At a seminar hosted in Ho Chi Minh City on Thursday, delegates were of the view that the multi-level marketing system must be improved and its legal framework amended so as to tackle and avoid several loopholes being exploited by businesses.
The seminar was hosted by the HCMC Department of Industry and Trade on management of multi-level marketing.
Tran Vinh Nhung, deputy director of the department, said that loopholes in the multi-level marketing system were being unscrupulously exploited by businesses.
The biggest loophole was the licensing method, whereby businesses can obtain a license in one locality and operate in another quite freely. Most multi-level marketing businesses have registered in one province but operate in another province without liabilities.
Related by-laws state that businesses must periodically report on their status every six months to the department of industry and trade in the province or city they are registered in. They are not required to do so in other localities, where they continue to do business unhindered.
This loophole hinders authorities in managing and monitoring the operations of multi-level marketing businesses in their localities.
Departments of industry and trade have proposed that businesses must report their operations every six months to departments in all localities where they operate.
Penalty rates should also be increased to deter violators as the current level of VND20-30 million (US$960-1,440) is far too low. This has led businesses to intentionally avoid registering with authorized departments.
According to Vietnam Competition Authority, the country now has 76 businesses registered for multi-level marketing. Hanoi has the highest number with 38 companies, followed by HCMC with 34 enterprises.
More than 4,400 commodities are being traded under multi-level marketing, including essential food items, cosmetics and sports goods.
Turnover from multi-level marketing reached only VND614 billion in 2006, but increased to VND2.8 trillion in 2010 and VND4 trillion in 2011.
