In a report on the draft amendments sent to the Government, the ministry says new regulations on transparency are meant to safeguard the interests of consumers and distributors on the one hand, and facilitate management of State agencies towards this controversial practice on the other hand.

If the draft decree gains Government approval, the playground for many companies conducting multi-level marketing schemes will be drastically narrowed down as consumers will be better informed whether they get fair prices when buying products, while disputes will be settled in a more convenient manner.

In specifics, enterprises launching pyramid schemes are told to develop an information technology system governing their distributors, allowing the latter to browse for information related to their sales activities. The server for such an IT system must be placed in Vietnam.

Such enterprises must also operate websites providing information on their organizations, products, and plans to pay bonuses, and training programs and the list of trainers. The enterprises must also announce and update prices of products, and clarify that such prices are determined by the enterprises, not by competent State agencies.

Commissions and bonuses must be transferred via banks – cash prohibited – and when running ads on such monies for distributors, these enterprises must give all information on the beneficiaries including their names and addresses, their ranks or positions in the system, the network they run and the time length needed to obtain such award-giving revenues. In addition, relevant information about sales, the process of conducting transactions with participants, and measures to terminate contracts with participants must also be provided.

The draft decree demands that multi-level marketing enterprises must maintain hotlines to respond to any complaints by consumers or participants in the scheme, and must issue invoices for customers to protect their interests in case they want to return the purchased items.

Also with an aim to guarantee the interests of consumers and participants, the draft decree also raises the deposit for each multi-level marketing enterprise to VND10 billion against the current level of VND5 billion, and the deposits can be adjusted annually corresponding to the size of sales schemes.

Recently, many people participating in multi-level marketing schemes have gone bust due to expectations of high returns promised by such enterprises. The settlement of disputes has also proven difficult due to vague provisions in their contracts.

At the question-and-answer session at the National Assembly sitting in Hanoi last week, Minister of Industry and Trade Tran Tuan Anh admitted that there remained many shortcomings in State management over multi-level marketing practices in the country. The ministry has been slow in bringing out policies and sanctioning violations, the minister said.