Traps for the unwary-protecting consumers from multi-level marketing schemes – Vietnam Law & Legal Forum, July 2010

Multi-Level Marketing (“MLM”) and its constantly-evolving schemes are no strangers in developed countries for the exploitation of its unwary participants. In the 2000s, this business activity found its way to Vietnam and lured countless Vietnamese aspiring business people with its strong entrepreneurial spirit and rapidly-increasing affluence while circumventing the laws, thus prompting the existence of this Article. 

However, it should be noted that the intention of this Article is neither to disparage the MLM industry nor imply that all MLM enterprises pursue the schemes discussed herein. Rather, it is to illuminate the intricacies of MLM schemes through (i) discussing its legally-turbulent history with an emphasis on the “Amway safeguards”; (ii) displaying the existing regulations of Vietnam on MLM, specifically in the 2005 Law on Competition and Decree 110/2005/ND-CP dated August 24, 2005; (iii) analyzing the “two-contract” loophole used by MLM enterprises to circumvent the regulations; and (iv) identifying the struggle of MLM participants with limited legal and contractual recourse.

Eventually, this Article shall show that a “class action lawsuit” or specific consumer protection legislation can be well-suited when dealing with MLM schemes. However, at the time of writing, Vietnam’s legal framework has yet to provide a clear path to civil class action or specific consumer protection provisions.

Therefore, it is suggested that with the adoption of the Law on Consumer Protection in the latter half of 2010, Vietnam should endeavor to educate the public on consumer rights as well as the right to pursue legal action in the courts.

The full PDF version of the Article can be read here.

Keywords: multi-level marketing; MLM; Amway safeguards; Law on Competition.