Subjects of Multi-Level Marketing Legal Relationship.

Competition. As of the time the author wrote this thesis, the only law that directly addresses the multi-level marketing method is the Competition Law. According to the author, that is the reason why the legislators used the Competition Law as the basis when issuing Decree 42 and it can be affirmed that the law on multi-level marketing is an important part of the Competition Law.

However, the competition law only regulates a part of the management of multi-level marketing activities when there are signs of illegality. Specifically, illegal multi-level marketing behavior is an act of unfair competition. The regulation related to administrative management of multi-level marketing activities is not within the scope of the Competition Law. It is a collection of legal norms with a separate administrative management nature.

Based on the above analysis, we can define the law on multi-level marketing as follows:

The Law on Multi-level Marketing is an important part of competition law regulating social relationships arising in the process of state management of multi-level marketing activities.

1.2.2 Legal content on multi-level marketing

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1.2.2.1. Subjects of multi-level sales legal relations.

There are many subjects participating in the legal relationship of multi-level marketing including: the State as a manager, multi-level marketing enterprises, multi-level marketing participants, and customers as consumers. The main subjects participating in the legal relationship of multi-level marketing include multi-level marketing enterprises and multi-level marketing participants:

Firstly , a multi-level marketing enterprise can be an enterprise that directly produces products for sale or an enterprise that distributes products from different traders. It can be a domestic or foreign enterprise depending on the level of market openness of each country as well as the domestic business environment. Multi-level marketing enterprises can be established in different forms such as a single-member LLC, a two-member LLC, or a joint stock company. The laws of each country stipulate different conditions (barriers) for enterprises to participate in product distribution by the multi-level marketing method depending on the characteristics.

market situation, population size, construction perspective...

Second , multi-level marketing participants join the multi-level marketing network through a contract. The profits they receive from the multi-level marketing company are derived from their own sales and those of others in the system they have established. In terms of legal status, multi-level marketing participants have a very special status. They are considered agents, marketers, sales staff, and also people who deliver products to consumers. The laws of each country stipulate conditions for participants based on personal characteristics, level of awareness, population density, labor policies, etc.

1.2.2.2. The State - a special subject of multi-level marketing legal relations

The State is a special subject in the legal relationship of multi-level marketing. The State's participation plays a regulatory and management role. For example, the commission level paid to participants is often controlled at a certain level (Vietnam does not exceed 40% [26, Article 27, Clause 2]).

The State demonstrates its role through the promulgation of legal documents regulating multi-level marketing; promulgating a set of registration procedures to be granted a business registration certificate, a reporting regime, a regime for inspection, detection and handling of violations (if any)... The State has policies to encourage, facilitate or hinder the development of this industry depending on their viewpoints at different periods.

In addition, the state is also a subject with special power because only the state can decide whether or not to allow the existence of the multi-level marketing method in each country.

1.2.2.3. Relevant associations

The establishment and participation in associations mark the development of cooperative relations between multi-level marketing enterprises. The establishment and existence of associations bring many benefits to members, especially the association has a greater voice and helps to better convey the wishes of members to competent authorities and the community.

1.2.2.4. Contract for participation in multi-level sales

The multi-level marketing relationship between a multi-level marketing enterprise and a participant in the multi-level marketing network is established and implemented through the legal form of a contract. It can be understood that a multi-level marketing participation contract is the establishment, change or termination of rights and obligations in the multi-level marketing relationship between the subjects participating in this legal relationship. As a legal form of the multi-level marketing legal relationship, the multi-level marketing participation contract has the following legal signs:

- Subject of the contract: Multi-level marketing enterprise and multi-level marketing participant;

- The form of the contract is a means to record the results that the parties have agreed upon. It can be expressed in words, in writing or in specific actions. However, with the complex nature of the BHDC relationship, the possibility of disputes arising during the implementation of the contract is very high, so the BHDC participation contract must always be expressed in the clearest forms of assurance to help the implementation and dispute resolution process become more convenient.

- Subject of the contract: The subject of the contract depends on each country. Many countries recognize both goods and services, but there are countries that only recognize goods as the subject of this contract.

- Basic content of the contract: The content of the contract is an agreement between the parties on rights and obligations in the multi-level marketing relationship. The law on multi-level marketing often has guiding regulations on the main contents of multi-level marketing contracts such as: Subjects, goods, commission calculation, rights and obligations of the parties, termination of contract, handling of disputes and breaches of contract, etc.

1.2.2.5. Control of multi-level marketing activities

Multi-level marketing is an advanced method to bring products closer to consumers. However, the multi-level marketing method also has many potential risks that negatively affect the rights of consumers, participants and disrupt social order. Therefore, the issue of controlling multi-level marketing activities is necessary. Mechanisms that can be applied to control multi-level marketing activities include: Civil compensation; Administrative handling; Criminal handling.

1.3. The issue of learning from the experiences of some countries in the world about multi-level sales in Vietnam

1.3.1. The need to learn from international experience to improve Vietnamese law on multi-level marketing

Firstly, the world is getting flatter, the world is opening up with the main trend in international relations still being integration. Faced with that main trend, Vietnam cannot isolate itself, separate itself from the international community to become an oasis. We have also correctly assessed this issue. Therefore, Vietnam's foreign policy perspective is to integrate and want to be friends with all countries in the international community to learn, absorb and shorten the development gap between us and the world [14, 15]. We need to actively integrate deeply and absorb the achievements of countries in the international community, including legislative achievements related to the law on the management of multi-level marketing activities.

Second, MLM in the world has a history of nearly 80 years of development but entered Vietnam very late (less than twenty years). We are latecomers, so learning from the experiences of countries with long-term and appropriate adjustment processes is necessary and in accordance with the law. Born in the early 20th century, MLM is associated with the name of American chemist Carl Renborg (1887-1973). He was the first person to apply the idea of network marketing into life, creating an economic system, a business sector considered to be the most promising in the 21st century [21]. The time considered to have started this business method was late 1939 early 1940. Currently, MLM has been developing strongly in most countries and territories across all continents, with more than 30,000 large companies applying the distribution of goods according to the MLM model [53].

Third, the MLM industry in the world has achieved many successes and also revealed shortcomings. Therefore, learning from the experiences of other countries will help Vietnam minimize the shortcomings and promote the positive aspects of this method. In 2013, global MLM retail sales reached 178.52 billion USD [51]. In the US, MLM has developed very strongly.

The Direct Selling Association (DSA), an industry body in the United States, reported in 1990 that only 25% of its members were engaged in multi-level marketing, but by 1999 this figure had increased to 77.3% [47]. Large companies such as Avon, Electrolux, Tupperware, and Kirby, although initially very successful with single-level marketing, later switched to multi-level marketing [49]. By 2009, 94.2% of the association's members were engaging in multi-level marketing. The number of distributors of these companies accounted for 99.6% of the total number of sales staff of all member companies, and 97.1% of the association's sales were from multi-level marketing companies [45]. According to 2011 report, DSA has 200 members [46] and it is estimated that in the US there are currently more than 2,000 companies operating under the MLM model. One in every 10 families in the US works in the industry, accounting for about 15% of the population, with about

500,000 people became millionaires thanks to multi-level marketing [36]. In addition to the above achievements, we will also be shocked to hear about multi-level marketing scams that have shaken the world market, such as: The PrimeAmerica case that caused a loss of 57.6 billion USD/year to the US economy or the case of the US Securities and Exchange Commission (SEC) - an agency with the mission of protecting investors, maintaining fairness, order and efficiency of the market as well as creating conditions for capital creation, decided to terminate the operation of ZEEKREWARDS.COM Company with 1.5 million distributors because it was concluded that it was conducting illegal multi-level marketing.

Fourth, multi-level marketing is a method introduced to Vietnam from abroad, so we have passively accepted it. Both the people and the government have not been fully prepared to accept this new method. While the government has shown weaknesses in management capacity, the people are extremely gullible. To move from passive to active requires us to learn from international experience to improve domestic laws. In 1998, in Ho Chi Minh City, a group of people from Taiwan came to Vietnam to form a joint venture with Incomex Company and do business in the form of multi-level marketing, marking the first appearance of the multi-level marketing method in Vietnam [33].

1.3.2. Principles of learning from international experience

We are behind, we develop slower, so learning proactively and selectively is necessary. We need to pay special attention to 02 principles when absorbing international experience:

Firstly , the experiences of other countries must be consistent with the actual circumstances of Vietnam. The characteristics and circumstances of each country are different, so the process of formation, development and legal regulation of multi-level marketing activities is also different. We need to pay attention to this principle if we do not want to fall into a state of impracticality when adjusting, leading to low efficiency.

Second , the experience of other countries has been verified through practical management, control and operation. Practicality needs to be placed in a very high position when evaluating and learning the legal regulations governing the activities of the BHDC of other countries. We must see the comprehensive and long-term legal adjustment process of other countries to see its advantages and disadvantages, from which we can draw the basis for which issues should be learned and which issues should not. Combining this reference system with the circumstances and conditions of Vietnam will help us have a scientific, objective and creative absorption that brings high efficiency in practice.

1.3.3. Experience of some countries

1.3.3.1. Malaysia

General introduction:

Malaysia is a country in Southeast Asia, a founding member of the Association of Southeast Asian Nations (ASEAN) with relatively similar geographical and cultural characteristics to Vietnam. This is the reason why the author chose Malaysia as the first country to learn from the experience of managing multi-level marketing activities. Malaysia follows a federal model consisting of 13 states and 02 federal regions. Malaysia follows a parliamentary monarchy, bicameral with a legal system based on the British legal system [60]. As of February 2013, Malaysia's population was 29,179,952 people, of which Malays accounted for 50.4%, Chinese accounted for 23.7% and other ethnic groups accounted for 25.9% [61].

Statistics on BHTT in Malaysia

According to the report of the World Federation of Life Insurance Associations in 2013, Malaysia's revenue from life insurance activities reached a relatively impressive figure of 4.659 billion USD (accounting for about 3% of global life insurance sales - equivalent to the sales level of France, a country with a much higher population of 65.8 million people in 2013 [80]). The number of distributors reached 4,250,000 people (accounting for more than 15% of the population) [43].

Among the Malaysian MLM products, herbs and supplements have the highest revenue accounting for about 33%, followed by cosmetics & EPC at 23%, home appliances at 13%, food, household items at 8%, embroidery/underwear products at 6%, and beverages at 6% [62].

Malaysian Direct Selling Association

The Direct Selling Association of Malaysia (DSAM) was established in 1978 as a national trade association with the aim of promoting and marketing the Direct Selling industry and serving as a practical spokesperson for the industry. The association has 64 members, of which 50% are multinational companies. After 30 years, in 2008, the DSAM logo was changed and is still used today, commensurate with the influence and development of the Direct Selling industry [62].

Administrative management agency for social insurance activities

The Ministry of Domestic Trade, Co-operatives and Consumerism (MDTCC) is the state management agency for the insurance business in Malaysia. Established on October 27, 1990, this agency was established to promote the development of domestic trade and protect the rights of Malaysian consumers [63]. To carry out administrative management of insurance business in this country, lawmakers have issued many documents and assigned MDTCC to organize and implement such as:

Direct Selling Act 1993 (Act 500);

In 2011, the Direct Selling and Anti-Pyramid Schemes Amendment Act 1993 was enacted;

Competition Act 2010, Personal Data Protection Act 2010, Price Governance and Anti-Hacking Act 2011, Consumer Protection Act 1999.

Some main features of legal regulations governing social insurance activities

License requirements:To operate as a BHTT in Malaysia, registration for a license is a mandatory requirement [43, Article 4]

Subject matter distributed under the pyramid scheme: Malaysian law recognises pyramid schemes for both goods and services. In which: goods are defined as all types of movable property except other property rights, commercial papers, shares, bonds and money; services include any rights and interests other than the supply of goods and the performance of works under a service contract, and a reference to the word services in Act 500 relates to pyramid schemes and pyramid sales; [43, Section 2]

Customers of the distribution channel under the BHTT method in Malaysia can only be individuals [43, Article 1(3)(a)].

The scope of insurance in Malaysia is expanded when the legislator recognizes both goods and services as subjects of this activity. The legislator also clearly stipulates which goods and services are distributed under the insurance method. Through this, we can see that the insurance market in Malaysia is relatively open to investors.

Name and definition:In Malaysia, the distribution activity by MLM method is called: Direct Selling. According to Malaysian law, MLM activities are defined to include: Door-to-door sales, sales by email and sales by electronic transaction. Door-to-door sales is defined as the method of selling goods or services in the following way: A person or any authorized person visits locations other than a fixed place of business or conducts telephone calls to find out potential buyers of goods or services. Then, this person or some other people negotiate with potential buyers to sign similar contracts.

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