In Depth: E-Commerce Platforms’ Buyer-Friendly Policies Leave Door Open for Scammers

In post-pandemic China, consumer demand has decreased, causing e-commerce platforms to introduce customer-friendly policies that inadvertently allowed scams to flourish, burdening sellers. Platforms like Alibaba’s Taobao, JD.com, and Pinduoduo implemented a “refund only” policy and return shipping insurance, both exploited by fraudsters at the expense of sellers.[para. 1]Scammers leverage the “refund only” policy by purchasing products to resell and then requesting refunds, benefiting from the platform's consumer-centric approach, which often blocks sellers’ attempts to reclaim losses.[para. 3]Pinduoduo, implementing “refund only” during prosperous times, saw significant growth, outpacing its competitors despite the economic downturn, compelling rivals to adopt similar policies to maintain market competitiveness.[para. 4][para. 5]This intensified seller frustration, leading to protests with sellers overwhelming stores with false orders, illustrating the backlash against the policies.[para. 7]

The return shipping insurance policy has been manipulated by fraudsters who order in bulk and then request refunds while misleading platforms into covering the discrepancies between the insurance payout and lower actual shipping costs.[para. 8][para. 9]This organized scam network involves merchants, couriers, and tech providers, further eroding trust and increasing financial burdens on sellers as competition among platforms heightened such schemes to proliferate.[para. 10]Experienced sellers, familiar with platform loopholes, exploit these vulnerabilities, worsening the scams’ impact and prompting authorities’ ineffective responses due to the schemes' complexity and cross-jurisdictional nature.[para. 12][para. 24]Despite these efforts, platforms’ consumer-oriented policies and slow countermeasures continue to shield fraudsters, with sellers often left defrauded and helpless[para. 18][para. 20].

New policies by platforms like Taobao and Pinduoduo have initiated a crackdown against such abuses, offering sellers more rights, supporting appeal processes, and implementing consumer behavior checks to identify fraud.[para. 25][para. 27]New regulations effective September 1, 2023, further deter platform operators from imposing unfair merchant restrictions, promoting an equitable competitive environment.[para. 28][para. 29]Escalating competition has also forced sellers to voluntarily offer return shipping insurance to stay competitive, yet this has inadvertently enabled insurance fraud due to weak regulations and platform policies favoring consumers.[para. 30][para. 33]Fraudsters exploit the insurance system by purchasing low-cost goods and claiming fraudulent returns, benefiting from the difference in shipping cost coverage.[para. 31][para. 32]Scams’ widespread nature has created a robust industrial chain by involving logistics networks skilled in avoiding detection and engaging multiple accounts to mitigate the risk of exposure.[para. 35][para. 37]However, ongoing police efforts and platform crackdowns have struggled with operational limitations and jurisdictional challenges, making significant reductions in scamming activities difficult to achieve.[para. 38][para. 39]

Despite platforms taking corrective actions to protect sellers, fierce competition stymied collaborative efforts to address widespread fraud, harming e-commerce’s overall integrity, according to an Alibaba insider.[para. 42]Therefore, while purported measures aim to protect the ecosystem and sellers, rivalry between platforms hinders unified solutions to tackle rampant fraud effectively.[para. 43]