The EU has launched formal proceedings against the Chinese shopping website Temu amid concerns it is failing to halt the sale of illegal products online.
A formal investigation was opened on Thursday with the European Commission citing concerns over the platform, which is a cut-price rival to Amazon.
With its tagline “shop like a billionaire”, the service has rapidly grown in the EU market since its launch in April last year, selling everything from cosmetics to clothing as well as furniture and tech, sourced directly in China to about 100 million users.
The European Commission said it had numerous concerns that the platform, owned by PDD Holdings, was breaching the new Digital Services Act (DSA), which regulates tech firms ranging from Facebook to X and Google.
Among them are concerns that it does not have sufficiently robust systems in place to stop the reappearance of “previously suspended rogue traders” with products re-emerging sometimes within days of being removed.
A senior commission official said concerns about the selling of counterfeit products, pharmaceuticals, cosmetics and toys had been raised by various authorities across Europe, particularly in Germany, Denmark and Ireland, where the company is headquartered in the EU.
“We have received a lot of input by other authorities, but there is a real kind of suspicion that not enough is done, not in an effective way, to really prevent the dissemination of illegal products,” they said.
The official added that they suspected Temu had not put “effective control systems” in place “reviewing and monitoring and screening what happens on their platform”.
The commission is also concerned about the aggressive sales tactics on the platform with an “addictive design” involving “game-like rewards”, with weak systems to “mitigate the risks stemming from such addictive design”.
If found to be in breach of the DSA the company could face large fines.
Margrethe Vestager, the executive vice-president in charge of the Europe fit for the digital age portfolio at the commission, said: “We want to ensure that Temu is complying with the DSA. Particularly in ensuring that products sold on their platform meet EU standards and do not harm consumers.
“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.”
Officials said Temu was “extremely responsive” to the EU inquiry, responding “within minutes” to any questions.
Temu’s growth has been rapid, registering 75 million users in the EU in April, rising to 92 million in September.
“I want to stress that these are suspicions at this stage. These are not conclusions, not even preliminary conclusions,” said an official.
They added that the investigation was designed to find out whether there was a “systemic” issue or not.
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Complaints were levelled against Temu by a pan-European consumer group that said it was breaching the DSA by failing to provide customers with crucial information about the sellers on its platforms.
It filed its complaint in May, with 17 EU members including France, Italy and the Netherlands also filing complaints to relevant national authorities.
In June the commission sent formal requests for information to Temu and its Chinese rival, Shein, regarding their formal obligations to design online interfaces that strived to protect children and make the source of the goods on sale transparent.
Fernando Hortal Foronda, digital policy officer at the European Consumer Organisation (BEUC) which raised one of the original complaints, welcomed the investigation. “There are many problems consumer groups have identified with Temu, which include many dangerous or illegal products on sale or the frequent use of design techniques to trick consumers. This decision by the commission is a promising step, but only the first,” he said.
Rocio Concha, of the British consumer group Which?, praised the commission’s investigation, but said there were barriers to taking such action in the UK where there are similar concerns. “Weak consumer protection laws [in Britain] mean Temu and other online marketplaces are not held responsible for unsafe products being sold by third parties,” she said.
“The government must use its product regulation and metrology bill to give online marketplaces greater legal responsibility for preventing unsafe products from being sold on their platforms and to enable tough enforcement action, including heavy fines, if they flout the rules.”
Temu said: “Temu takes its obligations under the DSA seriously, continuously investing to strengthen our compliance system and safeguard consumer interests on our platform. We will cooperate fully with regulators to support our shared goal of a safe, trusted marketplace for consumers.”
It said it was due to sign a “memorandum of understanding on the sale of counterfeit goods on the internet”, a voluntary agreement facilitated by the commission.
“Counterfeiting is an industry-wide challenge, and we believe that collaborative efforts are essential to advancing our shared goals of protecting consumers and rights holders,” a spokesperson said.
Source: theguardian.com
