Consumer Rights in Vietnam: Legal Obligations and Liabilities of Companies
The National Assembly, Vietnam’s legislature, recently passed an amendment to the country’s Law on the Protection of Consumer Rights (the “amended LPCR”). The amendment addresses shortcomings and strengthens the protection of consumer rights in Vietnam. In one important update, the amendment expands the scope of application to foreign companies providing products and services to consumers in Vietnam, which could increase their compliance burden.
Vietnam’s consumer rights legislation has developed significantly over the last two decades, but rapid changes to the consumer environment, as well as inconsistent enforcement of existing laws, have meant that consumers are still left vulnerable to wrongdoing with limited avenues for seeking recourse. The amended LPCR is therefore hoped to address some of these shortcomings and create a stronger consumer rights regime, thereby fostering a more transparent and reliable consumer market.
The amended LPCR will come into force on July 1, 2024.
The legislature has also released a draft decree [insert link to new article] guiding the implementation of the amended LPCR, which, if passed, will come into effect on the same day as the amended LPCR.
Below we outline the legal requirements of companies in Vietnam’s existing consumer rights legislation and discuss the changes in the new amendment.
Vietnam’s consumer rights protection laws
Vietnam’s first piece of legislation on the protection of consumer rights was the Ordinance on Consumer Protection, passed in 1999.
In 2010, the National Assembly passed the Law on the Protection of Consumer Rights (LPCR), further strengthening consumer rights protections in the country. Consumer rights are enshrined in various other legislation in Vietnam, including the Civil Code, the Criminal Code, and the Commercial Law.
The LPCR applies to:
- Organizations or individuals trading goods and services; and
- Agencies, organizations, or individuals involved in activities to protect the interests of consumers in the territory of Vietnam.
Protection of consumer information
The protection of consumer information under the LPCR operates under the principle of informed consent. In addition, the LPCR stipulates that consumers’ information should be kept safe and confidential when they engage in a commercial transaction.
In order to obtain informed consent for the use of consumer information, organizations that collect consumer information are required to notify the consumer of which information is being collected and what the information will be used for. The organization is only permitted to use the information for the stated purposes to which the consumer has consented.
In addition, the organization must guarantee the safety, accuracy, and completeness of the information during procedures such as the collection, use, and transfer of the information. Consumer information can only be transferred to a third party upon consent from the consumer.
If any information is found to be incorrect, the organization must enable the consumer to correct it or do it on their behalf.
Prohibited behavior under the LPCR
The LPCR prohibits companies from deceiving or misleading consumers through advertising, the omission of certain information, or provisions of incomplete, false, or inaccurate information about a company’s product, service, reputation, or capabilities, or the content or characteristics of the transaction between the consumer and the company. Companies are also prohibited from requiring consumers to pay for goods or services without the prior agreement of the consumer.
The law also prohibits the use of force or threat of use of force on consumers or taking advantage of disadvantaged consumers, a natural disaster, or diseases to force a trade. In addition, companies and individuals trading products or services are held liable if the product or service they are selling is of poor quality and damages the lives, health, and property of consumers.
Responsibility to provide information
Companies and individuals are required to inform consumers of the product or service they are providing by:
- Labeling goods as required by law.
- Displaying prices publicly at business locations.
- Providing warnings about potential health, life, and property risks related to goods or services, along with preventive measures.
- Supplying information about the availability of components and spare parts for goods.
- Offering manuals, warranty details, conditions, duration, and procedures for goods or services with warranties.
- Disclosing accurate and complete information to consumers about contract forms and general transaction conditions before completing transactions.
When information is conveyed through a third party, it is imperative that the third party ensures the accuracy of the information. This involves requesting evidence of accuracy from the trading entities involved. Furthermore, the third party shares a collective responsibility for the completeness and accuracy of the information provided. Media outlets, if used to provide information, bear a significant responsibility in preventing any form of consumer harassment. To achieve this, media outlets should proactively employ technical solutions that effectively curb harassment. Moreover, these outlets have the prerogative to decline the use of services under their purview if such use has the potential to lead to consumer harassment.
Companies in Vietnam that provide warranties are required by law to fulfill their warranty obligations for the supplied goods, components, or accessories.
As part of their obligations, they must provide consumers with a warranty receipt that clearly states the warranty duration. Under Vietnam’s Civil Code, consumers are also entitled to request the seller to repair a defective item free of charge, reduce its price, or exchange or return the item during the warranty period.
During the warranty period, companies are required to offer temporary replacement items or alternative settlements accepted by consumers during the warranty period. In addition, if the warranty expires without successful repair, the company is required to provide the consumer with a new similar item, component, or accessory, or refund the consumer. The company is responsible for covering repair costs and the cost of shipping the product to the consumer during this period.
Note that the company providing the product or service remains responsible for the warranty, even if they authorize other entities to perform it on their behalf.
Liabilities for violating consumer rights
Individuals that violate the LPCR and other relevant legislation are liable to sanctions or being investigated for criminal liability, depending on the seriousness of the violation. If the violation results in damages, then the individual is liable to pay compensation.
Companies that violate the LPCR may also be liable for administrative sanctions, and, in cases that result in damages, payment of compensation.
Product recalls and liabilities for damages
If a manufacturer or importer discovers that one of their goods is defective, they are required to take the following actions:
- Immediately halt the supply of defective goods to the market.
- Publicly announce the defects through the media, including details on the product itself, the reasons for the recall, recovery process information, how the defects will be addressed, and other measures to protect consumer interests.
- Carry out the recall as per the public announcement and cover the expenses incurred for consumers.
- Report the recall results to the appropriate state management agency, either provincial or central, depending on the scope of the recall.
Companies and individuals involved in trading goods are accountable for damages caused by defective products to a consumer’s life, health, or property, regardless of whether they were aware of the defects.
This includes manufacturers, importers, entities using trade names, trademarks, or commercial identifiers related to the goods, and those directly providing defective goods to consumers in cases where responsible entities cannot be identified.
Under the Civil Code, the company bears no liability for damages arising from a defective item in situations where the consumer was aware, or reasonably should have been aware, of the said defect at the time of purchase. Additionally, this exemption applies if the item was acquired through an auction or from a second-hand shop. Furthermore, the company is relieved of responsibility in cases where the consumer themselves caused the defect in the item.
In addition, companies may be exempt from liability if they can prove that the defects were not detectable using the scientific and technical knowledge available at the time the goods were supplied to consumers.
The LPCR stipulates four key mechanisms for dispute resolution in cases involving consumer rights:
- Negotiation: In which consumers can request negotiations with organizations or individuals trading goods or services if they believe their rights have been violated. The company or individual providing the products or services must engage in negotiations within seven working days and the negotiation results should be documented in writing.
- Mediation: In which parties can agree on a third party for mediation. Mediation must be objective and confidential, and those meeting certain conditions can establish mediation organizations. The process, outcomes, and implementation duration are recorded and signed by the involved parties.
- Arbitration: In which arbitration terms are communicated before contract conclusion, allowing consumers to choose other dispute resolution methods. Dispute resolution follows commercial arbitration laws, and the burden of proof aligns with civil proceedings regulations.
- Settlement of disputes by a court: In which cases for consumer protection are initiated by consumers or social organizations. Simplified procedures apply when specific conditions are met, and evidence is clear. Consumers are to provide evidence while the company or individual providing the product or service must prove innocence in causing damage. The court shall then decide which party is at fault and mete out any penalties deemed necessary.
Negotiation or mediation is not permitted in cases involving damage to the interest of the state, large numbers of consumers, or public interests.
Limitations to consumer rights in Vietnam
Despite the notable progress that the LPCR represents in bolstering consumer rights within Vietnam, challenges arise due to inconsistencies and conflicts between this legislation and other existing laws. This has resulted in obstacles to effective enforcement, creating opportunities for wrongdoers to evade their obligations towards consumers.
In addition, Vietnam’s consumer market has evolved considerably since the law was passed in 2010, with online shopping and digital services taking off. This has created a variety of new consumer scenarios that the LPCR and similar legislation have not been designed to address. Analysis conducted by the Law Faculty of the Vietnam National University in Hanoi suggests that changes to the legislation should include clearer definitions of consumer-related transactions, as well as cover e-transactions.
The evaluation also notes that the law in its current form leaves consumers at risk of “buying counterfeit, pirated or poor-quality products, products of unclear origin, dishonest advertising, or suffering delivery delays”. Consumers in Vietnam are vulnerable to having their personal information leaked and becoming victims of online scams by unregistered online traders.
In order to address these shortcomings, it is suggested to broaden the definition of “consumer…..in order to provide consumers with more rights and interests in traditional transactions as well as transactions arising upon new modes of business.”
The definition of “organizations” that provide products and services to consumers includes an “individual who performs commercial activities independently, regularly, without business registration”. The Law Faculty’s argument is that the lack of requirements for individual operators to undergo business registration complicates the supervision of business activities and therefore makes the enforcement of consumer rights protection more difficult. Accordingly, requiring the registration of these individual businesses may help to better protect consumer rights.
Key changes proposed in the LPCR
The amended LPCR addresses some of the concerns over inconsistencies and shortcomings of consumer rights protections.
One such change is stronger protections for the personal information of consumers. The amendments add a definition of “consumer information”, something which was absent from the previous law. The added definition includes “consumers’ personal information, information about their process of purchasing and using products, goods and services, and other information related to transactions between consumers and traders”.
One of the major changes to the LPCR is in the expansion of the application of the law to entities based outside of Vietnam. Article 2 on the “Subjects of Application” of the amended LPCR removes the phrase “in the territory of Vietnam”, suggesting that “agencies, organizations, and individuals” based outside of Vietnam that violate the rights of consumers in Vietnam could be subject to criminal liability. This will increase the compliance burden of foreign companies providing products and services in the country but could help to improve consumer rights and trust in the country with regard to foreign products.
The amended LPCR also stipulates that service providers must offer consumers an “opt-in” mechanism for the use or sharing of personal information and provides more specifics on the information that companies must provide consumers when obtaining their informed consent. This includes informing them of the purpose for collecting their information, the scope of the information collected, and the period of time the information will be stored.
These amendments will align the provisions of the LPCR on the protection of consumers’ personal information with those contained in Vietnam’s Personal Data Protection Decree.
The amended LPCR also increases the legal obligation of companies for product recalls by providing different categories of defective goods and outlining specific responsibilities to the companies depending on the type of defective goods. This means that the liabilities for defective goods or services that damage a consumer’s life or health are higher than for those which damage consumer property.
The amended LPCR also expands the list of prohibited behavior. One of the additions directly addresses the failure of companies to compensate consumers for previous mistakes, stating that companies must not fail to compensate, refund, or exchange a product or service.
Finally, the amended LPCR prohibits the sponsorship of products and services through influential people without expressly notifying consumers that it is a sponsorship, a type of behavior that is especially prevalent online.
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