LONDON — The European Union is conducting an investigation into Chinese online retailer Temu, amid concerns that it may not adequately prevent the sale of illegal products. This announcement was made by the EU’s executive branch on Thursday. The inquiry comes five months after Temu was categorized as one of the “very large online platforms” that require heightened scrutiny under the Digital Services Act (DSA). This legislation aims to regulate online platforms comprehensively, ensuring the safety of internet users and imposing significant fines for non-compliance.
Having entered Western markets just two years ago, Temu has rapidly gained traction by offering a wide array of affordable goods, from apparel to household items, sourced from Chinese merchants. Owned by Pinduoduo Inc., a leading e-commerce platform in China, Temu boasts approximately 92 million users across the EU.
In response to the investigation, Temu stated that it takes its responsibilities under the DSA seriously and is committed to bolstering its compliance measures to protect consumer interests on its platform. The company expressed its willingness to fully collaborate with regulators to achieve a safe and trustworthy marketplace.
European Commission Executive Vice-President Margrethe Vestager emphasized the EU’s objective to ensure that products available on Temu conform to EU regulations and do not pose risks to consumers. She stated that EU enforcement actions are intended to ensure a level competition environment where every platform, including Temu, adheres to the laws that uphold the integrity and safety of the European market.
The investigation will evaluate whether Temu’s mechanisms are adequate in combating the presence of “rogue traders” who sell “non-compliant goods.” Concerns have arisen about these vendors’ ability to re-emerge quickly after being banned from the platform. The commission has not specified particular illegal items being sold.
Additionally, the investigation will assess the potential risks associated with Temu’s “addictive design,” including features akin to gaming reward systems, and how the company plans to address these concerns. The inquiry will also examine Temu’s adherence to two other DSA mandates: providing researchers access to data and ensuring transparency in its recommendation systems. Companies are required to disclose their content and product recommendation processes and offer users at least one alternative to view recommendations that do not rely on personal profiles or preferences.
Temu now has the opportunity to respond to the findings of the commission, which has the option to impose fines or close the case if the company proves that the allegations are unfounded or implements necessary changes.
Since the DSA’s implementation last year, Brussels has intensified its scrutiny of tech companies. The EU is also investigating other e-commerce platforms, such as AliExpress, as well as social media giants like X and TikTok, with some of these platforms facing pressure to address new features that have come under regulatory scrutiny.
Temu has also garnered attention in the United States, where a Congressional report alleged that the retailer did not effectively block the sale of products made with forced labor on its platform.