Due to Pinduoduo’s frequent violation of intellectual property rights and undermining business rules of the Chinese market, the company faces prosecution. The startup’s fraudulent actions led to 248 Chinese companies to sue the company. Similarly, the crackdown in the quality of products in the platform resulted to dispute its dispute with store owners.
According to store owners doing business on Pinduoduo, the platform executed improper standards in evaluating products. One of the issues concerning Pinduoduo app is the frequency of occurrence of fake goods in this social networking-based e-commerce platform. Among the fake products frequently occurring in the platform are sex and violent items.
This and the selling of unauthorized series of products has caused a consumer confidence crisis. Following this, the platform launched an internal quality and authenticity check to find out fake goods. The suspicious products examined were then labeled in quality ranks, A, B, C, and D. A is the quality rank to represent the worst situation.
Piduoduo’s punishment for the unauthorized online shops was the freezing of the store owner’s business trading accounts and orders. The platform also demands the owner to compensate for consumers’ loss through payment of up to 300% of respective sales revenues. Many store owners on Pinduoduo faced this consequence.
According to an owner, his products were labeled A goods without any explanation. The store owner has only been operating legally for three months. Moreover, he told the Chinese local media that he didn’t understand why all of his trading orders in those three months were frozen when he’s only sold one shipment of the goods.
Besides freezing his business account and trading orders, he also has to pay an added RMB 180,000 fine. The fine is necessary if the business owner wants to resume his business on the platform. But his complaints about Pinduoduo don’t end here. He also said he was informed of the check result only through chat texts. There were not even any examination reports or witnesses available.
The store owners protested at the office building of Pinduoduo to demand an explanation. However, the platform’s response is that it maintains their punishment decision for all the stores. According to them, they have solid evidence backing the counterfeit activities of said store owners. Pinduoduo is pushing an IPO to NASDAQ and this action could be a show that their platform isn’t a place for counterfeit items.
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