Over the last few years, the rise of Temu has seen it become a serious competitor in the low-budget marketplace, rivalling companies such as Shein and Amazon. However, its practises have also seen it come under legal pressure, particularly in the EU which recently launched an investigation against Temu.
Background on Temu and the European Union’s Digital Services Act
In May 2024, Temu was designated as a Very Large Online Platform (VLOP) under the European Union’s Digital Services Act (DSA), a classification that mandates stringent compliance measures due to its substantial user base of over 45 million monthly active users in the EU. As a VLOP, Temu is required to assess and mitigate systemic risks associated with its services, ensuring the safety and well-being of its users. By September 2024, Temu reported an impressive 92 million monthly users, further emphasising the platform’s significant impact on the digital marketplace.
Formal Proceedings Opened by the Commission
On 31 October 2024, the European Commission initiated formal proceedings to investigate potential breaches of the DSA by Temu. This decision follows a review of a risk assessment report submitted by Temu in late September 2024, along with responses to the Commission’s inquiries made on June 28 and October 11, 2024.
If the Commission’s suspicions are substantiated, Temu could face liability for infringing several articles of the DSA. The formal proceedings empower the Commission to gather further evidence, issue additional requests for information, and potentially adopt a non-compliance decision. However, it is important to note that the opening of these proceedings does not imply any predetermined outcome.
The investigation will delve into several critical areas, including:
1. Sale of Non-Compliant Products: The Commission will examine the effectiveness of Temu’s systems designed to prevent the sale of illegal products within the EU, particularly focusing on measures to curb the re-emergence of previously suspended rogue traders.
2. Addictive Design Risks: The inquiry will assess the platform’s design features, such as game-like reward programs, which may contribute to addictive behaviours and their potential negative impacts on users’ physical and mental health.
3. Content Recommendation Compliance: The investigation will scrutinise how Temu recommends products and content to users, ensuring transparency in the parameters used and providing non-profiling options.
4. Data Access for Researchers: The Commission will evaluate Temu’s adherence to DSA obligations regarding access to publicly available data for researchers.
As the investigation unfolds, the Commission will continue to collaborate with national authorities to ensure compliance with the DSA and consumer protection laws. This ongoing scrutiny highlights the importance of regulatory adherence in the rapidly evolving digital marketplace, underscoring the need for platforms like Temu to prioritise user safety and transparency.
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