2024-10-31 16:22:00
LONDON (AP) — Chinese online retailer Temu faces an EU investigation for allegedly failing to prevent the sale of illegal products, the 27-nation European Union’s executive arm announced Thursday.
Five months later, the European Commission added Temu to the list of “very large online platforms” subject to the most stringent scrutiny under the EU’s Digital Services Act (DSA). It’s an extensive rulebook designed to clean up online platforms and keep users safe, with the potential for hefty fines.
Temu began to enter Western markets in the past two years and has grown in popularity by offering cheap products, ranging from clothing to homewares, shipped from Chinese sellers. The company is part of popular Chinese e-commerce site Pinduoduo and currently has 92 million users in the EU.
Temu said, “We conscientiously fulfill our obligations under the DSA, continue to invest in strengthening our compliance system and protect the interests of consumers on our platform.”
“We will cooperate fully with regulators to support our shared goal of providing a safe and secure market for consumers,” the company said in a statement.
European Commission Executive Vice President Margrethe Vestager said in a press release that Brussels wants to ensure that products sold on the Temu platform “comply with EU standards and do not harm consumers.”
He said enforcement of EU law “will ensure a level playing field and ensure that every platform, including Temu, fully respects the laws that ensure European markets are safe and fair for everyone.”
The commission’s investigation will examine whether Temu’s systems are adequate to clamp down on “rogue traders” selling “non-compliant products” amid concerns they could resurface soon after the suspension. The commission did not identify specific illegal products sold on the platform.
Regulators are also examining the risks of Temu’s “addictive design,” including its “game-like” rewards program, and what steps the company is taking to mitigate those risks.
Also under investigation is Temu’s compliance with two other requirements of the DSA: access to data for researchers and transparency in recommendation systems. Companies should detail how they recommend content and products and provide users with at least one option to see recommendations that are not based on their profiles and preferences.
Temu now has an opportunity to respond to the commission, which could decide to impose a fine or dismiss the case if the company makes changes or is able to prove suspicions invalid.
Brussels has been cracking down on tech companies since the DSA came into effect last year. It also launched an investigation into AliExpress, another e-commerce platform, as well as social media sites such as X and TikTok, which bowed to pressure after the commission demanded answers about the new rewards feature.
Temu has also faced scrutiny in the United States, where a congressional report last year accused the company of failing to prevent products made with forced labor from being sold on its platform.
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This story was translated from English by AP editors with the help of generated artificial intelligence tools.
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**Interview with Dr. Elena Schmidt, E-commerce and Digital Policy Expert**
**Editor:** Thank you for joining us today, Dr. Schmidt. There is significant news surrounding Temu, the Chinese online retailer, and the EU’s recent investigation. Can you explain what prompted this scrutiny from European regulators?
**Dr. Schmidt:** Thank you for having me. The European Commission has initiated an investigation into Temu primarily due to concerns over the sale of illegal products on its platform. This step reflects growing vigilance within the EU to ensure that all online retailers maintain stringent compliance with local laws and standards, especially given the rapid expansion of foreign platforms in European markets.
**Editor:** Temu has been gaining popularity across the EU with its low-priced offerings. How does this rising competition impact the European market, particularly for local retailers?
**Dr. Schmidt:** Temu’s entry into the European market certainly introduces a competitive dynamic that local retailers must navigate. While consumers benefit from lower prices, there’s a risk that if such platforms are not held to the same standards as local businesses, it may create an uneven playing field. This investigation serves to ensure that all players adhere to the same regulations, thus fostering fair competition.
**Editor:** You mentioned the Digital Services Act (DSA). How does this legislation specifically affect Temu and other large online platforms operating in the EU?
**Dr. Schmidt:** The DSA imposes rigorous obligations on very large online platforms, which include enhanced transparency and accountability measures regarding the content and products they allow for sale. For Temu, this means they must actively monitor and remove illegal products, ensure the safety of their offerings, and protect consumer rights. The consequences of non-compliance can be severe, including substantial fines.
**Editor:** Temu has stated that they are committed to cooperating with EU regulators. How important is this cooperation for their future in the European market?
**Dr. Schmidt:** It’s crucial. Cooperation with regulators can significantly influence Temu’s reputation and legitimacy within the European market. By demonstrating a commitment to compliance and consumer safety, they may alleviate some of the scrutiny. Conversely, a contentious relationship with regulators could lead to stricter enforcement actions and possibly damage their brand trust among European consumers.
**Editor:** what do you think the implications of this investigation could be for consumers in the EU?
**Dr. Schmidt:** If the investigation leads to reform in how online platforms operate, we could see enhanced consumer protections. This includes better product safety standards and greater accountability from retailers. Ultimately, the goal is to create a safer online shopping environment for consumers, which can only be beneficial in the long run.
**Editor:** Thank you, Dr. Schmidt, for your insights on this important topic.
**Dr. Schmidt:** You’re welcome! I’m glad to be here.
