Pinduoduo imposes stricter rules on merchants to crack down on fake goods

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Chinese social e-commerce platform Pinduoduo has vowed to protect consumers’ rights and cut down on fake goods by increasing its oversight of merchants on its platform, reports Chinese media.

The company will evaluate sellers through business operations appraisals, comments from users, and credit information from government sources. The new set of policies will be implemented on Jan. 1, 2019.

The company was not immediately available for an official response, but a member of its hotline staff confirmed to TechNode that the policy is now available to all storeowners within the Pinduoduo app.

The company claims that merchants with bad evaluations will be put on a watchlist, downgrading their products in search results or even forbidding them to be sold on the platform. In severe cases, untrustworthy storeowners can be blacklisted by the company and reported to market regulation authorities.

Pinduoduo, which listed on the Nasdaq in July, has been cracking down on merchants since its IPO, following lawsuits and investigations into the proliferation of fake goods on its platform. According to reports, in compensation for selling counterfeits, discredited merchants would pay up to 10 times the historical sales revenue from a problematic product.

Since July investors have filed lawsuits in the US against the company claiming that they had been misled ahead of its IPO. The filings followed an investigation into Pinduoduo by Chinese regulators after it was accused of selling fake goods. The announcement caused the company’s share price to plummet, resulting in losses for investors.

Following the increased scrutiny, 14 storeowners protested outside the company’s office in Shanghai, claiming that the company had infringed upon their rights through improper evaluation standards.

The Chinese e-commerce giant has followed a similar path to its rival Alibaba-owned marketplace Taobao, where a flood of fake goods culminated in government intervention in 2015. The company was censured by the State Administration for Industry and Commerce after 60% of its products were identified as being fake.