Pinduoduo shutters 1,128 stores and removes 4 million listings following concerns over fake goods

Recently-listed social e-commerce giant Pinduoduo has closed 1,128 stores and removed nearly 4.3 million listings from its platform in response to concerns over the sale of counterfeit goods.

The company issued an open letter stating that the removals were made between August 2 and August 9. Representatives at the company said that in light of recent public grievances, they had realized that the platform has many problems including lack of attention to intellectual property protection.

“We are fully aware that problems that existed in the past should not continue to exist in the future,” the company said.

According to the letter, Pinduoduo has already reported 36 businesses that infringe on copyrights to the Changning District Market Supervision Administration in Shanghai. It said Pinduoduo would continue to report suspected illegal companies to the relevant local market supervisor.

Pinduoduo said while it upgrades its merchant verification system, it would be manually verifying stores on its platform. It also said that it would continue investing in technology and its workforce and that it plans to set up an intellectual property service center while encouraging merchants to apply for trademarks.

This is not the first time the company has launched a crackdown on counterfeit and low-quality goods. In  June, it found itself at odds with storeowners after freezing the accounts of stores it found selling fake products. Merchants responded by protesting at the company’s headquarters in Shanghai.

Since its Nasdaq listing, Pinduoduo has faced increased scrutiny from regulators, investors, and law firms. Audio-visual equipment manufacturer Skyworth demanded the company remove all listings of counterfeit Skyworth products from its platform. This eventually led to the State Administration for Market Regulation ordering Shanghai’s Industry and Commerce Bureau to launch an investigation causing the company’s share price to tank.

As a result, seven US law firms launched an additional investigation on behalf of investors who incurred losses shortly after the IPO. The firms’ focus is on whether Pinduoduo misled and withheld information from public investors and whether the company and its representatives violated US federal laws.

Pinduoduo’s IPO has also started conversations about income inequality in China, with a vast majority of its users being low-income earners, highlighting the need to tailor business models to this bracket of the population.