#Notorious: Pinduoduo joins Taobao on US ‘naughty list’ for counterfeit goods

Addressing knockoff goods could be tricky given Pinduoduo’s key selling point and the demography of its customer base.

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#Notorious: Pinduoduo joins Taobao on US ‘naughty list’ for counterfeit goods

China’s third-largest e-commerce platform Pinduoduo is now featured on the ‘Notorious Markets’ list compiled by the Office of the United States Trade Representative (USTR) for 2018.

The list highlights marketplaces that reportedly enable substantial copyright piracy and trademark counterfeiting. It includes streaming, torrent, and direct downloading sites that facilitate the distribution of pirated content, as well as e-commerce platforms that proliferate counterfeit goods, especially via consumer-to-consumer sales.

Altogether, the 2019 Notorious Markets List highlights 33 online markets and 25 physical markets chosen because of the scale of their infringing activities and the damage they cause.

Pinduoduo’s inclusion on the list is a first for the company, which, for better or worse, reflects its growing influence in the global shopping landscape. Alibaba’s marketplace Taobao is a fixture on the list, as are most major online marketplaces in Southeast Asia, including Shopee, Tokopedia, and Carousell.

Founded in 2015, Pinduoduo earned a reputation for offering incredible bargains for bulk orders, with groups of users encouraged to pool their resources—a purchasing behavior the company calls “social commerce”.

The company listed on Nasdaq in July 2018. Last year it claimed to have 418.5 million active buyers, up 71% year-on-year, and 3.6 million active merchants, up from 1 million since March 2018, with annual revenue rocketing 652% to RMB 1.7 billion (USD 253 million).

Shortly after going public, it was investigated by China’s State Administration for Market Regulation for facilitating the proliferation of counterfeits on its site.

One common transgression witnessed on Pinduoduo, according to the USTR report, is the sale of “Shanzai” products or imitation products, which tap into loopholes in Chinese trademark law.

Yet addressing the issue of knockoff goods on Pinduoduo could be tricky given the platform’s selling point (low prices) and its customer base. An estimated 65% of Pinduoduo’s users are from China’s lower-tiered cities and rural areas—locales where shoppers are more likely to be price- rather than brand-conscious.

Still, Pinduoduo has signaled its intent to curb counterfeits on its platform. Last month, the company said it had removed 60,000 stores and blocked 30 million links for copyright infringement, and planned to add 500 staffers to fight the spread of counterfeits on its site.

Editor: Nadine Freischlad