The New Law on Protection of Consumers' Rights (LPCR) includes officially adopted critical changes and addresses various issues that will have direct impacts on onshore and offshore organizations that transact or do business with consumers in Vietnam.
In brief
On 20 June 2023, the National Assembly (NA) passed the Law on Protection of Consumers' Rights (amended) ("New LPCR"), with an effective date of 1 July 2024, superseding the current Law on the Protection of Consumers' Rights No. 59/2010/QH12 ("LPCR 2010").
The New LPCR includes seven Chapters and 80 articles under which many proposed critical changes have been officially adopted. This law also addresses various issues that will have direct impacts on onshore and offshore organizations that transact or do business with consumers in Vietnam.
Further to the first alert that we sent on 5 July 2023 regarding the New LPCR, this alert provides you with a summary of the most significant trends observed under the New LPCR and focuses on the new obligations for digital service providers.
Key takeaways
1. Extraterritorial scope of application for individuals, organizations and businesses
The New LPCR generally applies to all onshore and offshore organizations, agencies and individuals that are related to the protection of consumers' rights. We expect further clarifications from competent agencies and the Vietnamese government on what "related to the protection of consumers' rights" entails.
2. Consumers may include both individual and institutional consumers
During the drafting process of the new LPCR, the drafting agency (i.e., the MOIT) proposed removing "organization" as a criterion under the definition of "consumer". However, the NA rejected the proposal due to the practical need to protect organizations' rights. That said, the New LCPR further stresses the buyer's purpose as stipulated under the definition of consumer, which is defined as "individuals purchasing or using products, goods, services for consumption, personal use or family use and not for commercial purposes."
3. Obligation for business organizations and individuals to adopt specific protection policies for vulnerable consumers
Under the New LPCR, "vulnerable consumers" are defined as the elderly, people with disabilities, children, people of ethnic minorities, pregnant women or women who are nursing a child under 36 months old, people with fatal diseases, members of poor households, and, in general, "consumers who at the time of purchase or use of products, goods or services are likely to be subject to many adverse impacts in terms of access to information, health, property, and dispute settlement".
Business organizations and individuals are obligated to, among other things, implement policies on the preferential rights of and provide a suitable complaint resolution mechanism for vulnerable consumers. In addition, business organizations and individuals should ensure that vulnerable consumers can exercise their rights in the process of buying and selling products and goods and providing services.
However, these obligations are not required for small and micro enterprises unless these enterprises engage in specific transactions such as remote transactions, provision of continuous services and direct selling.
4. Expanded list of prohibited actions for protecting consumers
The New LPCR comprises a comprehensive list of prohibited actions, encompassing newly imposed restrictions on actions such as those mentioned below:
Forcing consumers to pay for products, goods and services without prior agreement
Failing to compensate, refund or exchange products and services for consumers due to mistakes
Reducing packaging, spare parts, replacement components, promotional goods and technical and user manuals when selling goods or providing services
Failing to comply with sector-specific regulations on the production and trade of goods before providing the products or services to consumers
Forcing consumers to deposit, pay money or buy certain goods to participate in multi-level selling
Using or taking advantage of images, advice and recommendations of reputational and influential person(s) to promote trade or encourage consumers to buy and use products or services without notifying them that the content is sponsored
5. Protection of consumers' information and potential conflicts with the new Personal Data Protection Decree (PDPD)
The New LPCR provides new, more detailed requirements for protecting consumers' information, which is defined to include consumers' personal and non-personal data. Generally speaking, these requirements for protecting consumers' information include disclosing the purpose, scope and retention period of data collection, using consumers' information per the announced purpose, and ensuring the security of consumers' data. Thus, the requirements set out in the New LPCR provide a similar protection standard as those under the PDPD. We anticipate potential conflicts between the new LPCR and the PDPD.
6. Language used in a contract with consumers
A contract with a consumer must at least be available in Vietnamese. If there is a difference between the Vietnamese version of the contract and versions in other languages, the version that is more favorable for the consumer, which can be either the Vietnamese or foreign language version, will apply.
7. Definitions and responsibilities of influencers/KOLs in promoting products, goods and services
The New LPCR introduces the new term "influencers/KOLs", which is defined as "experts, reputable people, people who gain societal notice in a specific field, industry or profession as prescribed by the Government". When promoting products, goods and services on behalf of any business organization or individual, influencers/KOLs are considered " third parties" and are responsible for: (i) providing complete and accurate information about the products, goods and services provided by business organizations and individuals and other related assessment and rating programs (if any); (ii) assuming joint liability with the relevant businesses for providing inaccurate or incomplete information about products, goods or services; and (iii) notifying consumers in advance that they are sponsored by the businesses to provide information about the products, goods and services.
Further clarification as regards "who are influencers/KOLs" will be provided under a government decree that is expected to be issued early next year (i.e., 2024).
8. New approach for a non-exhaustive list of scenarios where clauses under standard contracts and general trading conditions may be invalid due to disadvantages to consumers
Unlike the LPCR 2010, which provides a specific and exhaustive list of scenarios where clauses under standard contracts and general trading conditions may be invalid, the New LPCR sets out an expanded list. This newly revised list includes unspecified scenarios determined by the dispute resolution body. Specifically, the clauses deemed "contrary to the goodwill principle of civil laws, leading to an imbalance of rights and obligations that is disadvantageous for consumers" must not be provided under standard contracts and general trading conditions.
9. Separate product-recall regimes for defective products under two groups, i.e., (1) defective products that potentially cause harm to consumers' properties and (2) defective products that potentially cause harm to consumers' health and lives — new obligation on pre-call report to local authorities
Under the New LPCR, the recall procedure for defective products that potentially cause harm to consumers' health and lives are generally stricter than that applicable to those that potentially cause damage to consumers' properties. For instance, companies are explicitly required to make a public announcement on the recall of defective products that potentially cause harm to consumers' health and lives, in at least five consecutive issues of a daily newspaper or five consecutive days via the radio, television or newspaper in the area where the defective goods are circulated. Meanwhile, companies whose defective products may cause harm to consumers' properties may only make announcements of the recall at their own business locations, websites, or in another equivalent manner.
Companies must report to the competent local authorities prior to recalling defective products, regardless of the group classification. The Government will promulgate further guidance on the recall procedure.
10. Amending existing regulations for specific transactions covering remote transactions, provision of continuous services, and multi-level selling or direct selling
The New LPCR amends existing regulations regarding specific transactions to effectively cover internet-based and cross-border trading activities taking place in cyberspace. As for remote transactions, business organizations and individuals must adequately and completely provide contact information; information on the goods, products and services; and a suitable complaint mechanism to consumers.
Business organizations and individuals providing continuous services in Vietnam also have certain obligations, such as setting a representative presence if they do not have any legal presence in Vietnam, publicly notifying the authorized representative in Vietnam regarding their provision of continuous service, and ensuring the quality of their services.
For business organizations and individuals engaging in direct selling, the New LPCR mandates responsibilities for each category of direct selling, including door-to-door selling, multi-level selling, and selling outside the usual transaction locations.
11. New requirements for platforms and intermediary platforms
The New LPCR sets out new obligations for platforms and intermediary platforms, respectively. Notably, under the New LPCR, intermediary platforms will share similar obligations to those of e-commerce trading floors under Decree 52 (as amended), including the obligation to verify sellers/merchants on the platform. In addition, intermediary platforms must maintain an online reporting account and provide information, data updated as of the reporting time to serve the inspection and checking activities of local competent authorities. Furthermore, this law specifies additional obligations for large digital platforms (e.g., setting up the storage of targeted advertisements) that is subject to the Government's further guidance.
Although the obligations of the entities are articulated, the new LPCR does not define platforms or intermediary platforms explicitly. Instead, such definitions are provided under the new Law on E-Transactions, which was also issued at almost the same time as the New LPCR.
12. New regulations on dispute resolution with consumers — simplified court proceedings for disputes with a transaction value of under VND 100 million (~USD 4,245)
Similar to the LPCR 2010, the four methods for settling consumer disputes remain to be negotiation, mediation, arbitration and court proceedings, particularly as follows:
For negotiation: The role of social organizations in the protection of consumers' interests will be enhanced. If business organizations and individuals refuse to negotiate with consumers, then upon consumers' request, social organizations for the protection of consumers' interests can forward the request for negotiation to business organizations and individuals, and these entities will be responsible for notifying these organizations in writing about the negotiation result.
For mediation: The New LPCR clarifies that the procedures under the regulations on commercial mediation will apply.
For arbitration: The New LPCR maintains provisions under the LPCR 2010, which requires business organizations and individuals to notify consumers of the arbitration clause, and allows consumers to opt out of the arbitration clause in standard contracts and general trading conditions.
For court proceedings: Simplified court proceedings will be applicable to cases with a transaction value under VND 100 million (~ USD 4,245) without further conditions. This will likely significantly increase the number of disputes with consumers under simplified proceedings in the years to come. Additionally, social organizations for the protection of consumers' interests will be subject to more specific requirements, such as publishing information on disputes initiated by them for public interest.
Conclusion
The New LPCR has made numerous changes to the existing product liability and consumer protection framework, impacting the business of both onshore and offshore companies whose products are produced or sold in Vietnam. The recent actions taken by the MOIT clearly demonstrate the efforts of the state body to protect the rights of consumers. Relevant digital platforms and providers in Vietnam are strongly recommended to prepare a proper compliance plan aligned with the new regulations to avoid any risks of business interruption caused by enforcement measures applied by the competent authorities.
Source: CCIPV / Lexology / Baker McKinzie