Regulators in China have reportedly launched an investigation into Pinduoduo following on the heels of media reports that third-party vendors are selling fake goods on the marketplace.
According to a report in Reuters, the inquiry comes a few days after the startup raised $1.63 billion in what was China’s second largest U.S. listing by a Chinese company. The company is valued at $23.8 billion.
Citing comments the State Administration for Market Regulation made on its website, Reuters reported the government plans to interview the staff and deal with any illegal practices it uncovers, including failing to remove fake listing on its marketplace. In a statement on online news portal NetEase, Pinduoduo said it has been working to stamp out counterfeits on the platform.
“We did a lot of work but are still far from meeting society’s expectations,” Pinduoduo said in the statement. The probe noted the report could have an impact on investor expectations for the company. Tech analyst Chengdong Li told Reuters, “It’s normal to see a fast-growing startup having compliance issues,” Li said. “Essentially, it comes down to regulation on quality management.”
The Chinese startup isn’t the only one in China that has had to deal with fake goods being sold on its website. Last year Alibaba, China’s largest eCommerce player, announced it was taking steps to better police its shopping platforms. The company uses machine learning and other technologies to identify and take down counterfeit merchandise. It also relies on brands that hold the rights to team names and logos to catch fakes that its artificial intelligence tools may miss. Forbes reported last year that Alibaba has sued several fake goods sellers and worked with law enforcement to raid counterfeiting factories. According to that report, Jack Ma of Alibaba blames China’s weak counterfeiting laws, and industry experts agree that the laws could stand for some improvement.