Legal compliance in promotional activities in Vietnam

Promotion is a commercial activity conducted by a trader with the aim of promoting the purchase and sale of goods or the provision of services by offering certain benefits to customers.

Currently, there are 9 types of promotion, which include:

1. Provision of sample goods or services free of charge.
2. Gifting of goods or services.
3. Sale of goods or provision of services at discounted prices during the announced or registered period of promotion. In cases where the goods or services are subject to price controls by the state, promotions under this form must be carried out in accordance with the Government’s regulations.
4. Sale of goods or provision of services together with coupons.
5. Sale of goods or provision of services together with promotional contest entry form for selecting the prize winner according to rules and prizes already announced.
6. Sale of goods or provision of services together with participation by customers in promotional games of chance in connection with the purchase of goods or service and winning of prizes due to chance of participants according to rules and prizes already announced.
7. Organization of frequent customer programs as the basis for awarding customers according to the quantity or value of goods or services purchased in the forms of customer cards or coupons acknowledging the goods or service purchase.
8. Organization participation for customers in cultural, artistic, entertainment programs, and other events for promotional purposes.
9. Other promotional forms, provided they are approved by the state authority overseeing commerce.

Entities authorized to conduct promotions include:

1. Vietnamese traders.
2. Branches of Vietnamese traders
3. Branches of foreign traders in Vietnam.

Representative offices of businesses are not permitted to conduct promotions in any form.

Point b Clause 2 Article 17 of Decree 81/2018/ND-CP stipulates for cases in which the promotion notification procedure is not required, specifically “Traders who only sell and promote products through e-commerce exchanges or online promotional websites”.

Therefore, if the trader only conducts sales promotions through e-commerce exchanges or online promotional websites, it is not required to conduct the promotion notification procedure. However, except for the cases specified in Clause 2 Article 17 of Decree No. 81/2018/ND-CP, the traders is still required to carry out the promotion notification procedure. 

However, if the trader also conducts the sales promotion program “through an e-commerce service application”, then the notification procedure must be carried out as required. Thus, the trader must notify the sales promotion for the promotion program conducted through the e-commerce service application.

The Clause 1 Article 22 of Decree 81/2018/ND-CP states that traders conducting sales promotions are not allowed to terminate the sales promotion program before the announced deadline or confirmed by competent state management authoritiess, except for: (1) force majeure events, or (2) in case the trader has exhausted the quantity of promoted goods or services, or goods or services used for sales promotions, or (3) the quantity of evidence of winning announced has been exhausted, or (4) confirmed by competent authorities, or (5) in case the state authority requests to stop the implementation of the whole or a part of the traders’ sales promotion program.

Based on these listed cases, it is possible to conclude that internal issues of traders can fall under force majeure events, or the exhaustion of promoted goods or services, or goods or services used for sales promotions, or exhaustion of proofs of winning announced or confirmed by competent authorities. In cases deemed as internal issues, traders should note that:

• In case of force majeure events, the termination of the promotional program must be publicly announced to customers and relevant competent state authorities.
• In the case of exhaustion of the quantity of promoted goods or services, or goods or services used for sales promotions or such proofs of winning or confirmed by competent authorities, the termination of the sales promotion can only occur after notifying the competent state management authority and ensuring the rights of participants in the sales promotion program.

Depending on the specific circumstances, the trader can follow the appropriate procedure accordingly.

Point a Clause 2 Article 17 of Decree 81/2018/NĐ-CP stipulates that if the total value of prizes and gifts of the promotion program is less than VND100 million, that traders are not required to notify the promotions.

Accordingly, the total value of prizes is determined based on the total value of all prizes of a sales promotion program, not based on the values of prizes corresponding to different parts/stages/regions/targets or other criteria within the program. Therefore, if an enterprise conducts a promotion program in several regions under the same program with the total value of prizes exceeding VND100 million, it still needs to go through the administrative procedure of notifying the sales promotion as required by law.

Based on Point b Clause 2 Article 17 of Decree 81/2018/ND-CP, traders are not required to follow the sales promotion notification procedure if the sales promotion is conducted as specified in Clause 8 Article 92 of the Law on Commercial 2005 and Articles 8, 9, 10, 11, 12, and 14 of Decree 81/2018/ND-CP, which includes cases where traders only sell and promote products through e-commerce exchanges or online promotional websites.

Therefore, if the trader only sells online and conducts promotions through e-commerce exchanges (such as Shopee, Lazada, etc.), it is exempt from the procedure of notifying the sales promotion as required by law. However, if the trader simultaneously conducts sales promotions through an e-commerce service application, similar to the situation described in Question 2, the trader must conduct the sales promotion notification procedure.

In summary, regardless of the content of the trader’s sales promotion program, to determine whether the sales promotion being conducted falls under the category of sales promotions required to notified, the trader needs to rely on regulations regarding the form of that sales promotion.

According to Point a Clause 1 Article 2 of Decree 81/2018/ND-CP, “traders conduct the promotions, including manufacturers, businesses of goods and services, directly promote or conduct promotions through distributors (wholesalers, retailers, agents, franchisees, and other authorized distributors as regulated by law)”.

Furthermore, Point a Clause 1 Article 16 of Decree 81/2018/ND-CP stipulates that “traders conducting sales promotions are responsible for notifying and registering their sales promotions with the competent state administrative authority”.

Therefore, if the trader conducting promotions through distributors has already implemented the sales promotion notification/registration procedures, the distributors are not required to follow these procedures.

The trader’s products are currently discounted by 40-50% (a sales promotion program registered with the Department of Industry and Trade). Customers cannot apply an additional 15% loyalty discount on these products. This action would violate the maximum discount limit on the value of goods or services used for sales promotions, which cannot exceed 50% of the product’s price as stipulated in Clause 1 Article 6 of Decree 81/2018/ND-CP, except for the cases mentioned in Question 8 below.

In practice, companies often do not allow customers to apply multiple promotion codes simultaneously in order to avoid administrative penalties, particularly fines ranging from VND20,000,000 to VND40,000,000 for violating the implementation of promotions with discounts that exceed the maximum allowable level of the price of goods or services as regulated.[1]

According to Point a Clause 2 Article 21 of Decree 81/2018/ND-CP, within 45 days from the end of the prize-winning period of a promotion program in the form of:

• Sale of goods, provision of services combined with participation in chance-based programs linked to the purchase of goods or services, and the award is based on the luck of the participants according to the announced rules and prizes (chance-based  sales promotions).
• Goods or services that involve of the internet, electronic devices, and information technology applications use.

In accordance with this, the traders conducting a promotion programs must submit a written report on the results of the promotional program to the competent state administration authority (registered authority), using Form No. 07 - Appendix issued with Decree in 81/2018/ND-CP.

 According to Clause 4 Article 13 of Decree No. 81/2018/ND-CP, traders conducting chance-based sales promotion programs must set aside 50% of the announced prize value for the state budget in the event of there are no winners. A prize without winners in a chance-based sales promotion program refers to a prize for which the prize period has ended, but no recipient has been identified or no winner has been determined. Specifically, within 45 days of the prize expiration date of the promotion program, the trader must submit a written report to the competent authority on the results of the promotion program. Within 07 working days from the receipt of such report, the authority shall decide to collect 50% of the announced value of the prize without winners from the business that registered the sales promotion program. Within 15 working days from the date of receiving the authority's decision to collect the prize, the  trader obliged to pay 50% of the announced value of the prize without winners in accordance with the decision.

 On special occasions during the year, some companies often organize lottery programs for customers who have used or are using their services. In practice, companies are often denied registration with the relevant state authority on the grounds that the activity they are conducting is not considered a sales promotion. Businesses should be aware that the interpretation of the current legislation on sales promotions is not uniform among different authorities. However, the common and prevailing interpretation of state authorities, as observed in the process of notification/registration of sales promotions, is that the purpose of a sales promotion must be to stimulate the purchase or supply of goods and services at the time of the sales promotion by providing certain benefits to customers that are directly related to the purchase or supply of those goods and services. Therefore, activities aimed at expressing gratitude to customers who have purchased, used, or will purchase and use their products and services are generally not considered sales promotions by the Department of Industry and Trade.

In the event that it is not considered a sales promotion, such activity does not require merchants to go through the sales promotion notification/registration procedures

 As stated in Form No. 01 attached to Decree No. 81/2018/ND-CP on the notification template for sales promotions, in Section 9 of this document refers to the “total value of goods and services used for the promotion”. This is a criterion that enterprises must specify, indicating the total value of goods and services used for sales promotions. Specifically, in cases where enterprises offer discounts, this criterion refers to the total value of goods and services that have been discounted. Enterprises should pay attention to this detail, as many applications in which enterprises state the value of goods and services before or after applying the discount are often rejected by the Department of Industry and Trade.

 Currently, many real estate companies are based in Ho Chi Minh City but have products in projects located in the provinces adjacent to the city. When these businesses conduct sales promotions, which may include common activities such as offering discounts on the purchase of apartments or holding lotteries on the purchase of apartments, they should pay particular attention to the competent authority to notify/register these sales promotions.

Based on the regulations of Clause 1 Article 17 and Clause 2 Article 19 of Decree No. 81/2018/ND-CP, the notification/registration of sales promotions must be made to the Department of Industry and Trade where the promotions are conducted (the promotion area), except in the case of lucky draw promotions in the areas of two or more provinces and centrally governed cities, which must be registered with the Ministry of Industry and Trade. Since the purpose of the sales promotion is to promote the sale of apartments in these provinces, the Department of Industry and Trade of the provinces where the apartments are located will be the receiving authority for the notification dossier, regardless of whether the company is  headquartered in Ho Chi Minh City.

 According to the Article 17 of Decree No. 81/2018/ND-CP, the notification of sales promotions must be submitted to the Department of Industry and Trade at least 3 working days before the start of the sales promotion program. The date of receipt of the dossier is based on the date recorded on the postal receipt or equivalent valid forms in the case of postal submission, the date recorded on the document acceptance receipt in the case of direct submission, the time recorded in the email system for electronic submission, or the time recorded on the system for online public services submission. Typically, for documents submitted outside working hours, the date of receipt will be counted as the next working day. However, for enterprises submitting documents to the Ho Chi Minh City of Department of Industry and Trade, they should consider the regulations stated in Decision No. 09/2023/QD-UBND issued on 15 February 2023, by the Ho Chi Minh City People's Committee. According to Clause 6 Article 7 of the Regulations issued based on this Decision, “in cases where the dossier is submitted after 15:00, submitted on Saturdays, or submitted outside working hours, the starting time for processing the dossier shall be at the beginning of the next working day”. Therefore, if an enterprise submits a dossier after 3:00 pm, the date of receipt will be calculated on the next working day, which may affect the deadline for notifying the promotion.

In addition, when enterprises carry out the sales promotion notification procedures on the online public service system (specifically, the National Public Service Portal), when specifying the start date of the sales promotion, the system will automatically allow enterprises to enter this date at least 3 working days from the date of notification/submission of the dossier. This feature is convenient for enterprises.

The term “discount” is defined in Decision No. 149/2001/QD-BTC dated 31 December 2001, which issued and promulgated 04 (four) Vietnam Accounting Standards. According to this definition, a discount includes trade discounts and cash discounts.

“A trade discount is the amount by which an enterprise reduces its quoted price to customers who purchase goods in large quantities.”

“A cash discount is the amount that a seller deducts from the amount owed by a buyer because the buyer pays for goods before the due date of the contract.”

Based on the above regulations, it can be observed that when a company offers discounts to customers for purchasing goods in large quantities or making early payments, both forms of trade discounts and cash discounts are applied.

However, according to the provisions of the Law on Commercial 2005 and Decree No. 81/2018/ND-CP, discounts are not considered to be a form of sales promotion. Therefore, even though an enterprise is offering discounts to customers for purchasing goods in large quantities or making early payments, there is still no requirement to notify such activities as sales promotions.