Amway Viet Nam is among 23 multi-level marketing (MLM) firms in Viet Nam. — Photo thoibaokinhte

According to the Department of Competition and Consumer Protection (a unit under the Ministry of Industry and Trade), MLM firms work as pyramid schemes, 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.

In addition to more than 20 firms with working licenses, the department said there was a number of unlicensed firms trading to raise money from innocent participants, aiming at making illicit profits and affecting the market and consumers.

Since last year, the department has coordinated with localities to tighten management over those firms.

After checking 28 MLM firms in 2018, the department reissued working licenses for 23 firms that met the regulations on business conditions under the Government's Decree No. 40/2018 / ND-CP of March 12, 2018 on managing business activities in a multi-level manner. At the same time, it withdrew five that failed to meet the conditions.

As of early this year, 23 enterprises have been granted licenses to work as MLM firms across Viet Nam.

Last year, the department fined three MLM firms more than VND1.4 billion for their violations.

Thien Su Vietnam Co., Ltd. received a fine of VND585 million, New Image Vietnam Co., Ltd. Received a fine of VND250 million, while Morinda Vietnam Co., Ltd. received a fine of VND605 million and had its licence revoked.

Together with the tightened management, the department warned people about the risk of illegal MLM firms through different activities, like talk shows on mass media to inform them about the law on MLM activities and how to recognise and avoid illegal ones.

A representative of the department said it will closely coordinate with relevant agencies, especially local authorities, to inspect, examine and deal with violations, find and stop illegal firms to better protect consumers.

As of the end of June 2019, there were 817,034 people participating in MLM firms, down 35 per cent compared to the end of December 2018. Of those mentioned, only 36 per cent take part in sales activities and receive commission, while the rest participate in the firms to buy goods at preferential prices and do not make sales.

While less are people involved, the total multi-level sales in the first six months of 2019 reached more than VND5.8 trillion (US$250 million), an increase of 25 per cent over the total revenue of the same period of 2018.

Also in the first six months of 2019, MLM firms contributed VND886 trillion to the state budget including 40.39 per cent from value added tax, 33.9 per cent from import and export tax, 11.22 per cent from personal income tax, 12.22 per cent from corporate income tax and 2.15 per cent from other taxes.— VNS