On Thursday, the European Union’s technology regulatory agency announced that following an extensive investigation in the first phase, the Chinese online retailer Temu failed to take sufficient measures to prevent the illegal sale of products on its platform. As a result, it has been fined 200 million euros (approximately 232 million US dollars).
According to the EU Digital Services Act, this nearly two-year investigation may lead to further penalties in the coming months. The Act requires large internet companies to take more actions to combat illegal and harmful content on their platforms.
The EU regulatory agency initiated the investigation into Temu following complaints from the European Consumer Organization (BEUC) and its 17 member countries.
The European Commission, the executive arm of the EU, stated that the company failed to diligently identify, analyze, and evaluate the systemic risk of illegal products sold on its platform, and the harm this poses to EU consumers.
According to reports, an “undercover customer” check conducted by an independent testing agency commissioned by the European Commission found that a high proportion of chargers sold on the platform did not pass basic safety tests mandated by the EU. Several tested baby toys were also deemed dangerous, exceeding chemical limits and posing choking hazards due to detachable parts.
The European Commission criticized Temu for not properly assessing its recommendation system and the product promotion plans with influencer partnerships, which amplified the risk of illegal product sales.
In response, Temu stated, “Temu respects the goals of the Digital Services Act and the need for clear and consistent rules in the digital economy. However, we disagree with the decision of the European Commission and believe that this fine is disproportionate.”
Temu added, “The decision relates to our initial assessment under the Digital Services Act in 2024 and does not reflect the current state of our system.” Temu also mentioned that it will continue to communicate with regulatory agencies and consider all responses to the situation.
EU Tech Commissioner Henna Virkkunen told the media, “This relates to risk management. It is a cornerstone of our Digital Services Act. With this decision, we are sending a very strong signal to Temu.”
She mentioned that the regulatory agency will continue to investigate whether Temu’s service design is addictive, conduct a broader assessment on the sale of illegal products, examine its recommendation system, and study researchers’ access to data.
As per the requirements of Article 75 of the Digital Services Act, Temu must submit an action plan to the European Commission by August 28. Subsequently, the European Digital Services Committee will have a month to review the plan, after which the European Commission will have another month to make a final decision and set an implementation schedule.
The European Commission warned, “Failure to comply with non-compliance decisions may result in periodic fines.”
This move signifies a further escalation of the EU’s crackdown on Chinese e-commerce operating in the EU market. Companies that violate the Digital Services Act may face fines of up to 6% of their global annual turnover.
Last year, another Chinese retailer, Shein, was also under investigation and faced widespread criticism. Reports previously indicated that childlike sex dolls were being sold through its platform to European customers.