Monday, October 21 2019


Pyramid schemes a growing danger

Update: November, 10/2014 - 09:34

Phan Duc Que of the Ministry of Industry and Trade's Competition Authority spoke with Nong thon ngay nay (Countryside today) newspaper about network marketing violations.

What is your comment regarding violations in network-marketing management?

Network marketing has shown certain shortcomings, as some network marketing companies have yet to comply with current laws and regulations, thereby creating a bad image for the business model, as well as affected people and customers involved.

In addition, pyramid schemes exist alongside network marketing models that are permitted under current laws.

Some enterprises have taken advantage of multi-level marketing to accumulate money by means of fraud. Violations include selling products with prices many times higher than their real value or providing false information about products. These violations are a cause for much concern by society and have led to the community's antipathy towards the network marketing sector.

Some State authorities were mistaken when they considered the fraudulent behaviour of pyramid schemes as a form of illegal network marketing.

In recent years, the Competition Authority and provincial industry and trade departments have strengthened their inspection and punishment of network marketing violations, especially illegal network marketing. However, network marketing actually still has numerous shortcomings.

How would you evaluate legal sanctions against violations relating to network marketing?

First, Government Decree 42/2014 on regulations for tightening conditions for network marketing registration will help management units screen weak companies or those without long-term business plans to minimise violations.

Second, the decree provides more details regarding prohibited behaviour in network marketing.

Third, sanctions against violations have been strengthened in Government Decree 71/2014, with a larger scope of violations resulting in the cancellation of licenses for network marketing businesses.

In addition, the decree also tightly regulated the network marketing enterprise's responsibilities towards its employees.

Are current laws and regulations strong enough to protect consumers against tricks in network marketing?

Based on the foundation of legal documents that have been issued quite often enough and with a comprehensive scope, I think that consumers and people aiming to take part in network marketing must take responsibility to do research and learn about laws and regulations, as well as information on the network marketing sector and companies, such as business licenses and legitimacy, to protect themselves from the traps of fraudulent companies.

What measures have been taken to eliminate companies guilty of violating laws or regulations on network marketing and to make the network marketing environment healthier?

I think that management units should issue timely adjustment documents and organise their effective implementation.

For companies, it will be necessary for them to strengthen their awareness of and compliance with laws and regulations, as well as to practice participant co-management to avoid committing violations against participants.

For network marketing participants, they should fully understand legal regulations and check the legitimacy of multi-level marketing companies'activities.

Consumers and those aiming to participate in network marketing should carefully study legal regulations to protect themselves and heighten their vigilance against unusual benefits from network marketing activities or the outstanding qualities of products sold by means of the network marketing method. — VNS

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