Chinese authorities have directed e-commerce platform operators to cease the practice of refunding customers without requiring the return of goods, in an effort to reduce financial strain on merchants. According to two individuals familiar with the matter, the government has met with operators, including PDD Holdings, and concluded that the policy must end by July. From that point onward, only merchants will have the authority to initiate refunds. The aim is to prevent the financial situation of merchants from worsening amid economic slowdown.
This move comes after a series of protests in July, when hundreds gathered outside a PDD platform office in southern China, voicing their dissatisfaction with the refund policy. The market regulator and the Ministry of Commerce intervened shortly afterward, ordering PDD to revise its policy.
The refund-without-returns policy was initially introduced to benefit both buyers and sellers for certain types of transactions, and PDD began expanding it in 2021. This prompted rivals to implement similar policies. However, merchants from various sectors, including clothing and household appliances, have raised concerns that the policy is hurting their profits, as they are at risk of losing both the goods and the revenue.
The shift in policy also reflects growing concerns from Chinese government bodies about what they refer to as “involution-style” competition. This term, used to describe an over-competitive and unsustainable business environment, was criticized during the annual parliamentary session earlier this year. The government is focusing on addressing this issue to ensure fairer business practices that do not harm merchants’ financial well-being.
Both PDD and JD.com declined to comment on the matter, while Alibaba Group and the State Administration for Market Regulation did not respond to requests for feedback. The government’s involvement underscores the rising scrutiny of e-commerce policies and their impact on merchants, as well as the broader market. The proposed policy changes are seen as part of a broader effort to curb aggressive competition that can negatively affect businesses in China’s e-commerce sector.
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