In brief
On 20 June 2023, the National Assembly passed the Law on Protection of Consumers’ Rights (amended) (“New Law“), with an effective date of 1 July 2024, replacing the current Law on the Protection of Consumers’ Rights No. 59/2010/QH12 (“Current LPCR“). The New Law includes 80 articles addressing various issues that will have direct impacts on both onshore and offshore businesses that transact with consumers in Vietnam.
Key takeaways
Many proposed key changes under the draft law, which we have pointed out in a previous alert, have now been officially adopted under the New Law. These notable changes include the following:
1. New regulations on dispute resolution with consumers — simplified court proceedings for disputes with a transaction value of under VND 100 million (~USD 4,245).
“Consumers” is now defined under Article 3.1 of the New Law as “individuals purchasing or using products, goods, services for consumption purpose, personal use or family use and not for commercial purpose.” This new definition will broadly impact the scope of disputes classified as disputes with consumers.
The four methods for the settlement of consumer disputes remain to be negotiation, mediation, arbitration and court proceedings. In particular, as follows:
- For negotiation: the role of social organizations in the protection of consumers’ interests will be enhanced. If trading organizations/individuals refuse to negotiate with consumers, upon the consumers’ request, social organizations for the protection of consumers’ interests can forward the consumers’ request for negotiation to trading organizations/individuals, and trading organizations/individuals are responsible for notifying these organizations in writing on the negotiation result.
- For mediation: the New Law clarifies that the procedures under the regulations on commercial mediation will apply.
- For arbitration: the New Law maintains provisions under the Current LPCR, which requires trading organizations/individuals to notify the 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 the public interest.
2. 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 Law, 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 harm to consumers’ properties. For instance, companies that have defective products that potentially cause harm to consumers’ health and lives are clearly required to make a public announcement of the recall 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 that have defective products that potentially cause harm to consumers’ properties may only make announcements of the recall at their own business locations, websites, or in another equivalent manner.
Companies having defective products (regardless of the group classification) must report to the competent local authorities prior to making the recall.
The government will promulgate further guidance on the recall procedure.
3. Expanded list of prohibited actions for protecting consumers
The New Law will include a more comprehensive list of prohibited actions. This includes new prohibitions for acts such as the following:
- 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
- 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
4. Obligation for trading organizations/individuals to adopt specific protection policies for vulnerable consumers
Compared to the draft law that we previously reported on, the definition of “vulnerable consumers” is expanded. “Vulnerable consumers” are defined to be the elderly, people with disabilities, children, people of ethnic minorities, pregnant women or women who are nursing a child under 12 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”.
Trading organizations/individuals are obligated to, among other things, implement policies on the preferential rights of and provide a suitable complaint resolution mechanism for vulnerable consumers.
5. New approach for non-exhaustive list of scenarios where clauses under standard contracts and general trading conditions might be invalid due to disadvantages to consumers
Unlike the Current LPCR, which provides for a specific exhaustive list of scenarios where clauses under standard contracts and general trading conditions might be invalid, the New Law sets out an expanded list of scenarios where clauses under standard contracts and general trading conditions might be invalid. This list includes unspecified scenarios determined by the dispute resolution body as contrary to the goodwill principle of civil laws, leading to an imbalance of rights and obligations that is disadvantageous for consumers.
