Lax rules open doors for online fraud

08:00 | 24/08/2018

With the e-commerce market booming, the sales of counterfeit and prohibited products have become increasingly widespread. Both consumers and e-commerce companies are urging market regulators to take measures to resolve the industry-wide issue and ensure a better online shopping experience. Huong Van reports.

lax rules open doors for online fraud
Vietnam needs new policies to tighten management and penalties to improve the quality of the e-commerce market, Photo: Le Toan

Vietnam’s authorised agencies have recently inspected Shopee Vietnam after various media outlets had reported on third-party vendors selling illegal toys on its e-commerce marketplace. The e-commerce website was accused of selling toys depicting a Chinese map violating Vietnam’s sovereignty. Shopee Vietnam was ordered to remove listings of the illegal toy map depicting the illegal nine-dash line that China has used to claim Vietnamese territory in the East Sea.

However, Shopee is not the only e-commerce company that has caused trouble for customers with its lax management of vendors. Lazada.vn has also repeatedly been in hot water over the past few years, with numerous complaints from customers about used items, fake promotions, and wrong prices, among other issues.

Information provided by the Vietnam Competition Authority (VCA) under the Ministry of Industry and Trade shows that Lazada.vn received the most complaints of all comparable e-commerce sites in 2017.

Meanwhile, Sendo.vn, which is operated by Sen Do Technology JSC, a member of FPT Group, also received complaints on online forums and social networking sites. In June 2018, several customers reported that they had bought a large batch of phone cards from Sendo’s e-commerce platform, but all of the cards were used.

Additionally, counterfeit branded products are found on e-commerce websites like Lazada.vn and Shopee.vn. Many famous international brands like Chanel, Nike, Adidas, Fila, and Converse, as well as a series of cosmetics and accessories, are regularly advertised for sale at extremely low prices compared to authentic goods.

Easy registration and loose management

Currently, the relaxed conditions for business registration make it easier for e-commerce companies to attract a large number of vendors, but make the quality of goods an industry-wide problem.

Lazada.vn, the e-commerce platform backed by Recess Co., Ltd., has around 10,000 shops, over 500,000 items, and one million users. The company has used aggressive marketing strategies to attract customers, increase the number of listings, and develop quickly after six years of operations in Vietnam.

Likewise, Shopee Vietnam has lured a large number of vendors to its platform. Just one year after its official launch in 2016, the company’s app has garnered a total of four million listings. Meanwhile, Sendo has about 200,000 operational online shops on its e-commerce platform after six years of operations.

However, the problem lies in the undemanding terms and conditions for registering to sell on an e-commerce platform. Sellers only need to fill out basic information like name, age, address, phone number, email, and give a password, without any ID number or business licence needed. These rules apply to all e-commerce websites at the moment.

Although this was originally meant to create an open policy for e-commerce companies to attract e-retailers and develop their online shops, it has already shown shortcomings. For instance, if an online shop is sanctioned, the owners could register the same shop under a different name without any issues.

Nguyen Thi Viet Phuong, a vendor on Shopee.vn, told VIR that the easy registration is a “double-edged sword.” “It helps vendors to easily create an online shop instead of implementing a lot of complicated procedures to open a real shop. This is an opportunity for everyone to do business online.”

“However, the easy registration has increased the number of ‘dirty’ accounts and vendors. Due to fierce price competition, a lot of shops resort to false advertising,” Phuong said.

Crackdown on infringement and counterfeit

As the Vietnamese e-commerce market is in the initial stages of development, many say it is normal to see fast-growing e-commerce companies having issues with compliance.

Tran Tuan Anh, director of Operations and Finance at Shopee Vietnam, said that e-commerce companies are working hard to crack down on counterfeits. However, they still face challenges in dealing with millions of product listings.

“Selling low-quality products will not only affect the consumers, but also the e-commerce platform itself. It is obvious that e-commerce firms do not want a negative impact from these quality management issues,” he said.

On the same note, Nguyen Ngoc Dung, deputy chairman of the Vietnam E-commerce Association (VECOM), said that e-commerce companies have taken measures to deal with counterfeiting problems. “They remove thousands of listings violating their terms and conditions every day,” he said. “E-commerce companies have stepped up their quality management practices by applying new technology and forming specialised teams with a focus on monitoring online listings.”

Strengthening management mechanisms

According to Germany-headquartered Statista, an online statistics, market research, and business intelligence portal, Vietnam had around 35.4 million e-commerce users in 2017. In 2018, the number of e-commerce users is forecast to reach 37.3 million.

Moreover, e-commerce platforms have been receiving more and more investment. Last week, Sendo received a total of $51 million from Japan’s SBI Holdings and other companies based in Asia, including Daiwa PI Partners, Softbank Ventures Korea, and SKS Ventures. In 2014, Japanese companies poured around $18 million into Sendo.

Meanwhile, Chinese billionaire Jack Ma’s Alibaba has invested $4 billion into Lazada Group SA between 2016 and 2018, to develop six Southeast Asian markets. Tiki.vn has also received $44 million from China’s JD.com and $17 million from Vietnam’s VNG, while Shopee Vietnam has received $500 million from China’s Tencent (through SEA Ltd.). Amazon seems to have also set its sights on Vietnam, as it is preparing to carry out plans for developing markets in the region.

With the strong development of online businesses, many feel Vietnam needs new policies to further tighten management, supervision, and penalties to improve the quality of the e-commerce market and reduce problems for customers.

Nguyen Van Tuan, director of Vietnam Communication Corporation’s Zamba Department, which develops e-commerce projects, told VIR that it is very difficult for e-commerce platforms to honour their responsibilities because they are quite similar to a “real” market. An e-commerce platform can close scam shops and ban the associated accounts, but it does not have the power to prevent such a situation. Vendors can just register another account for a new shop.

“Although we have already notified vendors to not sell prohibited products, it is hard to check the quality of their goods. Even e-commerce giants like Amazon and Alibaba have been called out for similar problems,” Tuan said and affirmed the need for a legal framework and state sanctions to deal with fraudulent sellers.

In order to deal with these problems and strengthen management mechanisms, the Ministry of Industry and Trade (MoIT) plans to publish a list of e-commerce websites and mobile applications that have violated laws and regulations on online trading in the near future.

The ministry is also working on a draft circular on the management of e-commerce websites and mobile applications to reduce the shortcomings of the currently effective Decree No.52/2013/ND-CP on the management of online business forms.

Dang Hoang Hai, director general of the MoIT’s E-Commerce and Digital Economy Agency, told local media that the draft circular would require e-commerce websites to register or notify the ministry as prescribed by the law.

The draft circular also stipulates that organisations and individuals using e-commerce websites and mobile apps are not allowed to trade prohibited products like shotguns, sports weapons, and cigarettes, among others.

Violators would have to remove prohibited products from their e-commerce websites. In addition, owners of e-commerce websites would be required to implement technical solutions to prevent and remove listings of counterfeit or smuggled goods or products as well as services violating intellectual property rights.

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