Temu owner Pinduoduo (PDD) has seen two of its global facilities raided in recent days by market regulators under suspicion of fraudulent dealings and illegal subsidies.
Last week, Temu’s European headquarters in Dublin was stormed by European Union regulators due to rumblings about Chinese state subsidies that were possibly given to the e-commerce titan, a source familiar with the matter told Reuters.
The EU Commission’s Foreign Subsidies Regulation (FSR), which took effect in 2023, enables the trade bloc’s executive arm to address disruptive or unfair business practices caused by foreign subsidies. In recent years, the Commission said such state-sponsored grants have shaken up Europe’s internal market by providing their recipients with unfair advantages, like the ability to acquire other companies or obtain public procurement contracts.
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The EU and its members are becoming increasingly harried by China’s growing influence on the bloc, especially as the United States’ tariffs and de minimis ban have drastically decreased the volume of parcels from the likes of Temu and Shein. Europe currently has a duty-free waiver for small shipments worth less than 150 Euros (about $176), though an agreement was reached between member states in November to phase out the exemption by 2028.
French President Emmanuel Macron last week floated the idea of increasing tariffs on China unless the widening trade gap between the 27 countries and the sourcing superpower is addressed, saying the “imbalances are becoming unbearable” for European businesses. The EU had a 300-billion-euro ($350 billion) trade deficit with China last year.
Meanwhile, a dramatic scene unfolded last week at PDD Holdings Inc.’s Shanghai office that ended in fisticuffs between employees and Chinese regulators, according to a report from Bloomberg.
Officials from the State Administration for Market Regulation (SAMR) came to the company’s property to investigate reports of fraudulent deliveries on PDD’s platform, sources told the news outlet. After the fighting broke out, police made several arrests.
The investigators were reportedly there to look into PDD’s “refunds first” policy, which allows consumers to garner refunds on goods they purchased on PDD platforms without actually returning them. The SAMR told the company’s executives that the policy undercuts the small businesses on its platforms.
The agency has also been looking into reports of fraudulent deliveries and phishing scams linked to PDD.
The SAMR previously led an antitrust investigation into Alibaba that ended in the group being fined a previously unheard-of sum—18 billion yuan ($2.75 billion)—for monopolistic practices and abuse of its market position.
PDD did not immediately respond to Sourcing Journal’s request for comment.
