Why Beijing has put e-commerce sector’s ‘refund-only’ policy and PDD under scrutiny

The State Administration for Market Regulation and the Ministry of Commerce have directed Pinduoduo owner PDD to fix this practice

Reading Time:3 minutes

The intervention by regulators reflects how the “refund-only” practice has been abused and hurt online sellers’ earnings. Photo: Shutterstock

Published: 10:00pm, 12 Dec 2024Updated: 11:10pm, 12 Dec 2024

The “refund-only” policy in China’s e-commerce sector – where consumers can get back money for goods bought from merchants, without returning the products – is now under scrutiny, as analysts point to how the practice has been abused in the local market.

China’s market regulator has directed PDD Holdings, operator of popular budget-shopping platforms Pinduoduo on the mainland and Temu overseas, to fix this refund-only practice, according to a Bloomberg report on Wednesday.

The State Administration for Market Regulation (SAMR) and the Ministry of Commerce have summoned PDD executives to a meeting in Beijing over the matter, according to the report. The regulators did not slap PDD with any punishment.

PDD did not immediately respond to a request for comment on Thursday. No information about PDD’s meeting was found on the two agencies’ website.

The intervention by the SAMR and the Commerce Ministry reflects how an unchecked and aggressive “refund without return” practice has been abused and hurt online sellers’ earnings.

“The policy has been used by platforms to leverage their dominant position to attract consumers at the expense of merchants, leading to unfair practices and market distortion,” said Wu Libin, senior partner at M&T Lawyers. “Regulatory intervention aims to balance interests between platforms and merchants, while ensuring fair competition.”