Temu faces massive fine as EU launches probe

The European Commission has started a formal investigation against Temu over concerns the Chinese shopping giant violated the Digital Services Act (DSA).

Temu will be investigated for potentially breaching the EU rules designed to prevent the sale of illegal products, according to the bloc’s regulators. Concerns include insufficient measures to prevent “previously suspended rogue traders” from reappearing on the platform.

The probe will also look into a potentially addictive design of Temu’s service, including its game-like reward programmes.

Other areas under investigation will focus on the systems the platform uses to recommend purchases to users and its compliance with the DSA when it comes to giving researchers access to its public data.

“We want to ensure that Temu is complying with the Digital Services Act. Particularly in ensuring that products sold on their platform meet EU standards and do not harm consumers,” Margarethe Vestager, the EU’s outgoing antitrust tsar, said.

“Our enforcement will guarantee a level playing field and that every platform, including Temu, fully respects the laws that keep our European market safe and fair for all,” Vestager said in a statement.

If found guilty of breaching the DSA, Temu could face a fine of up to 6% of its global turnover. The company has reportedly set a $60 billion sales goal for 2024, which would be more than triple the roughly $18 billion it brought in last year.

Temu, which is owned by the Chinese commerce giant PDD Holding, said it would cooperate with regulators.

“Temu takes its obligations under the DSA seriously, continuously investing to strengthen our compliance system and safeguard consumer interests on our platform,” it said in a statement shared with the media.

It said it was also in talks of joining a voluntary EU initiative to combat the sale of fake goods online, adding that “counterfeiting is an industry wide challenge” that can be tackled through “collaborative efforts.”

Temu operates across the EU, a 27-nation bloc, where it had 92 million registered users in September, an increase from 75 million in April.

Under the DSA, which entered into force in November 2022, Temu is defined as a very large online platform and is required by law to do more to tackle illegal content and to protect their services against manipulative techniques.

Following the new legislation, the EU has opened similar proceedings against Meta, AliExpress, TikTok, and Elon Musk’s social platform X.