The need for state management of multi-level marketing activities

LL.M. LE VUONG (Mekong Vietnam Law Firm Limited)

ABSTRACT:

Managing multi-level marketing activities is the responsible of government, state management agencies, enterprises, distributors and consumers, aiming to detect and prevent illegal multi-level marketing activities. In particular, state management agencies need to closely monitor multi-level marketing activities, multi-level marketing businesses, people who participate in multi-level marketing businesses and related organizations in order to ensure that multi-level marketing activities are properly conducted in accordance with law. State management agencies need to strictly manage multi-level marketing activities in order to prevent multi-level marketing activities from violating the law, thereby regaining the confidence of people about multi-level marketing businesses.

Keywords: Managing multi-level marketing activities, marketing activities.

1. Concept of managing multi-level marketing activities

Multi-level marketing activities require the management of many different entities to ensure this activity is effective and operates according to a certain goal. Not outside the integration and development trend of our country, from the late years of the twentieth century, multi-level marketing has begun to appear and develop. Starting with distribution partnerships, then the presence of foreign companies and purely Vietnamese businesses doing business in this area. The first decade of the twenty-first century witnessed the explosion of multi-level marketing in our country. A series of businesses were launched, including the appearance of the world's leading multi-level business groups, these companies are constantly growing, many of which have a nationwide distribution network. The number of participants is extremely large with all sectors, all ages and their sales are huge numbers.

In that context, many companies have taken advantage of the newness, ignorance of the people and the loophole of the law to conduct fraud and illicit multi-level business. These things have a significant impact on the economy. Multi-level marketing is a new business model in Vietnam but it has many sensitive and hot issues. Multi-level marketing have grown so strong that the profits from advertising of newspapers and television have been affected, plus many fraudulent companies hiding in the multi-level business and a large part of multi-distributors. levels of wrongdoing have caused public opinion to speak out against multi-level business. The mass media constantly reflects fraudulent acts and illicit multi-level marketing of multi-level marketing businesses. Many National Assembly deputies have also raised the issue of illicit multi-level marketing to state management agencies before the National Assembly. Some opinions also suggest that banning multi-level marketing activities in Vietnam should be completely banned.

In fact, it is necessary to improve the legal system for managing multi-level marketing activities, creating a basis for the management of multi-level sales, thereby clearly separating multi-level sales and business forms but under the name of multi-level marketing, tightening management, contributing to creating trust for participants as well as consumers, creating a more favorable environment for business activities of true multi-level marketing businesses and contributing part of promoting the stronger and wider development of this business method.

The reality of multi-level marketing activities imposes an urgent need on the management of activities of multi-level marketing organizations so the management of the operation of a non-life insurance must be understood and defined?

“Management of multi-level marketing activities is a state management activity performed first and primarily by competent State agencies, with the content of ensuring the law observance of the subject management with management objects in multi-level marketing activities”.

During the course of administration, the agency managing multi-level marketing activities has the right on behalf of the State, to promulgate legal documents to set laws or specific orders to enforce the objects of operation. Multi-level sales activities must be performed.

We can understand that multi-level marketing activities from a social perspective it is the sum of the relationships between people. That means people cannot exist and develop without relationships and activities with others. When people participate in activities together, it is inevitable that there is a "will to control" or a management agent is required to achieve order and effectiveness. On the other hand, people through activities to satisfy this need generate other needs so people often have to participate in many types of activities with many different types of organizations. Therefore, multi-level sales management activities exist as an indispensable.

Thus, the management subjects are allowed to use the State's power to organize and control the activities of the managed objects, thereby clearly showing the relationship of "power - submission" between management subjects and managed objects in the field of management of multi-level sale activities.

2. Features of state management of multi-level marketing activities

Firstly, managing multi-level marketing activities demonstrates the relationship between the management subject and the managed object.

It is clear here that the entity managing the multi-level marketing activities is the competent State agency in the field of multi-level marketing. The objects being managed here are multi-level marketing enterprises, participants in multi-level marketing and agencies, organizations and other individuals involved in multi-level marketing activities.

Along with the development of the multi-level marketing method, a fraudulent business model has been developed according to the "pyramid" model of Vietnam's Competition Law called "illicit multi-level marketing". Countries and territories recognize multi-level marketing and all have legal documents to prohibit the method of trading under the pyramid model, and to strictly manage the mode of multi-level sales. The law on multi-level marketing is a necessary and effective tool for managing multi-level marketing activities, playing an important role in combating illicit multi-level marketing activities, protecting the market, and encouraging fair competition, thereby protecting the legitimate interests of businesses, consumers and the whole society. The State and agencies managing multi-level marketing activities manage activities so that these activities comply with the provisions of law. Simultaneously manage multi-level marketing activities of other businesses to avoid unfair competition acts.

Management activities are conducted on the basis of certain tools, means and impacts. However, unlike other activities, management activities can exist only when using power (it can be said that power is a special tool and means). As power, power or state power is exactly the factor that helps the owner manage multi-level marketing activities affecting multi-level marketing management to control their behavior. The power in this case is expressed through management decisions, management principles, management regimes, regimes, policies ... thanks to the State power, competent agencies in the management of new multi-level marketing activities takes care of its role of maintaining discipline and establishing sustainable and stable development of organizations. It is noteworthy that the way the management's power is used will determine the nature and characteristics of management activities, management culture, especially management style.

Secondly, the management of multi-level marketing activities of the State is a content of the State management on economy.

State management of the economy is the organized and legal effect of the State on the national economy in order to make the most effective use of domestic and foreign economic resources possible opportunities to achieve the national economic development goals set forth in the context of international integration and expansion. Regarding the management of multi-level marketing activities, the State also has the right and necessary attention expressed by a legal corridor that regulates issues such as the conditions of entry of sales agents. multi-level marketing participants and multi-level marketing participants. In addition, the Government also has documents on handling violations for illicit multi-level marketing, tax policy is also a matter of concern. The State management agency for managing multi-level marketing activities has also been systemized from top to bottom, ensuring the good performance of its roles and functions.

Vietnam's economy is a commodity economy that operates on a market-regulated mechanism of the State towards socialist orientation. Since the Sixth Party Congress, the economy from the centralized bureaucratic centralized planning model on production means with two main forms of state and collective has shifted to the multi-sector commodity economy operates under the market mechanism under the management of the State according to the socialist orientation. The State participates in the process of economic management as a macro manager, the State regulates market activities, middle for the economy to develop stably in the right direction by the Party and the State describe.

Thus, in recent years, multi-level marketing activities have made important progress, thereby contributing to the development of the economy in particular and the development of the country in general.

Thirdly, managing multi-level marketing activities aims to realize the objective of protecting legitimate multi-level marketing activities and preventing and handling illegal multi-level marketing activities.

The effectiveness of this activity is specifically measured by the end result that it brings to meet the needs of the multi-level marketing management entity and meet the interests of the sales management entity. multi-level. It is an activity that has to be both effective and effective. In management practice, goals are not always fully implemented. It depends on the socio-economic conditions of certain historical periods.

Conflicts of interest between the management subjects and the managed objects often exist. Therefore, multi-level marketing management activities must take into account the impact to overcome those conflicts.

3. The need for State management of multi-level marketing activities

Multi-level marketing management activities are activities of management subjects, including the State, management agencies, enterprises, distributors and consumers, aiming to detect and prevent multi-level marketing activities goods violate the law through a system of regulations and sanctions in the field of multi-level marketing.

In particular, the multi-level marketing management agency manages the multi-level marketing enterprises involved in the multi-level marketing and relevant organizations so that the activities are carried out in accordance with the prescribed framework legal suffering.

There have been positive developments after about 20 years in Vietnam, but when it comes to multi-level marketing, there are still many people think that this is a form of "fraud" because besides business enterprises. There are still many businesses and distributors taking advantage of this business method to gain illicit profits, causing damage to both participants and consumers.

In particular, recent incidents such as the collapse of Agel or MB24. Tam Mat Sun Investment Joint Stock Company and Viet Community Service Trading Investment Joint Stock Company, Thang Long group, Thien Rong Viet Investment Joint Stock Company, Viet Link Company were prosecuted for their actions. The fraudulent business is even more negative for the true multi-level marketing model. Most companies have foreign companies that hide and direct, and provide goods, advertising and marketing costs. The common way of doing business is to be irresponsible, ready to close down relocation, to start a new business. This business method is complicated in organization, so managing the multi-level distribution system becomes difficult and very easy to be used to serve fraud. A common form of business is to get goods to cover up their fraud, enteprise  multi-level marketing often sell uncommon products.

To participate in the system (collaborators, distributors ...), consumers have to spend a lot of money to buy the right to become a distributor that sells products and sponsors others to participate in the form of buying. products with very high prices compared to the real value from 5-6 times to 40-50 times.

Therefore, the product cannot be sold to consumers but mainly to new distributors because it can buy new products to join the system. Consumers have to spend large sums of money to buy virtual values ​​that are too high for the real value of the products, and these same people participate in the propaganda network of products that have vague effects, claiming to be a panacea. In order to sell many products, employing many distributors, companies doing business in the form of illicit multi-level marketing often organize impressive presentations, receive high commissions of 5 - 40%, have money, houses and diamonds the goal is to in the greed of those who want to get rich without having to work hard.

This is an illicit multi-level marketing business trick "that has created a virtual service class, not creating wealth for society, doing business against unacceptable morals. If not prevented, it will have serious consequences for society not only economically but also on human health”.

The diversion of multi-level business as well as the complexities in managing this business are causing bad consequences for the mode of multi-level sales in Vietnam. Currently, in Vietnam many people are deceived to steal money, mostly students, who do not have a stable job. Recently, the target audience is people in remote areas where information is not fully and timely accessible. That makes the public very discontent, many people oppose this type of business. Whenever people mention multi-level marketing, they think of fraud and deceit even when they think that multi-level marketing should not be allowed in Vietnam. It can be said that these reactions are somewhat lacking knowledge and outrageous, but not without cause.

So the reality of managing multi-level marketing activities imposes an urgent requirement on management agencies that need to get involved. Helping true multi-level marketing companies not affected by illicit multi-level marketing companies, defaming the reputation of the development environment of other businesses. Create a strict regulatory regime that does not create loopholes for illicit multi-level marketing companies to cheat other individuals and especially consumers. Regaining trust has been lost for a long time from all walks of life in society.

TABLE OF REFERENCE:

  1. Le Vuong, "Vietnam law on the management of multi-level marketing activities" Master thesis in law - Hanoi Law University.
  2. Competition Administration Department, 2014, Summary report on multi-level sales management, Hanoi.
  3. Kim Son (2004), "Multi-level sales: More and more victims", http://vietbao.vn, April 17, 2004.
  1. National Assembly (2004), Competition Law, Hanoi.

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 ThS. Lê Vương 

Công ty Luật TNHH MEKONG Việt Nam

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