China’s e-commerce platform Pinduoduo’s overseas platform Temu’s penalty policy has sparked controversy. Recently, hundreds of merchants protested at its headquarters in Guangzhou. Reportedly, Temu is facing fines totaling up to 1.14 billion yuan.
On July 29, hundreds of merchants gathered outside Temu’s headquarters in Panyu District, Guangzhou to safeguard their rights and protest. Dozens of them entered the 25th floor office area in hopes of negotiating with Temu’s executives regarding the frequent issuance of penalties but were unable to meet with them. Subsequently, the police advised these merchants to leave, citing trespassing.
Many small merchants complained that Temu has established strict terms, imposing huge “fines” if customers complain or request refunds. In recent months, these penalties or fines have significantly increased without clear explanations.
One group of protesting merchants compiled a list of 279 penalty records amounting to 1.14 billion yuan.
According to the China Securities Journal, Zheng Long (pseudonym), who rushed from Putian, Fujian with two employees to support the rights protection on-site, revealed that his four shops on the Temu platform accumulated fines and reserved funds of 1.6 million yuan, with each store being fined tens of thousands of yuan per month on average. The cash flow crisis caused by penalties, deposits, and other frozen funds has led to the factories being unable to pay wages.
Currently, the rights-protected merchants mainly focus on categories such as clothing, 3C products, luggage, shoes and hats, and toys with more after-sales issues, with relatively fewer penalties in the department store category. Zhang Hua (pseudonym), a merchant from Taizhou, Zhejiang, operating in the clothing category on Temu, stated that his total reserved funds and fines on the platform amount to 1.01 million yuan. The platform claims that the reserved funds are frozen funds reserved for potential after-sales penalties.
Several merchants disclosed that since March this year, Temu has released a large number of lists of fines, mainly due to “after-sales issues,” without explaining the specific problems in each case. The minimum penalty is not settling the payment, while the maximum penalty is a fivefold compensation based on the declared price of the goods in addition to not settling the payment.
Reports mentioned that from May this year, merchants have been in communication with Temu regarding penalties. By early July, more than a dozen sellers were directly involved in negotiating with Temu, visiting Temu headquarters and local petition departments about ten times seeking resolution. On July 22, hundreds of people protested outside Temu headquarters holding banners for rights protection. On July , there were hundreds of merchants at Temu headquarters.
On July 30, Pinduoduo released a statement, mentioning a dispute amounting to millions without referring to the previous day’s protest, and indicated that merchants refused to resolve disputes through normal arbitration and legal channels as stipulated in the seller agreement. “The current situation is stable, with the company actively cooperating with merchants to seek solutions.”
Currently, Temu, which is expanding aggressively worldwide, faces continuous troubles concerning customer data security, and low-priced dumping.
On July 2, Tim Griffin, Attorney General of Arkansas, stated to Fox Business Network, “The threat from China is not a new one but a real one; Temu is not an online marketplace like Amazon or Walmart but a company using the sale of goods as a means for data theft.” The company is using malicious and spyware to “enter your phone and device, collect your data.” Griffin’s office filed a lawsuit against Temu the previous week.
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Early this month, citing three sources, the Financial Times reported that the EU is considering imposing tariffs on goods sold by Chinese e-commerce giants Shein and Temu to prevent the influx of low-quality goods from China into various EU countries.