Pinduoduo fired a local government affairs team after a physical altercation involving dozens of employees at its Shanghai office and Chinese regulators, people familiar with the matter said. The mass layoffs occurred after an unusual physical altercation earlier this month, which Pinduoduo attempted to control through internal accountability, while another government affairs team at the company that was not involved in the conflict remained on staff.
Previously, there were at least two physical conflicts in Pinduoduo’s office in Shanghai. One party was a company employee and the other was an inspector sent by the State Administration for Market Regulation (SAMR), who was investigating suspected false shipments on the platform. After the incident, the police detained a number of relevant personnel, including some members of the company's management, causing great concern from the outside world about the relationship between corporate governance and supervision.
People familiar with the matter said that during the inspection process, regulators asked to see Pinduoduo’s transaction data. This type of data is highly sensitive and often contains details of user behavior and business operations that go far beyond the scope of the company’s publicly disclosed information. The differences between the two parties on this issue are considered to be one of the important triggers for the conflict to escalate and eventually turn into a physical conflict.
It is unclear what follow-up measures the State Administration for Market Regulation will take regarding this incident, but it is extremely rare in the industry for interactions between large Chinese Internet companies and regulators to turn into public physical confrontations. Neither Pinduoduo nor the State Administration for Market Regulation has publicly responded to this issue, and this silence has further deepened the market's judgment on the sensitivity of the incident.
Affected by the news, Pinduoduo’s share price fell 3.7% on Wednesday. Chinese financial media Caixin was the first to report that many government affairs employees of Pinduoduo were fired due to "fighting incidents." However, the relevant reports were subsequently removed from its official website, and reprinted versions on news portals such as NetEase and Sina were also deleted.
The collective removal of the report highlights the sensitivity of the incident and intensifies the outside world's concerns about Pinduoduo's future regulatory risks. In particular, the State Administration of Market Supervision led an antitrust investigation into Alibaba in 2020, which triggered a series of strong regulatory measures on the Internet platform economy. It was not until February this year, after Chinese President Xi Jinping met with entrepreneurs including Jack Ma, that the market generally believed that the regulatory environment for the platform economy had eased.
The timing of this incident is particularly unfavorable for Pinduoduo. Just last month, the company warned that business growth was facing slowing pressure amid intensifying competition and pressure on the consumer environment in China, and competitors such as Alibaba and JD.com were stepping up efforts to grab market share. On the one hand, Pinduoduo relies on Pinduoduo and Temu platforms to consolidate its domestic and foreign e-commerce business, and on the other hand, it actively increases its exposure to the US and European markets, which also makes it face additional scrutiny at the overseas regulatory level.
It is worth noting that in the same week that the State Administration for Market Regulation came to inspect, Temu’s Dublin headquarters in Europe was raided by the European Union’s competition regulator. The investigation focused on whether it had received illegal subsidies from the Chinese government. Simultaneous pressure from domestic and foreign regulators has made Pinduoduo face greater compliance and image challenges in a complex regulatory environment.