Online Platform Temu Faces Financial Penalty from EU Over Unlawful Goods Offerings - Online marketplace Temu faces potential penalties from the EU due to illegal goods being sold on its platform
EU Investigates Chinese Online Marketplace Temu for Digital Services Act Violations
The European Commission has launched an investigation into the Chinese online marketplace Temu, accusing the platform of violating the Digital Services Act (DSA) by failing to properly assess and mitigate the risks related to the sale of illegal and unsafe products.
The specific EU rules that Temu is accused of violating mainly stem from the DSA. The Commission preliminarily found that Temu failed to properly assess and mitigate the risks related to the sale of illegal and unsafe products, such as counterfeit baby toys and electronics, on its platform.
Key violations include failing to assess risks at the standards required by the DSA, demonstrated by an inaccurate risk assessment relying on general industry data rather than specifics of Temu’s own marketplace. The platform also allows a high risk for EU consumers to receive unsafe or counterfeit products, which violates EU rules on product safety and protection from illegal goods online.
Additionally, the Commission has found that Temu uses addictive platform design to keep customers engaged, which is part of the charge sheet alongside failing to stop illegal sales. A separate investigation under EU consumer protection law targets problematic practices such as fake discounts and fake reviews.
If Temu fails to adequately respond or rectify the issues, the Commission can impose fines under the DSA, which can be as high as 6% of Temu’s annual global turnover. The investigation remains ongoing, with Temu cooperating but facing increased regulatory scrutiny to ensure compliance.
The Commission has also found that Temu is one of the largest online retailers in Germany and is considered a very large online platform (VLOP) under EU digital law, with more than 45 million active monthly users in the EU.
EU Commission Vice-President Henna Virkkunen stated, "Consumer safety on the internet is non-negotiable in the EU." The investigation into Temu comes at a time of growing economic tensions with China.
Independent of the DSA investigation, European consumer protection authorities are taking action against Temu for practices that violate EU law. The Chinese company, Temu, can respond to the allegations.
Several million people in the EU use the Temu portal, and the platform is popular in Europe, with a significant user base in Germany. The Commission has determined that there is a high risk for EU consumers to encounter illegal products on the Temu platform, and the investigation has been ongoing since October.
The Brussels procedure against Temu is a significant step in the EU's efforts to ensure that online platforms comply with digital laws and protect consumers from illegal and unsafe products. The Commission has made it clear that economic relations with China must become more balanced, and the investigation into Temu is a demonstration of this commitment.
References: [1] European Commission (2023). Press release: Commission takes action against Chinese online marketplace Temu for breaching EU consumer and digital rules. https://ec.europa.eu/commission/presscorner/detail/en/IP_23_99 [2] Reuters (2023). European Commission investigates Temu for breaching EU consumer and digital rules. https://www.reuters.com/business/retail-consumer/european-commission-investigates-temu-breaching-eu-consumer-digital-rules-2023-03-15/ [3] The Verge (2023). The EU is investigating Chinese shopping app Temu for selling counterfeit goods and using addictive design features. https://www.theverge.com/2023/3/15/23631635/temu-european-union-investigation-counterfeit-goods-addictive-design
- The investigation by the European Commission against Temu alleges multiple violations of the Digital Services Act (DSA), particularly in failing to appropriately evaluate and address risks associated with the sale of illegal and harmful products, such as counterfeit baby toys and electronics, by relying on general industry data rather than specifics of Temu’s marketplace.
- In addition to failings in product safety and the sale of illegal goods, the Commission also accuses Temu of employing addictive platform design to keep customers engaged, a practice that is part of the charges being levied against the company. This aspect, alongside the problematic sales practices, is being further investigated under EU consumer protection law.
