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Despite PR storm, Pinduoduo stock and downloads stay robust

Pinduoduo, a rapidly growing Chinese e-commerce company, is weathering its PR storm after the death of an employee sparked criticism against the firm’s grueling working hours.

The employee, 21 years old, collapsed on her way home from work on a late night before New Year. The cause of her death has not been disclosed but internet users speculated that she had died from exhaustion.

Posts with the hashtag #PinduoduoEmployeeSuddenDeath have accumulated 300 million views on the Chinese microblogging platform Weibo. Separately, another Pinduoduo employee committed suicide on January 9 by jumping from his 27th-floor apartment. The local labor authorities are reported to be reviewing working conditions at Shanghai-based Pinduoduo.

On Sunday, a former Pinduoduo employee spoke out against the firm’s stressful work culture in a video that went viral, adding to the public outcry against Alibaba’s biggest rival. He alleged that employees at Pinduoduo’s headquarters are required to work at least 300 hours a month (about 75 hours a week), whereas staff in the newly established grocery delivery department have a 380-hour minimum. The employee who fell on her way home worked on Pinduoduo’s grocery business in the Western province of Xinjiang.

People with knowledge told TechCrunch that employees working on certain projects at Pinduoduo might work over 300 hours a month, though the hours aren’t mandatory. Companywide, staff are required to work from 11 AM to 8 PM.

Pinduoduo cannot be immediately be reached for comment.

Long working hours aren’t unique to Pinduoduo in China. The string of incidents is reviving the debate around “996”, a term that denotes employees working from 9 AM to 9 PM, six days a week, though it can refer to any other form of demanding work regime in China’s cutthroat internet industry.

Despite the public backlash and calls to boycott Pinduoduo, the company’s market position appears to remain firm. Its app downloads have remained stable since the first employee incident two weeks ago, with some days even seeing slight growth in installs, according to data analytics provider Jiguang. As of January 8, Pinduoduo had nearly 650 million installs.

Its shares, traded in New York, climbed from $144 on December 28 to $187 on January 5 and dropped slightly to $174 on January 11. A few venture capital investors of Pinduoduo contacted by TechCrunch declined to comment for this story.

The figures could be telling. Despite its efforts to attract more users in China’s wealthier cities, a substantial number of Pinduoduo users live in China’s low-tier cities and rural towns. The “996” culture of the megacity-based tech giants may be remote for them, while the deals on Pinduoduo, the e-commerce app famous for its “dirt cheap” goods, are tangible.

U.S. slams Alibaba and its challenger Pinduoduo for selling fakes

China’s biggest ecommerce company Alibaba was again on the U.S. Trade Representative’s blacklist over suspected counterfeits sold on its popular Taobao marketplace that connects small merchants to consumers.

Nestling with Alibaba on the U.S.’s annual “notorious” list that reviews trading partners’ intellectual property practice is its fast-rising competitor Pinduoduo . Just this week, Pinduoduo founder Colin Huang, a former Google engineer, wrote in his first shareholder letter since listing the company that his startup is now China’s second-biggest ecommerce player by the number of “e-way bills”, or electronic records tracking the movement of goods. That officially unseats JD.com as the runner-up to Alibaba.

This is the third year in a row that Taobao has been called out by the U.S. government over IP theft, despite measures the company claims it has taken to root out fakes, including the arrest of 1,752 suspects and closure of 1,282 manufacturing and distribution centers.

“Although Alibaba has taken some steps to curb the offer and sale of infringing products, right holders, particularly SMEs, continue to report high volumes of infringing products and problems with using takedown procedures,” noted the USTR in its report.

In a statement provided to TechCrunch, Alibaba said it does “not agree with” the USTR’s decision. “Our results and practices have been acknowledged as best-in-class by leading industry associations, brands and SMEs in the United States and around the world. In fact, zero industry associations called for our inclusion in the report this year.”

Pinduoduo is a new addition to the annual blacklist. The Shanghai-based startup has over the course of three years rose to fame among China’s emerging online shoppers in smaller cities and rural regions, thanks to the flurry of super-cheap goods on its platform. While affluent consumers may disdain Pinduodou products’ low quality, price-sensitive users are hooked to bargains even when items are subpar.

“Many of these price-conscious shoppers are reportedly aware of the proliferation of counterfeit products on pinduoduo.com but are nevertheless attracted to the low-priced goods on the platform,” the USTR pointed out, adding that Pinduoduo’s measures to up the ante in anti-piracy technologies failed to fully address the issue.

Pinduoduo, too, rebutted the USTR’s decision. “We do not fully understand why we are listed on the USTR report, and we disagree with the report,” a Pinduoduo spokesperson told TechCrunch. “We will focus our energy to upgrade the e-shopping experience for our users. We have introduced strict penalties for counterfeit merchants, collaborated closely with law enforcement and employed technologies to proactively take down suspicious products.”

The attacks on two of China’s most promising ecommerce businesses came as China and the U.S. are embroiled in on-going trade negotiations, which have seen the Trump administration repeatedly accused China of IP theft. Tmall, which is Alibaba’s online retailer that brings branded goods to shoppers, was immune from the blacklist, and so was Tmall’s direct rival JD.com.

Taobao has spent over a decade trying to revive its old image of an online bazaar teeming with fakes and “shanzhai” items, which are not outright pirated goods but whose names or designs intimate those of legitimate brands. Pinduoduo is now asked to do the same after a few years of growth frenzy. On the one hand, listing publicly in the U.S. subjects the Chinese startup to more scrutiny. On the other, small-town users may soon demand higher quality as their purchasing power improves. And when the countryside market becomes saturated, Pinduoduo will need to more aggressively upgrade its product selection to court the more sophisticated consumers from Chinese megacities.