Central and Shanghai market regulators have launched investigations into complaints, led by Shenzhen-based television manufacturer Skyworth Group, that counterfeits are sold on Pinduoduo Inc's online discount platform.
The State Administration for Market Regulation released an announcement on its official website on Wednesday, which said that they are paying significant attention to the many reports of infringement and counterfeit products sold on Pinduoduo's e-commerce site.
Whether it is the online platform itself or the business owners selling such products on the platform, any party that has violated the law will face legal punishment, the authorities said.
The Shanghai Municipal Administration for Industry & Commerce said on Wednesday it had grilled Pinduoduo's manager the previous day.
The central government's regulator said it has asked the company to launch an internal review and enact any necessary corrections immediately. The problems reported by media, consumers and trademark owners should be rectified, it said.
Pinduoduo said in an announcement released later on Wednesday that it will cooperate with market regulators, further cracking down on infringement and counterfeit products sold on the platform.
"Pinduoduo has never produced a single counterfeit product and has been making all efforts to crack down on such goods. We have done a lot, but our actions remain far below people's expectations. Apart from retrospection and self-examination, we will work harder to improve our ability to fight against counterfeits," the company said in a statement.
Skyworth was the first company to urge Pinduoduo to stop displaying and allowing sales of counterfeit products, but is by no means alone in its allegations. Information provided by the China E-Commerce Research Center shows that Pinduoduo received the most complaints among all such websites in China in 2016.
But, Pinduoduo said on Wednesday that it removed more than 10.7 million problematic products last year and blocked 40 million links related to infringing products. The company has a blacklist to permanently block companies found selling fake products on the platform, it said.
Huang Zheng, Pinduoduo's CEO, said in a news conference on Tuesday that people have confused the concepts of fake and copycat products.
"Those which can be defined as fake products are much fewer than the media imagines," he said.
Cheng Qiang, partner at Dentons law firm in Shanghai, said that there is not yet a clear definition for copycat products according to current laws in China. But, such products bear resemblance to well-known brands and products, either in name or appearance, he said.
If consumers can tell the difference, then there is no infringement. But if the difference is so subtle that consumers can be easily misled, this indicates infringement of the trademark and appearance patents, Cheng said.
Pinduoduo kicked off its IPO plan in late June. Although its share price surged over 40 percent on the first trading day when it listed on the Nasdaq stock exchange on July 26, the price slumped 15 percent in the following three trading days.