In brief

The Ministry of Industry and Trade (MOIT) has recently published the draft law on Protection of Consumers’ Rights (“Draft Law“). The Draft Law includes a number of proposed changes to the existing product liability and consumer protection framework. If adopted, the Draft Law may have major impacts on the business of companies whose products are produced or sold in Vietnam complying with new requirements under the Draft Law.

The MOIT is gathering public comments on the Draft Law until 10 March 2022. Then, it is expected that the Draft Law will go through further revisions before being reviewed in October 2022 and adopted in May 2023 by the National Assembly as scheduled.

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In more detail & Recommended actions

The Draft Law includes the following key proposed changes:

1. Introduce two separate product recall regimes for two groups of defective products, i.e., defective products that potentially cause harm to (i) consumers’ health and lives; and (ii) consumers’ properties, respectively.

Potential impact: Companies whose products are produced or sold in Vietnam may need to check which group their products fall under in case they are found to be defective products, as the recall procedure for each group is different.

2. Remove the post-recall report obligation under the current Law on Protection of Consumers’ Rights (LPCR).

Potential impact: In fact, the Draft Law proposes pre-recall obligations which would replace the reporting obligations under the current LPCR, including the post-recall report obligation. Therefore,  manufacturers and distributors would likely need to become familiar with the pre-recall obligations as soon as the Draft Law is adopted.

3. Expand the list of prohibited actions for protecting consumers. For example, the new prohibited actions may include the following:

• Failing to compensate, refund or exchange products and services for consumers due to mistakes
• Arbitrarily 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
• Using or taking advantage of images, advice and recommendations of reputational, influential person(s) to promote trade or encourage consumers to buy and use products or services without notifying them that the content is sponsored

Potential impact: If adopted, the Draft Law will introduce more compliance requirements for companies whose products are produced or sold in Vietnam.

4. Require trading organizations/individuals to adopt specific protection policies for vulnerable consumers.

The Draft Law defines “vulnerable consumers” as the elderly, people with disabilities, children and ethnic minorities. The Draft Law generally requires that trading organizations/individuals, for example, adopt and implement policies on preferential pricing and other preferences for the elderly, people with disabilities and children; provide a suitable complaint resolution mechanism for the elderly, people with disabilities and children; and protect vulnerable consumers from discrimination and abuse while collecting, storing and using their personal data.

Potential impact: If adopted, the Draft Law will introduce more compliance requirements for companies whose products are produced or sold in Vietnam.

5. Expand the list of scenarios where clauses under standard contracts and general trading conditions might be invalid due to disadvantages to consumers. For example, the following clauses might be considered invalid:

• Provide for sanctions that are more unfavorable to consumers, in case of contractual breach or termination.
• Allow trading organizations/individuals to renew their contracts without prior notice or a way to opt out of renewal.
• Require consumers to consent to trading organizations/individuals collecting, storing and using their personal data as a prerequisite to contracting standard contracts or general conditions.

Potential impact: If adopted, the Draft Law will introduce new prohibitions concerning standard contracts and general trading conditions. Companies whose products are produced or sold in Vietnam are strongly recommended to review their standard contracts and general trading conditions to ensure that they do not include prohibited clauses.

6. Amend the existing regulations on specific trading forms to clearly cover internet-based and cross-border trading activities.

Organizations/individuals conducting trading on the internet would be required to inform consumers about the details of transactions. The Draft Law also includes some specific obligations for intermediary platform service providers and operators. The Draft Law also covers cross-border continuous service providers who have no presence in Vietnam. In such cases, the cross-border service providers are required to appoint and announce their authorized representative in Vietnam, and the authorized representative is obligated to act in accordance with the Draft Law.

Potential impact: Organizations/individuals conducting internet-based and cross-border trading activities with consumers might be subject to various new requirements under the Draft Law. Thus, these organizations/individuals are recommended to keep a close eye on the Draft Law to be prepared to comply with the new law as soon as it is adopted.

7. New requirement for publishing a warranty policy and consumers’ complaint resolution policy.

The Draft Law requires that trading organizations/individuals publicly announce their warranty policy, and that this policy must cover at least the warranty term, content, scope, method and exemptions of warranty liability. The Draft Law also stipulates that trading organizations/individuals must formulate and publish the process for receiving and resolving consumers’ complaints in conspicuous locations at their headquarters and business locations, as well as on their websites and applications (if any).

Potential impact: If adopted, the Draft Law will introduce more compliance requirements. Thus, companies should formulate, review and revise their warranty policy and consumers’ complaint resolution policy.

8. New regulations on dispute resolution with consumers.

Under the Draft Law, commercial mediation centers could also act as a third-party mediator to disputes with consumers. Additionally, social organizations for the protection of consumers’ interests could be directly involved in the negotiation between consumers and trading organizations/individuals to facilitate the negotiation process and/or act as a witness to the negotiation results.

Potential impact: If adopted, the Draft Law will support the use of more flexible dispute resolution mechanisms, such as commercial mediation, for disputes with consumers. Manufacturers and distributors are recommended to use a flexible mechanism to maximize their chances in disputes.

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Given that the Draft Law has not yet been adopted by the National Assembly, it remains to be seen what the final contents of these proposals will be. 

If you would like to discuss the impact of the Draft Law, please feel free to reach out to us through the contact information provided in this alert.