The Chinese e-commerce site Pinduoduo finds itself at the center of investigations into the sale of counterfeit goods by third-party traders. The Chinese Market Surveillance Authority (SMAR) called for a respective initiative at the beginning of August, only a few days after Pinduoduo’s initial public offering on the Nasdaq in New York. Pinduoduo, which has grown into China’s third largest online marketplace after Alibaba and JD.com in just three years, merges shopping and social media features: Merchants sell their goods on the platform and users receive considerable discounts if they share products with friends who also buy them.
Moreover, several lawsuits against Pinduoduo have already been filed by US investors, say Chinese media reports. The suits argue that the trading platform has misled investors: As its measures against the sale of counterfeits by third parties are ineffective, the company’s revenues are based on unlawful conduct, so the plaintiffs’ claim. Meanwhile, trademark owners are demanding the takedown of fake goods off the platform. For instance, US diaper manufacturer Daddy’s Choice accuses Pinduoduo of knowingly allowing the sale of counterfeits carrying its trademark.
Reacting to this, Pinduoduo now wants to take more vigorous action against piracy, as CEO Colin Huang explains. According to company information, Pinduoduo has reached an agreement with nearly 500 brand owners to jointly combat counterfeiting. Also, it has recently removed 10.7 million suspicious products from its platform and blocked another 40 million suspicious links. Huang further maintains that Pinduoduo is “the first and one of the few platforms in China that have insisted on a 10 times penalty” for counterfeits. Nevertheless, he admits “there is still quite a lot to do on eliminating infringement offenses on our platform.”
The e-commerce platform’s latest updates therefore are to put more emphasis on brands, for example with flagship stores featured in Pinduoduo’s new “Branded Goods Pavilion”. New investments in anti-counterfeiting technologies are also planned, including improvements to Pinduoduo’s search algorithms that would steer customers away from fakes and towards branded products.
Pinduoduo, a Shanghai-based company whose business works with large discounts, now has over 300 million users in China. It is far from being the only online marketplace accused of inadequate controls against counterfeiting: Chinese e-commerce giant Alibaba and its US rival Amazon have also been denounced for allowing counterfeit sales by third parties (we reported).