Merchants Stage Protest at Temu’s Guangzhou Office Over High Penalties and Withheld Payments

Around 200 small and medium-sized merchants recently staged a protest at the Guangzhou office of a logistics affiliate of Temu, a cross-border e-commerce platform under PDD Holdings. The protest quickly drew widespread public attention, with merchants expressing their grievances over substantial penalties and withheld payments.

The merchants alleged that Temu had imposed hefty fines and deducted “after-sales reserve funds” due to after-sales issues. These penalties ranged from tens of thousands to millions of yuan, leaving the merchants with no avenue to appeal. As a response, they gathered in Guangzhou on July 22 and July 29 to stage their protest. By July 29, they reported that the total amount of after-sales penalties and reserve funds had reached approximately 138 million yuan, affecting 407 merchants.

The majority of those affected were small and medium-sized businesses, who stated that they were unable to cope with such significant deductions. A major trigger for the protest was a new rule implemented by Temu on July 23. This rule introduced a new penalty mechanism for sellers, intended to enhance the overall quality of products on the platform. However, this policy sparked considerable dissatisfaction among merchants.

Online video clips from the protest showed people holding banners reading “TEMU does not lend, no money to pay salaries”, with many sitting on the ground to express their discontent.

An insider at Pinduoduo, while speaking to a reporter from China Securities Journal, suggested that the protest primarily involved a small number of “troublemaking” merchants, predominantly from the clothing category. They allegedly brought additional people to support the protest. These merchants were reportedly hoping to address their inventory issues through cross-border e-commerce. When issues such as false shipping, size mismatches, and counterfeit quality inspection labels occurred, the platform protected consumer rights by deducting consumer protection funds. After being penalized by Pinduoduo, a minority of merchants allegedly sought to draw attention and profit from the protest, which the insider deemed unfair to law-abiding merchants. However, they clarified that this interpretation was personal and not an official statement from the company.

Launched by Pinduoduo in September 2022, Temu is a cross-border e-commerce platform now operating in 75 countries. Temu rapidly expanded by offering low prices. Most of the protesting merchants used the “full custody” model, where they supplied goods, and the platform handled marketing, logistics, after-sales, and other operations. However, if merchants overstocked, they were still responsible for managing the surplus inventory. Moreover, in cases of product quality or after-sales issues, Temu directly penalized the merchants, differing from the usual compensation approach of direct-selling e-commerce.

Several merchants revealed that Temu began issuing a significant number of penalty lists in March this year, primarily for “after-sales issues”, but did not provide detailed explanations for each order. The penalties ranged from withholding payment for goods to imposing a compensation of five times the declared price of the goods.

Starting in May this year, merchants initiated discussions with Temu regarding the penalties. By early July, around a dozen sellers were directly involved in these negotiations. They visited Temu’s headquarters and local petition departments approximately 10 times seeking negotiations. On July 22, hundreds of people protested at the Temu headquarters with banners. By July 29, hundreds of merchants had gathered at the Temu headquarters, with some entering the Temu office, causing some staff to leave work early.

Temu officially addressed the event on Tuesday, stating that the merchants were mostly from the clothing sector, and were “unhappy with how Temu handled after-sales issues related to the quality and compliance of their products, disputing an amount worth several million yuan. These merchants have declined to resolve the disputes through the normal arbitration and legal channels stated in the seller agreements. The situation is stable, and the company is actively working with the merchants to find a solution.”

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