The European Commission is going to tighten its oversight of Temu. The company appears to be out of compliance.
The European Commission has announced that it will start formal proceedings against Temu. This means that supervision of the Chinese Web store will be further tightened. The company is under a magnifying glass because it falls under the Digital Services Act (DSA).
If Temu fails to comply with the European Commission’s requirements, it could face a billion-dollar fine of up to six percent of its global sales. What exactly is going on?
Temu must comply with the DSA
The Digital Markets Act (DMA) and the Digital Services Act (DSA) were introduced to protect Europeans digitally from large corporations. These rules mainly focus on illegal content, disinformation and privacy.
In Temu’s case, the company must be transparent about how its algorithms work and why certain content is recommended. Why do users get to see certain ads and how is the information obtained used for that purpose?
Temu. (Image: AFP/Stefani Reynolds)
In addition, Temu must ensure proper data protection and customers must be able to easily file complaints when they encounter problems. It must also not sell products that are illegal in Europe.
This looks out of order
And just that last point doesn’t seem quite right. There are suspicions from the European Union that illegal products are being sold through Temu. This mainly concerns toys and cosmetics that do not comply with European regulations and may therefore pose a risk to health.
Although Temu does remove illegal products, they often reappear quickly afterwards. The EU therefore wants to carry out more systematic checks.
There are also transparency concerns about Temu. Regulators feel that the Web shop may have an addictive design and tries to gamify shopping, or make it a game. For example, there are reward programs that resemble games, and unlimited scrolling is also a point of criticism.
The app on iPhone. (Image: App Store/Temu)
In addition, the store’s recommendation system needs to be more transparent. For example, it lacks a non-profiling-based experience for users, and there are problems with obligations to access public data for visitors.
The European Commission is on top of Temu
The European Commission is grabbing right at Temu. The company has been under the DSA since May of this year. Temu had until the end of September to comply, but does not appear to have complied. Enforcers are therefore now focusing more intensively on the company, with safety a key concern.
Investigations of companies under the DSA are conducted by Digital Services Coordinators (DSC) in several EU member states. Both DSCs from Ireland and Germany have raised the alarm and provided data on Temu to the European Union. However, they are not the only ones; customs authorities and market regulators have also expressed concern.
Now that formal proceedings have begun, the EU has more enforcement powers. It can investigate Temu more deeply and collect more data to assess whether rules are indeed being violated.
This is what Temu thinks of the investigation
In a response to TechCrunch, Temu reveals that it takes its obligations under the DSA seriously. It claims to be strengthening its compliance system and seeking to better protect the interests of consumers. It also says it will cooperate with regulators.
Previously, another Chinese company was the subject of an investigation. This spring, the European Union launched an investigation into AliExpress, which is still ongoing.
