Ministry of Commerce and SAMR Review PDD Holdings' Refund-Only Policy Impact on E-Commerce

The Growing Scrutiny of Refund-Only Policy in China

The refund-only policy in China’s e-commerce sector, where consumers obtain refunds without returning products, is now the focus of regulatory scrutiny. The Ministry of Commerce and the State Administration for Market Regulation (SAMR) have summoned PDD Holdings executives in Beijing to address concerns stemming from the abuse of this policy.

Behind the Regulatory Action

Analysts highlight the refund-first approach has significantly impacted online sellers' revenues. Senior partner at M&T Lawyers, Wu Libin, stated that the policy enables platforms like Pinduoduo to attract customers while harming merchant interests.

• The practice was initially intended to protect consumer rights.
• However, it has led to increased waste as return rates soared.
• Merchants report a squeeze on profit margins due to significant return volumes.

Market Reactions

Some platforms, like Alibaba Group Holding, are adjusting their strategies amidst backlash from merchants, issuing fewer refunds to streamline operations. Meanwhile, only 1.06% of surveyed merchants expressed avoidance of disputes related to the refund-only policy according to 100ec.

Conclusion

As scrutiny over PDD Holdings intensifies, industry stakeholders urge a reevaluation of the refund-only system to establish a fair and sustainable e-commerce ecosystem in China.