The European Commission (EC) is investigating the Chinese online retailer Temu because of concerns that it may have violated the Digital Services Act (DSA). The investigation focuses on several issues, including the sale of illegal products, the potentially addictive nature of the platform’s design, the recommendation systems used to suggest purchases to users and data access for researchers.
Temu has only recently entered Western markets, launching its services in the past two years and quickly gaining popularity by offering low-cost goods shipped from sellers in China. On May 31, 2024, EC designated Temu as a Very Large Online Platform (VLOP) under the EU’s DSA, which subjects it to the highest level of scrutiny within the framework.
The growth in Temu’s user base has been remarkable. Last spring, the platform reported having over 45 million monthly active users in the EU, and by September 2024, this number had surged to 92 million monthly users.
“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,” Margrethe Vestager, Executive Vice-President for a Europe Fit for the Digital Age, said in a press release.
“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 added.
Temu stated it “takes its obligations under the DSA seriously, continuously investing to strengthen our compliance system and safeguard consumer interests on our platform.” The company emphasised fully cooperating “with regulators to support our shared goal of a safe, trusted marketplace for consumers.”
The Commission’s investigation
The Commission is investigating whether Temu has adequate systems to prevent the sale of non-compliant products in the European Union. This includes evaluating measures to avoid the return of previously suspended rogue traders and non-compliant goods.
The investigation will also assess the risks of Temu’s addictive design features, like game-like reward programmes, and how well the company addresses potential negative impacts on users’ physical and mental well-being.
Additionally, the Commission will examine Temu’s compliance with the DSA regarding content recommendation transparency and access to publicly available data for researchers.
If the concerns are confirmed, Temu may face liability under the DSA for violating specific articles. Although formal proceedings have begun, the outcome is not predetermined. Temu has the chance to respond, and the Commission may impose a fine or drop the case if appropriate changes are made or the concerns are disproven.
After initiating formal proceedings, the Commission will continue to gather evidence by requesting information from Temu or third parties and conducting interviews. This allows the Commission to take enforcement actions, including adopting non-compliance decisions or accepting commitments from Temu to address the issues.
DSA does not set a deadline for concluding these proceedings. The duration of an investigation depends on factors like case complexity and company cooperation. Notably, the opening of proceedings does not determine the outcome or prevent national consumer protection authorities from taking action regarding Temu’s compliance with Union consumer law.
EC aims to cooperate with national authorities through a dedicated working group on Consumers and Online Marketplaces. Additionally, formal proceedings do not hinder actions by market surveillance authorities under the General Product Safety Directive, effective December 13, 2024.
Since the DSA took effect last year, the EC has intensified scrutiny of tech companies, launching investigations into platforms like AliExpress and social media sites such as X and TikTok regarding their new features.
