European Commission sets its regulatory crosshairs on Temu for illegal product sales

Temu is the latest platform the European Commission (EC) has fixed its regulatory gaze upon. Europe’s top consumer enforcement authority said Thursday it’s opening a formal investigation into the online retailer for enabling the sale of illegal products, including limiting the reappearance of previously suspended “rogue traders” with a history of hawking prohibited goods.

In addition to the illegal product allegation, the EC is also investigating Temu’s potentially addictive design, the platform’s systems that recommend products and data access for researchers. The alleged violations fall under the Digital Services Act (DSA), which empowers the EC to levy fines of up to six percent of Temu’s annual revenue.

In a statement to Engadget, a company spokesperson said it plans to cooperate fully. “Temu takes its obligations under the DSA seriously, continuously investing to strengthen our compliance system and safeguard consumer interests on our platform,” the Temu spokesperson wrote. “We will cooperate fully with regulators to support our shared goal of a safe, trusted marketplace for consumers.”

Temu added that it’s in discussions to join the “Memorandum of Understanding (MoU) on the sale of counterfeit goods on the internet,” a collective of online retailers (facilitated by the EC) that collaborates to prevent fake product sales in Europe. “We can confirm that we are in discussions to join the initiative,” the Temu spokesperson told Engadget. “Counterfeiting is an industrywide challenge, and we believe that collaborative efforts are essential to advancing our shared goals of protecting consumers and rights holders.”

The EC’s formal proceedings follow a preliminary risk assessment report Temu provided the EU at the end of September, its replies to the Commission’s formal requests in June and October and info shared by third parties. As Bloomberg notes, Meta, X, AliExpress and TikTok are also facing DSA investigations.

The US, which typically lags far behind the EU in reining in Big Tech, said in September it may investigate Temu, too. Leaders of The Consumer Product Safety Commission (CPSC) ordered staff to evaluate concerns about “deadly baby and toddler products” on the platform.

Among the EC’s concerns are whether Temu’s systems are designed to prevent the reappearance of previously suspended traders and non-compliant products. It will also look at the platform’s potentially addictive gamified reward programs and its systems to mitigate the risks from addictive design choices that could harm customers’ mental well-being. It will investigate Temu’s parameters used to recommend goods (the Commission wants at least one “easily accessible option that is not based on profiling”) and whether the company complies with the DSA’s requirement to provide researchers with publicly accessible data.

The EC doesn’t set legal deadline for completing DSA investigations. Once concluded, the Commission will decide whether to bring the hammer down, accept voluntary commitments to remedy the problems or drop the case.