligible to enter into a multi-level marketing contract;

c) Paying money or other economic benefits to a participant in compensation for his/her recruitment of new distributors without consideration of his/her sale of products to recruited distributors;

d) Refusing to pay, without giving legitimate reasons, commissions, bonuses or other economic benefits to eligible participants;

dd) Providing false information concerning the compensation plan or benefits obtained from the participation in the multi-level marketing;

e) Providing false or misleading information about features or uses of products or operations of the multi-level marketing company through speakers or trainers at conferences, meetings, training courses or training materials of the multi-level marketing company;

g) Failing to fulfill or improperly fulfilling duties to repurchase products in accordance with laws.

2. A fine twice as much as the fine for an administrative violation prescribed in Clause 1 of this Article shall be imposed if such violation is found to involve two provinces or central-affiliated cities or more.

3. Besides the fines prescribed in Clause 1 and Clause 2 of this Article, the organization that commits administrative violations may be liable to one or several remedial measures mentioned below:

a) Enforced correction of information if the violation prescribed in Point dd or Point e Clause 1 of this Article is committed;

b) Enforced confiscation of exhibits and instrumentalities of violations against the Law on Competition, including illegal profits earned from such violations if one of the violations prescribed in Clause 1 of this Article is committed.

4. When imposing penalties, the person authorized to impose penalties for violations prescribed in Clause 9 of this Article shall also request the authority issuing the multi-level marketing registration certificate to consider revoking the multi-level marketing registration certificate of the violating entity in accordance with laws.”

2. To amend Article 92 of the Decree No. 185/2013/ND-CP as follows:

“Article 92. Violations against regulations on multi-level marketing

1. A fine ranging from VND 3,000,000 to VND 5,000,000 shall be imposed upon a participant in the multi-level marketing for one of the following violations:

a) Carrying out marketing, sale and recruitment of downline distributors before obtaining a membership card;

b) Failing to present the membership card before introducing or selling products.

2. A fine ranging from VND 5,000,000 to VND 10,000,000 shall be imposed upon a participant in the multi-level marketing for one of the following violations:

a) Failing to comply with terms and conditions of the signed multi-level marketing contract and the multi-level marketing company’s business rules;

b) Failing to satisfy eligibility requirements to be fulfilled by a participant in the multi-level marketing as regulated.

3. A fine ranging from VND 10,000,000 to VND 15,000,000 shall be imposed upon a participant for performing multi-level marketing activities in a province in which the multi-level marketing company does not yet go through formalities for registration of its multi-level marketing activities.

4. A fine ranging from VND 15,000,000 to VND 20,000,000 shall be imposed upon a participant in the multi-level marketing for one of the following violations:

a) Request a prospective participant to deposit or pay a certain amount of money in any way to be eligible to enter into a multi-level marketing contract;

b) Providing false or misleading information about the compensation plan, business rules, benefits of a participant, features or uses of products, or operations of the multi-level marketing company;

c) Organizing multi-level marketing conferences, meetings or training courses without obtaining a written authorization from the multi-level marketing company;

d) Luring, enticing or bribing participants of another multi-level marketing company to participate the network of the multi-level marketing company of which he/she is a participant;

dd) Taking advantage of his/her position, powers or social position to encourage, request, lure or entice other persons to participate in the multi-level marketing network or buy products sold through the multi-level marketing model.

5. A fine ranging from VND 20,000,000 to VND 25,000,000 shall be imposed upon an individual for participation in the multi-level marketing network of an organization or individual that fails to obtain the multi-level marketing registration certificate.

6. A fine ranging from VND 30,000,000 to VND 40,000,000 shall be imposed upon an individual for organizing conferences, meetings, training courses or introduction of his/her multi-level marketing network or the multi-level marketing network of another organization or individual without obtaining the multi-level marketing registration certificate.

7. A fine ranging from VND 40,000,000 to VND 50,000,000 shall be imposed upon an individual for operating the multi-level marketing network without obtaining the multi-level marketing registration certificate as regulated if illegal profit earned from his/her multi-level marketing operation is not exceeding VND 200,000,000 or this violation causes damage estimated at less than VND 500,000,000 to other persons.

8. A fine ranging from VND 25,000,000 to VND 30,000,000 shall be imposed upon a trader for committing one of the following violations:

a) Failing to carry out or improperly carrying out procedures for modification of the multi-level marketing registration certificate as regulated by laws;

b) Failing to carry out or improperly carrying out procedures for notification of changes in the list of products sold through the multi-level marketing network as regulated by laws;

c) Failing to carry out procedures for re-issuance of the multi-level marketing registration certificate in prescribed cases;

d) Signing multi-level marketing contract with an individual who fails to satisfy eligibility requirements to be fulfilled by a participant as regulated by laws;

dd) Signing a multi-level marketing contract which does not include basic contents as regulated by laws;

e) Failing to terminate the multi-level marketing contract when the participant must face penalties for any prohibited acts in the multi-level marketing sector;

g) Failing to comply with or improperly implementing the regulation that the multi-level marketing company must make and publish the list of trainers on its website, submit the one to the Ministry of Industry and Trade, and keep relevant documents;

h) Failing to comply with or improperly implementing the regulation that the multi-level marketing company must update the list of trainers on its website and send the updated list of trainers to the Ministry of Industry and Trade upon the occurrence of any changes in the list of trainers;

i) Failing to comply with or improperly implementing regulations on publishing of documents concerning the multi-level marketing company’s operation and products at its head office, branches, representative offices and business locations;

k) Failing to set up and publish the prices of products sold through the multi-level marketing model or failing to sell products at the announced prices;

l) Failing to supervise participants in its multi-level marketing network so as to ensure that they strictly comply with the signed multi-level marketing contracts, the company s business rules and compensation plan;

m) Failing to comply with or improperly implementing regulations on registration of modification of or supplements to registered multi-level marketing activities carried out in a province with the Provincial Department of Industry and Trade in prescribed cases;

n) Failing to give a written notification to the Provincial Department of Industry and Trade of failure to organize the conference, meeting or training course which has been notified to the Provincial Department of Industry and Trade as regulated;

o) Failing to carry out procedures for modification of the written deposit confirmation with the bank in case there are changes in confirmed deposit contents;

p) Failing to comply with regulations on time limit for completing procedures for renewal of the multi-level marketing registration certificate;

q) Failing to promptly report on the failure in the information technology system employed to manage participants in the multi-level marketing network to the authority issuing the multi-level marketing registration certificate.

9. A fine ranging from VND 30,000,000 to VND 40,000,000 shall be imposed upon a trader for committing one of the following violations:

a) Carrying out multi-level marketing activities in a province or central-affiliated city without obtaining a written certification of registration of multi-level marketing activities from the Department of Industry and Trade of that province or central-affiliated city;

b) Failing to maintain an authorized representative in a province where no head office, branch or representative office of the trader is located;

c) Failing to comply with or improperly implementing the regulation on retention and submission of documents concerning the multi-level marketing activities carried out in a province at the request of a competent authority;

d) Failing to comply with or improperly implementing the regulation on giving notification to the Provincial Department of Industry and Trade when organizing a conference, meeting or training program in multi-level marketing with the attendance of 30 persons, or 10 participants in the multi-level marketing network, or more, in a province where the registration of multi-level marketing activities has been certified as regulated;

dd) Failing to cooperate with relevant competent authorities in monitoring and supervising conferences, meetings and/or training programs in multi-level marketing organized by the multi-level marketing company;

e) Paying a sum of commissions, bonuses and other economic benefits, including benefits earned from promotion programs, to participants during a year in excess of 40% of sales from the multi-level marketing activities of the multi-level marketing company in the same year;

g) Failing to make payment of commissions, bonuses and other pecuniary economic benefits to participants by bank transfer;

h) Failing to comply with or improperly implementing the regulation on reporting on multi-level marketing activities;

i) Failing to enter into a written multi-level marketing contract with every participant or signing a multi-level marketing contract which does not meet format requirements as regulated by laws;

k) Failing to fulfill or improperly fulfilling the duty to make payment of commissions, bonuses and other economic benefits which a participant is entitled to receive during his/her participation in the company s multi-level marketing network after terminating the multi-level marketing contract signed with that participant;

l) Failing to provide or providing the basic training program to participants in the multi-level marketing network in an improper manner or collecting fees when providing such basic training program;

m) Failing to issue or issuing membership cards to participants in the multi-level marketing network in an improper manner or collecting fees when issuing a membership card;

n) Appointing unqualified trainers to provide basic training programs for participants in the company’s multi-level marketing network;

o) Failing to strictly comply with the registered business rules or compensation plan;

p) Failing to issue invoice for each supply of products to participants in the multi-level marketing network or clients who buy products directly from the multi-level marketing company;

q) Failing to operate the information technology system for managing participants in the multi-level marketing network as regulated;

r) Failing to operate or regularly update the multi-level marketing company’s website in Vietnamese version in order to publish information concerning the company’s profiles and multi-level marketing status as regulated;

s) Failing to operate a communications system to receive and take actions against complaints and queries of multi-level marketing participants, including telephone, email and contact address;

t) Failing to provide the right to access to the multi-level marketing company’s information technology system for managing participants at the written request of a multi-level marketing authority;

u) Organizing conferences, meetings, training courses or introduction of its multi-level marketing network or the multi-level marketing network of another organization or individual without obtaining the multi-level marketing registration certificate;

uu) Failing to comply with or improperly implementing the regulation on delivery of products.

10. A fine ranging from VND 40,000,000 to VND 50,000,000 shall be imposed upon a trader for committing one of the following violations:

a) Maintaining more than a multi-level marketing contract, position, identity number or another of equivalent validity for a participant;

b) Implementing sales promotion program using multi-level network in which a participant has more than a position, identity number or another of equivalent validity;

c) Providing commercial intermediary services as regulated by the Law on commerce with the aims of maintaining, expanding and developing its own multi-level marketing network;

d) Receiving or accepting a participant s application or another document which states that the participant relinquishes a part or all of his/her rights as regulated by laws or says that the multi-level marketing company must not fulfill obligations towards to the participant as regulated by laws;

dd) Failing to use the management system registered with the authority issuing the multi-level marketing registration certificate to manage its multi-level marketing participants;

e) Trading or transferring the network of multi-level marketing participants to another enterprise, except for acquisition, amalgamation or merger of enterprises;

g) Operating the multi-level marketing network without obtaining the multi-level marketing registration certificate if illegal profit earned from this violation is not exceeding VND 200,000,000 or this violation causes damage estimated at less than VND 500,000,000 to other persons;

h) Using the multi-level marketing strategy to trade or sell a subject other than the permitted subjects as regulated.

11. A fine twice as much as the fine prescribed in Clause 10 of this Article shall be imposed upon a trader for committing one of corresponding violations prescribed in Clause 10 of this Article if that violation is found to involve two provinces or central-affiliated cities or more.

12. Remedial measures:

a) Enforced transfer of illegal benefits obtained from the administrative violation prescribed in Point a Clause 4, Point k, Point l or Point m Clause 9, Point e, Point g and Point h Clause 10 of this Article;

b) Enforced correction of information if the violation prescribed in Point b Clause 4 of this Article is committed.

13. When imposing penalties, the person authorized to impose penalties for violations prescribed in Clause 9 of this Article shall also request the authority issuing the multi-level marketing registration certificate to consider revoking the multi-level marketing registration certificate of the violating entity in accordance with laws.”

Article 2.Effect

1. This Decree takes effect on November 25, 2018.

2. Application of regulations hereof to violations committed before the date of entry into force of this Decree:

If this Decree does not contain legal liability or impose a less serious legal liability on a violation which is committed before the date of entry into force of this Decree but is detected afterwards or is under consideration, regulations hereof shall apply.

Article 3. Implementation

Ministers, heads of ministerial-level agencies, heads of Government’s affiliates, Chairpersons of people’s committees of provinces and central-affiliated cities, and relevant organizations and individuals shall implement this Decree./.

For the Government

The Prime Minister

Nguyen Xuan Phuc