Understanding Vietnam’s Draft E-Commerce Law: A New Era of Regulation
Vietnam’s e-commerce sector, rapidly expanding and now valued at approximately $32 billion as of 2024, is on the brink of significant transformation. The Draft E-Commerce Law, introduced by the Ministry of Industry and Trade (MoIT), seeks to overhaul existing regulations to better accommodate the evolving digital landscape. Such moves not only aim to strengthen consumer protections but also impose stricter compliance measures on both domestic and foreign businesses.
Background: The Current Regulatory Landscape
Vietnam’s e-commerce is currently governed by Decree No. 52/2013/ND-CP and its amendments, including Decree No. 85/2021/ND-CP. While these regulations marked pivotal steps in defining online transactions and platform operations, they leave considerable gaps in crucial areas such as counterfeit goods, livestream selling, and cross-border enforcement. As digital commerce expands, a more comprehensive framework is urgently needed.
Key Developments in the Draft E-Commerce Law
The Draft E-Commerce Law comprises several critical provisions designed to address the existing regulatory shortcomings and enhance accountability among various stakeholders in the e-commerce ecosystem.
Platform Classification
The new law introduces a four-tier classification system for e-commerce platforms:
- Direct Business – Companies selling products directly to consumers.
- Intermediary Platforms – Services that connect buyers and sellers.
- Social Media with E-Commerce Functions – Platforms that also facilitate buying and selling.
- Multi-Service Integrated Platforms – Those offering a combination of services, including e-commerce.
While this categorization is more reflective of the diverse business models in the e-commerce landscape, the criteria for differentiating these categories still require clarity.
Stricter Operator Responsibilities
One of the cornerstone features of the draft legislation is the introduction of stricter responsibilities for platform operators. Key mandates include:
- Identity Verification: Platforms must verify the identities of all sellers, including international operators.
- Content Moderation: Automated systems are required to monitor and remove unlawful content within 24 hours of receipt of a complaint.
- Data Retention: Platforms must maintain transaction data, including livestream records, for a minimum of three years.
Moreover, large-scale platforms will need to implement sophisticated complaint-handling systems to enhance consumer support.
Focus on Livestreaming and Affiliate Marketing
The draft law acknowledges the growing impact of Key Opinion Leaders (KOLs) and Key Opinion Consumers (KOCs) in influencing purchasing decisions. These influencers will now be classified as sellers and subject to the same regulatory obligations, including:
- Real-time monitoring of livestream content.
- Immediate action against any violations.
This measure aims to safeguard the credibility of online transactions in an ever-evolving digital marketplace.
Cross-Border E-Commerce Regulations
To tighten control over foreign platforms, the draft emphasizes stricter entry requirements. Key proposals include:
- Legal Representation: Direct sales platforms must appoint a legal representative in Vietnam.
- Local Legal Entity: Intermediary and multi-service platforms are required to establish local entities, demonstrating use of Vietnamese language or meeting specified transaction thresholds.
These requirements signify a substantial push for local accountability, with serious implications for taxation and consumer protection compliance.
Supporting E-Commerce Services
The draft law extends its regulatory reach to supporting services crucial to e-commerce, including logistics, payment services, and electronic contract authentication. This integration is aimed at promoting accountability across the supply chain, ensuring that all components work in synergy to uphold consumer rights.
Algorithm Transparency
For the first time, there is an expectation that large digital platforms will disclose their algorithms upon request from regulatory authorities during inspections. This disclosure is intended to facilitate oversight but also prompts concerns around intellectual property rights and confidentiality. Operators must ensure that proprietary information is balanced against regulatory requirements.
Enhanced Consumer Protection and Tax Compliance
The Draft E-Commerce Law significantly boosts consumer rights, offering:
- Greater control over personal data.
- Options to cancel transactions under certain conditions.
- Streamlined dispute resolution mechanisms for efficient conflict management.
On the seller side, enhanced obligations will include accurate product information and responsiveness to consumer complaints, thus fostering a trustworthy e-commerce environment.
Tax compliance is another vital element, introducing a withholding tax for e-commerce transactions aimed at curbing tax evasion, thus ensuring equitable contributions from all sellers, both local and foreign.
Challenges Ahead
Despite its forward-thinking approach, the draft law does not come without challenges, particularly in implementation. The multifaceted nature of oversight requires impressive coordination among multiple agencies, an area where Vietnam has historically faced hurdles.
Additional challenges include:
- Digital Infrastructure: Insufficient digital infrastructure may impede the ability to enforce real-time monitoring and extensive data retention mandates.
- Compliance Burdens: Small and Medium Enterprises (SMEs) and foreign investors may find the compliance requirements particularly taxing, necessitating investments in systems to meet regulatory expectations.
The demand for algorithm disclosure also poses significant dilemmas around intellectual property protection.
Business Implications
The Draft E-Commerce Law marks a significant shift in Vietnam’s regulatory approach toward e-commerce, emphasizing accountability and consumer protection across various platforms and stakeholders. For businesses, it is crucial to assess their compliance frameworks early to adapt to the new regulations effectively.
Companies operating in or entering Vietnam will need to proactively develop local presences to align with regulatory stipulations, particularly concerning platform classification and seller verification. Embracing these compliance obligations not only mitigates risks of penalties but also positions businesses favorably as trusted entities in Vietnam’s burgeoning e-commerce sector.
By preparing for these changes now, companies can navigate the complexities of Vietnam’s evolving digital economy with confidence.