HÀ NỘI – Việt Nam’s Competition Authority has revoked the licence of multi-level marketing firm Việt Nam Consumer Alliance Joint-Stock Company (VietNet JSC) and slapped it with a fine of VNĐ409.5 million (US$18,350), local media reported.

The firm, headquartered in Bắc Giang Province, has violated a number of regulations on multilevel sales activities, the state agency (under the Ministry of Industry and Trade) found.

The multi-level marketing (MLM) business model, referred to as a pyramid scheme, is a legitimate but controversial marketing strategy in which the sales force is compensated not only for the sales they generate, but also for the sales of the other salespeople they recruit. 

The competition authority found out that, first, the firm did not observe procedures for amending and adding to the registration for MLM when there were changes and additions related to application documents for MLM activities. 

Second, going against the prescribed regulations, the firm did not provide sufficient information in their MLM contracts and signed contracts with individuals who were not eligible for participation in MLM.

Third, VietNet JSC neglected to submit periodic reports to relevant authorities.

Fourth, the company also did not fulfil the requirement to equip MLM distributors with proper training.

Fifth, it did not deduct personal income tax from MLM participants before paying commissions, bonuses and other economic benefits to participants.

And last, against rules, VietNet JSC allowed one distributor to maintain more than one position, one MLM business code and one MLM contract.

The revocation of the licence will not mean that the firm is no longer bound by law to carry out its legal duties, which include the obligation to guarantee the legitimate rights of MLM distributors and other individuals who participate in its MLM network. Those participating can ask VietNet JSC for refund and commissions.

Earlier, back in 2012, one of VietNet JSC’ founders, Vũ Ngọc Thuyển (1976), was sentenced to four years’ imprisonment for fraud in the Muaban24 Online Trade and Training Company case, where Thuyển was the director of the company’s branch in Bắc Giang Province. – VNS