Vietnam Issues Draft Decree Guiding Implementation of Consumer Rights Protection Law
Foreign companies should note upcoming changes to the Vietnam consumer rights protection law. We discuss the National Assembly’s new draft decree providing additional details and clarity on a number of articles in the amended Law on the Protection of Consumer Rights (LPCR).
The amended Law on the Protection of Consumer Rights, which was approved by the Vietnam National Assembly over the summer, will come into effect on July 1, 2024. The National Assembly is currently soliciting feedback on the draft decree from the public until October 25, 2023. If passed in its current form, this document will also come into effect on the same date.
The draft decree provides important clarity on a number of terms raised in the LPCR, standardizes administrative procedures, and expands responsibilities for certain types of companies in consumer rights protection work.
Clarifications on key definitions
The amended LPCR has added a new provision prohibiting 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.
The draft decree defines influential people as people who are “experts, reputable people, and people who are recognized by society in a specific field, industry, or profession who have the ability to influence consumers”.
- Famous people;
- Experts, people with high expertise and influence in a specific field;
- Reputable person according to the provisions of law;
- People who are noticed by society and have influence in the mass media; and
- Other subjects as prescribed by law.
Large digital platforms
Under the amended LPCR, “large digital platforms”, along with other businesses operating in the digital sphere, are subject to a range of requirements to ensure they are protecting and upholding consumer rights. These include requirements to enter into a contract with consumers for concluding digital transactions, fully and transparently displaying information about the products, goods, and services sold, and ensuring open channels for public feedback, among many others.
However, large digital platforms are subject to additional compliance obligations that other types of companies are not. This includes the requirement to periodically evaluate the implementation of regulations on handling fake accounts, the use of artificial intelligence, and fully or partially automated solutions.
The draft decree now clarifies that large digital platforms are digital platforms that meet one of the following criteria:
- Have 10,000 visits or more or have more than 1,000 users in one month (over the course of six consecutive months) in Vietnam;
- Have a total transaction value arising from transactions in cyberspace in the Vietnamese market in one year (up to December 31 of the previous year or the 12 immediately preceding months) of over VND 12 trillion (US$490.7 million);
- Are established and operated by business organizations and individuals belonging to the group of five market-leading business organizations and individuals in the field of e-commerce services according to the provisions of Vietnam’s laws on e-commerce;
- Are established and operated by business organizations and individuals belonging to a group of enterprises with a dominant market position according to the provisions of Vietnam’s competition law; and
- Are a large or very large digital platform according to the law on electronic transactions.
The draft decree also proposes two additional responsibilities for large digital platforms. The first is that organizations establishing and operating large digital platforms should have a department dedicated to assessing compliance with legal regulations on protecting consumer rights. The companies should also ensure that employees are trained and knowledgeable of Vietnam’s consumer rights and protection laws, as well as other relevant regulations.
The second is requiring this department to develop a compliance assessment report, which will summarize information related to its compliance with the LPCR and other related legislation. Specific information that should be disclosed in this report includes information on content censorship, use of algorithmic systems and advertising targeting specific consumer groups, the use of algorithmic and advertising systems targeting vulnerable consumer groups, and the implementation of regulations on handling fake accounts, use of artificial intelligence, and fully or partially automated solutions during the reporting period.
Standardization of consumer contracts
The amended LPCR stipulates requirements for contracts and general transaction agreements that are entered into between a business or service provider and a consumer. It outlines details that the contract must contain, the format, and terms that are prohibited from being used in contracts.
The draft decree provides some basic details on the format and application of consumer contracts, including determining the language, font, and layout that must be used.
In addition, the draft decree outlines application and processing procedures for contract registration for the provision of certain types of goods and services, including the forms required and the processing agency. The revised LPCR mandates that organizations and individuals engaged in the trade of products, goods, and services frequently purchased and regularly used by a substantial number of consumers, which have direct and long-term impacts on consumers, must register the legal contracts they enter into with consumers in advance.
The LPCR also stipulates that the Prime Minister will periodically publish and amend a list of products, goods, and services requiring contract registration in accordance with current socio-economic conditions and consumer right’s needs. However, such a list appears not to have been published yet.
Clarification on responsibilities for recall of defective products and goods
Under the LPCR, product defects are divided into two categories, defined as:
- Products and goods with group A defects, which are products and goods capable of causing damage to the lives and health of consumers (Group A products); and
- Products and goods with group B defects, which are products and goods capable of causing damage to consumers’ property (Group B products).
The LPCR outlines the actions that businesses must take in the event that a defect that falls into the above categories is discovered. These include requirements on product recalls.
The draft decree offers additional details on these requirements, stating, for instance, that businesses must publicly notify consumers of a recall within five days of discovering the defect for Group A or Group B products.
In addition, the draft decree proposes that businesses should report the product recall to the relevant state management agency three working days before recalling the defective products. It also provides forms that businesses must submit to do this and the information that they must provide.
Clarifications on responsibilities for establishing and operating intermediary platforms
The amended LPCR lists several responsibilities for companies or individuals that establish or operate “digital intermediary platforms”. This term has been separately defined in Vietnam’s Law on Electronic Transactions, as an information system serving electronic transactions that creates an electronic environment that allows parties to conduct transactions. In addition, to be an “intermediary” platform, the owner of the platform must also be independent of the parties performing these transactions.
The amended LPCR imposes information transparency requirements on digital intermediary platforms. This includes mandatory disclosure of the platform’s operating rules, information about the business organizations and individuals using the platform, and details about the products and services offered. Additionally, the regulations entail obligations for soliciting feedback and facilitating public reviews of the goods and services available on the platform.
The draft decree also stipulates that these platforms must publicly announce the criteria for determining the display priorities of products, goods, and services, in cases where the digital platform features a search function. Moreover, if the displayed content is paid or sponsored, this information must be disclosed within the search results.
Furthermore, the draft decree suggests the mandatory development of an annual assessment report by digital intermediaries. This report would outline their adherence to obligations under the LPCR (and the draft decree, if enacted), along with compliance with other pertinent laws. The report should encompass information about business organizations and individuals operating on the platforms when requested by consumers engaging with said entities, the removal of feedback and reviews that breach the law or contravene “social ethics,” handling and resolving consumer feedback, requests, and complaints, and transparency in digital advertising activities.
Further considerations on the draft decree
The draft decree addresses some of the issues raised with the amended LPCR, providing important clarifications on terms and the implementation of the rules. This could help authorities to enforce the law and protect consumers while enabling companies to better navigate compliance requirements more accurately and efficiently.
In addition, the draft decree strengthens consumer rights in several areas, most notably in terms of information transparency requirements when engaging with digital platforms.
On the other hand, more watertight clauses and the expansion of responsibilities could also increase the compliance burden for companies. Proposals such as the requirement for large digital platforms and digital intermediary platforms would require these companies to dedicate additional resources to compliance.
It is important to note that the draft decree remains under deliberation, and therefore may be further altered before the final draft is adopted. This means that provisions may be loosened or tightened depending on the feedback that they receive.
Companies directly affected by the provisions of the draft decree are advised to monitor developments from the National Assembly and prepare to comply with both the LPCR and the draft decree when they come into effect in July 2024.
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