VietNamNet Bridge – Decree 181/2013/ND-CP, effective from January 1, 2014, will impose stricter controls on the advertising of products and services that may have a direct impact on health and the environment.

Decree 181 offers a bewildering and ambitious array of rules and regulations related to advertising of certain products hosted on websites outside of Vietnam.

 

The new decree also tightens the activities of offshore online advertising service providers, Baker & McKenzie Vietnam partner Nguyen Lan Phuong provides an indepth look at what the changes mean.

Under Decree 181, advertising for certain products and services (see table below) must be approved by the Ministry of Industry and Trade, Ministry of Health, or Ministry of Agriculture and Rural Development. The ministries will be required to accept or reject any application to advertise these products and provide reasoning for their decision within 10 working days. In practice, this means that adverts for these types of products will now be subject to the highest level of scrutiny. Delays seem inevitable.

Advertising activities on foreign websites

The government has recently stepped up efforts to monitor the advertising activities of foreign websites whose servers are located outside Vietnam. This effort appears to aim at achieving two goals, one is to exert state management on advertising targeted at Vietnamese eyes, the other, which is probably more important, is to collect well-deserved tax revenues from these seemingly lucrative activities of offshore websites.

Decree 181 is another step toward these targets, as it has one exclusive chapter to govern this matter.

Foreign websites (defined as websites of foreign organisations or individuals with servers located outside of Vietnam that provide advertising to users inside Vietnam) must enter into a contract with Vietnam-based advertising companies in order to provide cross-border advertising services for Vietnamese customers on their foreign websites.

At the other end of the spectrum, Vietnamese organisations and individuals that want to advertise their goods and services on a foreign website must enter into a contract with a legally registered advertising company in Vietnam to place such advertisements on a foreign website.

The revenues from advertising activities of foreign websites incurred in Vietnam are subject to taxes in accordance with the provisions of Vietnam’s tax laws.

Decree 181 provides certain conditions for foreign websites to meet, such as complying with Vietnamese laws on the internet and online information use, supply and management. It remains to be seen in practice if these conditions would be practical given that they would impinge on existing laws in countries abroad, and how these foreign websites could be made subject to Vietnamese registration requirements.

Decree 181 also puts the burden of notification on the owners of the foreign websites. In particular, the foreign websites must notify in writing the Ministry of Culture, Sports and Tourism about the name and the main business lines of the Vietnamese advertising counterpart company at least 15 days before airing the advertisements. It is noteworthy that the Vietnamese government dumps this obligation on the foreign websites, instead of on the Vietnamese advertising companies. What language, what form of delivery, what consequences in case of failure for the notification from abroad to reach the Vietnamese competent authority, have yet to be addressed in the decree.

The Vietnamese advertising company must also meet certain conditions. Notably, they will be responsible for the advertising of products, and must do bi-annual reports to the Ministry of Culture, Sports and Tourism.

As a result of these stricter rules, major foreign websites in theory would find they need to work with Vietnam-based registered advertising companies. This will create both opportunities and challenges for Vietnamese advertising companies to pair up with foreign partners to meet increasing demands for online advertising in the domestic market.

Outdoor advertising planning

Guidance for advertising regulations in public spaces has been long-awaited; however, Decree 181 only offers some high-level direction on the matter. It provides just general guidance on the acceptable location of outdoor advertising. It also outlines the need for a dossier to be submitted for outdoor advertising planning. What seems odd is that Decree 181 bestows the provincial people’s committees with the tasks to propose and prepare the plans for outdoor advertisements, and to approve their own plans and to finally implement such plans. There seems a lack of concrete criteria for these planning activities or any checks and balances.

Representative offices for foreign advertising companies

Decree 181 does not improve on the previous Decree 24 governing advertising activities, in the sense that the chapter on representative offices is unnecessarily included in this decree, and largely overlaps Decree 72 on representative offices of foreign businesses in Vietnam. The administrative procedures for obtaining a license and any amendment are quite similar to the general regulations under Decree 72, with the exception that applications for the establishment of representative offices for advertising companies must be filed with provincial people’s committees. It would make more practical sense for the decree to assign this task to a department under a people’s committee, such as the local departments of culture, sports and tourism.

Decree 181 goods that require permission before being able to be advertised

Drugs, cosmetics, foods and food additives, chemicals and bactericide products used in healthcare and household activities, medical devices, dairy and nutritional products for children, healthcare services, plant protection products, fertilizers, biological products used in cultivation, cattle and poultry feeds, and biological products used in animal husbandry, plants, and animals

The other point that is worth noticing is that Decree 181 no longer provides for the establishment of a branch of a foreign advertising company in Vietnam. Practically speaking, this reflects reality, because hardly any foreign advertising companies have ever been licensed to establish a branch in Vietnam.

Conclusion

Decree 181 is designed to exert stricter control at a ministerial level on the advertising of certain products and services. What has not changed is the typical approach that imposes controls through red tape and approvals. Control on the activities of offshore advertising websites has also been introduced in an ambitious attempt to manage tax revenues.

Source: VIR