EU launches formal investigation against Chinese retail company Temu

The EU on Thursday initiated formal proceedings against Chinese e-commerce giant Temu, alleging that the popular shopping platform has failed to prevent the sale of illegal products and has displayed potentially harmful design features.

The move places the EU's burgeoning platform economy in the spotlight, as regulators ramp up scrutiny over compliance with the new Digital Services Act (DSA), which aims to strengthen the oversight of digital platforms operating within Europe.

The investigation, announced by the European Commission, focuses on Temu's alleged failure to enforce strong safeguards against rogue traders selling illegal products on the site.

Temu, owned by China-based PDD Holdings, is a popular low-cost alternative to Amazon and boasts over 100 million users in Europe alone.

Since its EU launch in April 2023, Temu has attracted a substantial customer base with its wide variety of goods, ranging from cosmetics and clothing to furniture and technology, all available at discounted prices under the slogan "Shop Like a Billionaire."

At the core of the investigation concerns that the Chinese company lacks adequate systems to prevent banned traders from reappearing on the platform.

According to the commission, products from previously suspended sellers have re-emerged on the platform just days after removal, raising doubts about Temu's control over compliance issues.

Officials have also criticized the platform's "addictive design" model, which they say includes game-like rewards aimed at driving higher engagement and purchases.

The EU claims Temu has failed to implement adequate measures to mitigate the potential risks of this approach, which regulators argue may encourage excessive and compulsive shopping.

If the company is found to be in violation of the DSA, it could face substantial fines.

In a statement, a spokesperson for Temu said the company "takes its obligations under the DSA seriously, continuously investing to strengthen our compliance system and safeguard consumer interests on our platform" and "will cooperate fully with regulators."