Investigation Launched Against Temu

On October 18, 2023, the European Commission announced an official investigation into Temu, a Chinese online marketplace, under the Digital Services Act (DSA). The Commission suspects that Temu, categorized as a 'very large online platform,' has failed to comply with essential DSA regulations. This investigation highlights three primary allegations against the platform, specifically focusing on product safety and user manipulation.

Key Allegations

The European Commission's main concern revolves around the rapid growth of Temu, which appears to be neglecting crucial measures aimed at minimizing risks. Margrethe Vestager, the Vice-President of the Commission, emphasized the importance of ensuring that Temu adheres to EU laws to prevent consumer harm. The Commission aims to guarantee that all online platforms fully comply with European legal standards.

One specific allegation against Temu is its inadequate control over the sale of products deemed illegal under EU law. These include consumer goods such as cosmetic products and toys. The investigation will assess whether Temu's existing measures to eliminate illicit goods from their platform are effective. Although Temu responds swiftly to remove illegal items, reports suggest that these products often reappear on the marketplace just as quickly.

Consequences of Non-Compliance

Should a marketplace be alerted about illegal products and continue to allow their sale, they may lose their liability protection under the DSA. This means that if consumers face issues related to such products, they may hold the marketplace operator accountable if their attempts to prevent the sales were proven ineffective. Although it is customary for some non-compliant products to circulate, Temu is being urged to enhance its efforts to meet industry standards.

User Manipulation Claims

The second allegation involves concerns that Temu may be influencing user behavior through its reward programs and inadequate sorting algorithms, leading users towards harmful practices. The third point of contention arises from Temu's reluctance to grant researchers appropriate access to publicly available data about the platform. Adherence to the DSA mandates transparent access to such data.

Ongoing Dialogue and Responsibilities

Throughout the investigation, the EU Commission may request responses from Temu, seize internal data, or interview company personnel. So far, Temu has shown a willingness to cooperate since the initial inquiries made in the summer. However, reports indicate that existing issues have not yet been adequately addressed. No set deadline exists within the DSA for resolving these allegations, but it is in Temu's interest to expedite this process.

Since May, Temu has been classified as a 'very large online platform' (VLOP), which imposes stricter obligations than on smaller marketplaces. The investigation may expand to include additional issues as it progresses.

Potential Outcomes

If the Commission substantiates the allegations, Temu could either be required to implement necessary changes or face penalties under the DSA, which can reach up to 6% of the platform's annual global revenue. The EU Commission has already initiated similar proceedings against other platforms, including AliExpress. The DSA is one of several regulatory measures currently under discussion in the EU, aiming to improve market oversight regarding compliant products and customs enforcement among online marketplaces.

This investigation shines a spotlight on the broader implications of the DSA in ensuring safer online shopping environments within the EU.

Original Source