The European Commission issued a statement on July 30 accusing the Chinese online retailer Temu of failing to fully comply with its obligation to provide information to regulatory authorities during a surprise inspection at its European headquarters in Dublin last December.
According to Reuters, this action is part of an investigation by the EU under the Foreign Subsidies Regulation (FSR) to assess whether Temu has received foreign subsidies that could affect fair competition, and whether these supports have given the company an unfair advantage in the European market.
During the inspection, Temu reportedly failed to provide some requested information in full, including details about the company’s organization and management in the EU region, information technology systems used by the business, and relevant business records and documents. If found to have breached its cooperation obligations, Temu could face fines of up to 1% of its global annual turnover.
Temu has voiced objections to the accusations and denied receiving foreign subsidies that distort market competition. The company stated that it has fully cooperated with the EU Commission’s investigation requests, emphasizing that its operational funding in Europe primarily comes from cash flow generated through its own business activities, rather than relying on foreign subsidies to gain a competitive edge.
In recent years, the EU has been ramping up its oversight of Chinese low-cost cross-border e-commerce platforms. Platforms like Temu, Shein, and AliExpress have rapidly expanded in the European market with their low-priced goods and cross-border direct mail model, raising concerns among European retailers who fear that these platforms may exert pressure on local businesses due to supply chain cost advantages and regulatory differences.
To address the influx of low-priced imported goods, the EU has implemented several measures, including imposing a €3 fee on small packages from China starting from July 1. Previously, such packages typically enjoyed tax-free status.
In May of this year, the European Commission fined Temu €200 million (approximately $232 million) for its failure to effectively assess and mitigate the risks associated with the sale of illegal products on its platform under the Digital Services Act (DSA). The ongoing investigation into foreign subsidies is yet to reach a final determination on whether Temu has received distorting foreign subsidies that affect competition.