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The European Union has launched an investigation into the Chinese e-commerce giant, Temu. The probe focuses on Temu’s alleged violations of the Digital Services Act (DSA), with the EU particularly concerned about selling illegal and potentially hazardous products on the platform.
According to the European Commission, Temu, a subsidiary of China-based PDD Holdings Inc., may face significant penalties if found non-compliant with the DSA. The commission suspects the platform is not taking adequate measures to monitor and restrict the sale of counterfeit and unsafe items, reports Bloomberg.
If proven to be in breach, Temu could face fines of up to 6% of its annual revenue, a potential financial blow as the platform has grown rapidly since entering Western markets.
The investigation will examine Temu’s approach to data transparency and user protection. Regulators will assess the platform’s data access policies, questioning whether its practices align with the DSA’s standards for clear, accessible data usage information.
Temu’s reliance on addictive, game-like features to boost user engagement has raised red flags for the commission. These design elements mirror social media’s engagement tactics and could be seen as exacerbating compulsive consumer behaviour.
The EU’s problem follows an October 11th data request, when regulators demanded Temu disclose its practices for identifying and mitigating unsafe or counterfeit items on the platform. The request sought ‘detailed information and internal documents’ on Temu’s safeguards against rogue traders.
However, Temu’s response has not alleviated the EU’s concerns, prompting the formal investigation. The company has, however, expressed its intention to cooperate fully with the EU’s review.
“Temu takes its obligations under the DSA seriously, continuously investigating to strengthen our compliance system and safeguard consumer interests in our platform,” a Temu spokesperson said.
Temu also confirmed it is exploring participation in a voluntary EU-led agreement to curb counterfeit sales.
EU has recently investigated several big names in the tech world, including Apple, Meta, and Microsoft, for DSA and antitrust violations.
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