HM&P Lawyer shares e-commerce business conditions and compliance with legal requirements in Vietnam through insights on the Temu case

On November 8, 2024, in the "Business and Law" program on Ho Chi Minh City’s Voice of the People Radio (VOH), Lawyer Nguyen Nhat Duong, representing HM&P Law Firm, provided legal perspectives on business conditions of the cross-border e-commerce platform Temu, as well as the legal requirements these businesses must comply with in Vietnam.

Temu’s Discount Strategy – A Legal Perspective on Promotion Laws

E-commerce in Vietnam has been growing at an exceptional pace, attracting numerous domestic and international businesses. However, the entry of Temu, a cross-border e-commerce platform, and its aggressive discount strategy, has sparked debates and created significant pressure on industry competitors.

According to Clause 1, Article 7 of Decree No. 81/2018/ND-CP, which guides the Law on Commerce, the maximum discount for goods and services in general promotional programs is limited to no more than 50% of the original price. However, Temu has applied discounts ranging from 70% to 80%, which far exceed this limit. Lawyer Duong explained that discounts exceeding 50% are only permitted under special conditions such as state-organized promotional campaigns or during specific holidays, as stipulated by law. Since Temu does not fall under these exceptions, its aggressive discount strategy clearly violates Vietnam’s current promotional laws.

Temu and Unfair Competition Concerns

Lawyer Nguyen Nhat Duong insights that Temu's deep discount strategy not only breaches promotional regulations but also raises concerns regarding unfair competition. According to Clause 6, Article 45 of the Competition Law 2018 prohibits the sale of goods or provision of services below cost if such conduct leads to the exclusion of other competitors within the same industry or disrupts the normal development of other businesses.

In addition, Temu's practices also raise significant concerns regarding product quality. Lawyer Duong remarked: "By eliminating intermediary steps and delivering goods directly from manufacturers to consumers, Temu can significantly reduce costs. However, the lack of intermediary oversight raises valid concerns about the quality of products that reach consumers." Especially since Temu has not established a commercial presence in Vietnam (meaning it has not set up a company, branch, or representative office), consumers may face difficulties in complaining or seeking protection of their rights in case of disputes.

Legal Obligations for Foreign E-commerce Business

Under current Vietnamese law, foreign e-commerce platforms providing services in Vietnam are required to:

• Register for e-commerce business;
• Establish a representative office or appoint an authorized representative in Vietnam.

Additionally, as a conditional business sector, businesses must comply with licensing and procedural requirements. Lawyer Duong outlined several key procedures that must be followed, including:

• Obtaining an e-commerce service provision license as required by Decree No. 09/2018/ND-CP, on the sale of goods and related activities by foreign investors and foreign-invested economic organizations in Vietnam;
• Notifying the registration of an e-commerce website if it offers online ordering functionality;
• Obtaining a license for the establishment of a commodity exchange and registering an e-commerce platform.

Recommendations for the relevant authorities

The Temu case serves as a cautionary reminder for both businesses and regulatory authorities, according to Lawyer Duong:

• For regulatory authorities: Enhance supervision over cross-border e-commerce platforms, particularly those operating without registration or commercial presence in Vietnam.
• For domestic businesses: Proactively protect their rights through legal recourse, such as complaining about unfair competition practices.
• For consumers: Exercise caution when choosing e-commerce platforms, especially those that do not comply with legal regulations.

In conclusion, Lawyer Nguyen Nhat Duong reaffirmed that while e-commerce in Vietnam is experiencing rapid growth, it also presents significant challenges in terms of regulation and legal compliance. To establish a fair business environment, businesses, regulatory authorities, and consumers must coordinate effectively to ensure transparency and adherence to legal requirements.

HM&P sincerely thanks Ho Chi Minh City’s Voice of the People Radio (VOH) for providing Lawyer Duong the opportunity to share valuable insights and practical solutions with the business community, thereby contributing to supporting businesses in ensuring compliance with legal regulations and conducting safe, efficient business operations in Vietnam.

Please follow the link below for the detailed content of this interview:

Điều kiện kinh doanh thương mại điện tử tại Việt Nam, nhìn từ vụ việc Temu