Pinduoduo Hit by Accusation of Counterfeiting

Pinduoduo Inc. is suffering its first setback less than a week after listing in New York, as a Chinese television-maker is demanding the e-commerce site withdraw a slew of fake products carrying its TV brand.

Skyworth Digital Holdings Ltd., one of China’s top TV-makers, issued a statement (link in Chinese) on its official WeChat account on Saturday, asking Pinduoduo to immediately stop selling such knockoffs and noting that it reserves the right to sue the site for selling phony products.

The statement comes after Pinduoduo, backed by social media giant Tencent Holdings Ltd., made a strong debut on the Nasdaq Stock Market on Thursday, following a $1.63 billion initial public offering that was one of the biggest floats by a Chinese enterprise this year.

Pinduoduo has long faced allegations that some products on its platform are fake or substandard — a problem it must now confront after going public.

“We have noticed that recently, there have been enormous sales of counterfeit Skyworth TVs on Pinduoduo, which seriously undermines the rights of consumers and our company brand,” the statement said.

The Shenzhen-based Skyworth urged consumers to buy its products on its official website or call its customer hotline for product authentication. In the post, it showed a screen grab of four TV sets on the Pinduoduo mobile app, all carrying logos containing the word “Skyworth,” but they were not the company’s products.

If Pinduoduo wants to maintain its success in the long term, it has to “take responsibility to control and manage the products’ quality and their safety on its platform,” said Jia Mo, a Canalys technology analyst based in Shanghai.

“It also needs to repair its relationship with manufacturers hurt by the fake products sold on Pinduoduo, as well as the consumers who bought such goods,” he said.

Pinduoduo said it has a policy that if a fake product is sold, the seller is required to compensate the buyer 10 times the price of the product.

Pinduoduo’s American depositary receipts finished their first trading day at $26.70, up 40% from the listing price of $19. On Friday, its shares closed down nearly 8% at $24.60, leaving it with a market cap of $27.3 billion.

The three-year-old platform is noted for its group-purchase model that encourages buyers of groceries, electronics and other goods to invite their friends to join to get discounts.

“Pinduoduo offers various aggressive discounts, which are attractive for bargain-hunting customers,” said CCB International in a research report released on July 19. “This appeal has helped grow the platform, most notably attracting elderly people that have not previously touched e-commerce.”

The company now ranks third among China’s e-commerce giants in terms of sales, behind Alibaba Group Holding Ltd. and JD.com Inc.

A previous version of this story misidentified Pinduoduo's parent company.

Contact reporter Jason Tan (jasontan@caixin.com)