As a young company that was started in 2015, we strive to refine our processes and governance so as to ensure that our operations remain robust, sustainable and beneficial to society.
To achieve this, we have developed a corporate governance framework that builds in a system of checks and balances. Central to this is the Board of Directors, whose role is to oversee the management’s running of the business. The Board is responsible for regularly reviewing reports from management on various aspects of the operations, including risk management. This is to ensure that the company is being run in line with its corporate mission and in the best interests of its shareholders.
To ensure that the Board can discharge their duties effectively, we have ensured that it has both the authority and processes in place to be able to adequately review and evaluate business operations. We believe that an independent Board is more likely to align their interests with those of shareholders. Having an independent majority on the Board also helps it to foster independent decision-making and to mitigate conflicts of interests that may arise.
To further strengthen the independence and objectivity of the Board, key committees are composed solely of independent directors:
Oversees our accounting and financial reporting processes and the audits of the financial statements of our company. It also reviews the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures.
Assists the Board in reviewing and approving the compensation structure relating to our directors and executive officers, as well as the company’s equity incentive plans.
Assists the Board in selecting individuals qualified to become our directors. It also reviews the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience, and diversity.
Although not legally required, we voluntarily hold annual general meetings (AGM) to provide a forum for direct communication between our board and our shareholders on the company’s key corporate decisions.
All shareholders and ADS holders, regardless of where they are, can attend our AGMs virtually via webcast and directly ask the senior management questions relating to Pinduoduo.
We proactively encourage all shareholders to participate at our AGM. The AGM can be accessed via a webcast so that shareholders, regardless of location, can have immediate access to information presented and issues raised at the meeting. The AGM includes a question-and-answer session where shareholders can ask the board and management questions relating to Pinduoduo.
We meet with investors regularly to update them on our business progress, strategy, operating and financial performance. We host quarterly earnings calls with investors.
We provide access to all investors through a variety of forums, including investor meetings, one-to-one or group calls/webcasts, and investor conferences organized by financial institutions.
Among companies, healthy competition helps to produce new ideas and improves the quality of products and services in the marketplace. At Pinduoduo, we are focused on creating the best user experience for consumers and anticipating their changing needs.
Fair competition among merchants results in the creation of more value-for-money products for consumers, while competition among service providers benefits merchants by lowering their costs, which they can in turn pass on to consumers.
We are committed to being an open and inclusive platform that benefits all and puts people first.
As an example of how we put this into action, in our operations, we work with multiple cloud computing platforms and are connected to all the major mobile payment platforms. Our merchants are free to choose between Pinduoduo and third-party e-waybill systems to manage their order fulfillment and logistics. Pinduoduo welcomes any legitimate merchant who wishes to set up a store on our platform. We condemn any form of forced exclusivity imposed on merchants.
We hope to set an example for the industry to become more open. By directing our energy and resources toward building a stronger and healthier ecosystem, we can pave the way for more meaningful initiatives that can benefit society and people.
Pinduoduo has zero tolerance for any form of bribery or corruption. The company demands a high standard of integrity from its employees. All employees are required to comply with the policies and guidelines set out in the anti-corruption compliance policy adopted by the company.
Pinduoduo adopts a two-pronged approach of prevention and enforcement to fight corruption.
Alongside enforcement, Pinduoduo places equal emphasis on prevention to sustain a culture of integrity and deprive corruption of its breeding ground. The company strictly prohibits engaging in or tolerating bribery or any other form of corruption including:
All employees are required to refuse any form of gifts under improper business practices. Any employee who receives any gift or other advantages from merchants, suppliers or other business partners is required to report to our anti-corruption department, regardless of the value of the gift or advantage.
Pinduoduo is committed to nurturing an environment with a strong probity culture. In addition to inculcating our core value of “Benfen” (本分), we provide training, case studies and reminders of common corruption risks to our employees to maintain their high awareness toward corruption and bribery.
Merchants, suppliers, and other business partners are expressly prohibited from offering bribes to our employees for commercial benefits or privileged treatment and are required to cooperate with Pinduoduo’s investigation of any suspected corruption. We have a standard anti-bribery provision in all of our commercial contracts.
Unlike other crimes, corruption involves a mutually beneficial relationship between two parties and is thus difficult to investigate. To ensure employees’ observance of our anti-corruption compliance policy, Pinduoduo established an anti-corruption department that is independent from the other departments and reports directly to the chief executive officer.
The anti-corruption department is responsible for: (i) leading the investigation of suspected corruption; (ii) reviewing complaints and leads of corruption reported by merchants, business partners and the public; (iii) deepening the company’s culture of integrity; and (iv) coordinating with law enforcement authorities on suspected corruption cases.
Pinduoduo encourages employees, merchants, suppliers, business partners and the public to report suspected corruption. The company has set up dedicated channels for whistle blowers to report suspected corruption on its corporate website and merchant portal. We also put in place measures to protect the whistle blowers and maintain their anonymity.
We review every single report of suspected corruption. Depending on the severity of the allegation and assessment of impact, our anti-corruption department will report the case to the chief executive officer or, for more severe instances, to the board of directors directly. Employees who are found in violation of our anti-bribery rules will be dismissed with cause and blacklisted from future employment. For those who are suspected of committing a criminal offence, we will work proactively with the law enforcement authorities to pursue criminal charges.
Pinduoduo prohibits merchants from conducting any illegal activity on our platform, including offering prohibited or restricted items and posting obscene or other illicit content.
To efficiently and effectively monitor product and content, we have developed a screening system involving textual analysis, using keyword, syntax, and semantics, and image analysis, including optical character recognition and image captioning to help identify illicit product and content. Any illicit product or content will be removed immediately, and the infringing merchants banned from the platform. Serious cases will be reported to the police for further action.
We also have a zero-tolerance policy toward fake transactions that attempt to manipulate sales volume, customer review or merchant rating--practices commonly known as “brushing.” To identify fake transactions, we have developed dedicated algorithms to screen for patterns of anomalous transactions and make inquiries to merchants if we suspect any “brushing” activities.
We further deter merchants from “brushing” by adopting measures that make it less effective. In ranking sellers, Pinduoduo takes into account multiple factors, of which sales volume is not the most important of considerations. We consolidate and show the sales volume by a merchant across different e-commerce platforms to make “brushing” more expensive. We also use our e-waybill system to strengthen our surveillance of any such wrongdoings.
For “brushers,” we impose heavy penalties and sanctions, such as freezing accounts, restricting traffic, removing product listings, blocking new listings, and shutting down stores. For merchants involved in criminal activities, we will work with law enforcement to pursue criminal charges against such merchants.
Taken as a whole, we estimate that we have a much lower rate of “brushing” than our peers because of the strict enforcement and disincentives for merchants.
Trust is an invaluable asset for an e-commerce platform like Pinduoduo. We serve over 800 million active users, connecting them with more than 8.6 million merchants, or sellers, on our marketplace.
Pinduoduo takes its anti-counterfeit measures very seriously because we are aware that our buyers are unable to check the products prior to purchase. At the same time, their trust is built on their user experience and their satisfaction of the products and services. They spend time and money on our platform, and we are constantly striving to ensure that spurious sellers are unable to exploit the access they have to the hundreds of millions of consumers on our platform.
To ensure that the rights of our consumers are protected, Pinduoduo has put in place stringent policies to reward good quality merchants and punish sellers who violate platform rules.
We have a zero-tolerance policy when it comes to counterfeit goods as they pose risks to our consumers, and harm the reputations of the brands on our platform and our platform as a result.
Since our inception, we have put the issue of combating IP infringement at the center of our operations. Using advanced technologies, we work with brands to take down fake products so that our consumers can trust that their purchases are authentic.
As an open platform, we want to invite all like-minded stakeholders to join our efforts.
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To facilitate communications and keep stakeholders abreast of Pinduoduo’s initiatives and developments in the IP community, we have shared regular IP newsletters since February 2020.
To promote dialogue on key issues and best practices on IP protection in the e-commerce sector, we published a white paper in August 2020 on the prospects, challenges and best practices of IP protection in China’s e-commerce industry. The white paper shared Pinduoduo’s insights on best practices for IP protection as well as the challenges and hurdles faced by the industry, with the hope of generating further constructive dialogue and action toward a cleaner online marketplace.
Every month, in addition to the regular updates on the latest developments on IP protection relevant to Pinduoduo, the newsletter also has a feature article introducing in detail one specific IP protection measure or tool available on our platform.
Our screening processes kick in from the time a merchant or a brand applies to join our platform. Verification begins at the application stage and continues with every new item listed. There is ongoing scrutiny in collaboration with brands whenever a warning is flagged.
Below are the processes we have in place to safeguard the trust of consumers, merchants and brands on our platform:
Scrutiny and verification happen at the stage when a new vendor registers on our Platform. We are proactive with our best practices when it comes to combating the sale of counterfeit goods online, following the guidelines set by the International Trademark Association (INTA) 2017.
The guidelines call for e-commerce platforms to strengthen and streamline procedures for identifying and taking more effective action against repeat offenders.
As per our IP policy, individual merchants must submit their national ID cards, and we apply facial recognition technology to cross check against the national public security database to confirm the prospective vendor’s identity.
We also have restrictions on the number of stores that a merchant can set up. Corporate merchants looking to sell on our platform must submit their business license and national ID cards of their legal representatives and store managers, which are also checked against national databases. This screening process helps investigate alleged breaches and precludes those on our blacklist from setting up another account.
Our IP protection measures include the use of advanced technology such as data analytics, artificial intelligence, machine learning and image recognition, to name a few, to screen billions of products as they are listed onto our platform. Products which we identify to be potentially problematic are blocked and cannot be listed. The bulk of the platform’s efforts happen well before customers can see the product online.
We have also introduced new measures in keeping with the rapid growth of live streaming e-commerce. We have stepped up our monitoring of live streaming on the platform and apply voice recognition and motion-picture capture technology to detect suggestions of counterfeits by merchants during their live streaming sessions.
This is a program that enlists leading and well-recognized brands. We develop customized blocking rules for each brand using tech-powered verification models. Counterfeits are blocked automatically, and borderline cases are sent for manual review.
Pinduoduo works with IP rights holders to conduct secret purchases to audit product authenticity.
In 2020, our proactive efforts resulted in over 147.5 million listing removals.
Specific to agricultural products, we have also built a database of recognized GI products and their seasonality, which is cross-referenced with a list of permitted imported agricultural products from China Customs.
In this way, out-of-season products or those not on the permitted imported list will be automatically flagged for review by our enforcement staff.
In addition to the normal merchant vetting procedure, Pinduoduo also conducts site visits to farms, production and packaging facilities. To promote international GI products, we work with government agencies to open country pavilions on our platform to promote their goods. These pavilions are prominent gateways that allow our users to purchase authentic GI products from different countries.
Pinduoduo established a dedicated channel, “Local Specialties” to promote domestic GI products. To date, more than 100 million transactions have been generated, channeling demand to the agricultural growing regions.
As knowledge of GIs deepens, we are also using technology to provide users with greater product traceability. For instance, we have worked with growers to promote the use of authentication codes so that consumers can verify product origins.
We have also partnered with industry associations to publish self-regulatory standards which help small-scale farms standardize their farming process, maintain consistent quality and boost consumer confidence. This further feeds back into the development of more agricultural brands where consumers can identify quality products easily by looking out for labels or collective marks for assurance. Check out how Pinduoduo is working with the hairy crab industry on this.
Pinduoduo’s IP Protection Platform facilitates rights holders to lodge IP infringement complaints and facilitate efficient takedowns through simple and straight-forward procedures.
The portal supports multiple product complaints at one go, which significantly reduces the time needed for rights holders to lodge their complaints. The process is transparent, with rights holders able to check on the progress and results of each IP complaint and the reasons behind the results.
We also have an English-language version of this portal to help international vendors and brands, and we use enhanced algorithms to improve the speed of takedown requests. We are constantly iterating based on the feedback and recommendations of rights holders and other stakeholders and expect to launch an upgraded IP Protection Portal in October 2021.
In 2020, the IP protection portal helped rights holders remove over 1.43 million infringing listings.
Pinduoduo has the toughest compensation policy among the major e-commerce platforms in China. Any merchant who sells counterfeit goods is fined 10 times the value of the products he sells on our platform, a compensation far exceeding what is required by Chinese law.
Additionally, all customers who bought such counterfeit products are compensated, regardless of whether they raised a complaint. We also give our customers triple compensation for substandard products and for delayed shipments.
Pinduoduo has the toughest compensation policy among the major e-commerce platforms in China. Any merchant who sells counterfeit goods is fined 10 times the value of the products he sells on our platform, a compensation far exceeding what is required by Chinese law.
Additionally, all customers who bought such counterfeit products are compensated, regardless of whether they raised a complaint. We also give our customers triple compensation for substandard products and for delayed shipments.
We have maintained a merchant blacklist to thwart repeat infringers. With our secret purchase program, merchants found to be selling counterfeit products are added to the blacklist and permanently banned from conducting business on our platform.
During the beginning of the pandemic, PPE was in high demand and supply was catching up.
To prevent malicious merchants from taking advantage of anxious consumers with counterfeits, we took resolute action in screening the PPE offered on our platform.
In the first quarter of 2020, we removed approximately 500,000 PPE listings, shut down 40 stores and reprimanded close to 6,000 suspicious merchants.
We alerted law enforcement agencies to about 75 merchants for selling fake PPE or illegally raising prices on essential supplies.
To prevent malicious merchants from taking advantage of anxious consumers with counterfeits, we took resolute action in screening the PPE offered on our platform.
Harnessing Tech for a Greener Future. Using technology, we can make the agrifood supply chain more productive and efficient, reducing its carbon footprint.
Nurturing Communities Through Digital Inclusion. Sharing the benefits of the digital economy by connecting communities and facilitating the exchange of goods and ideas.
Read about how our efforts to sow the seeds of growth through technology has impacted the lives of our farmers, merchants and other stakeholders.