Temu Under Scrutiny: EU Investigation into Alleged DSA Violations
The European Commission has launched an official investigation into the Chinese e-commerce platform Temu, following allegations of non-compliance with the European Union’s Digital Services Act (DSA) and product safety standards. This inquiry marks a significant step in the EU's enforcement of digital regulation, aimed at ensuring online platforms protect users from unsafe products and uphold transparency in their digital services. The investigation raises questions about Temu's practices regarding product safety, platform design, data accessibility, and compliance with DSA obligations, and could lead to substantial legal implications for the fast-growing platform.
Background of the Investigation
The inquiry into Temu, which entered the European market in April 2023, is spurred by a surge in customer concerns and regulatory reviews. The platform has seen extraordinary growth, reaching 92 million users in the EU by September 2024. However, as its user base expanded, so did concerns about Temu's safety standards and transparency. The investigation follows a risk assessment report submitted by Temu in September 2024, in response to the Commission’s formal inquiries, along with additional information from third-party sources facilitated by the European Board of Digital Services Coordinators. With key support from the Irish Digital Services Coordinator, the Commission aims to address allegations that Temu’s practices may breach the DSA.
Key Areas of Concern
The investigation focuses on four main issues, beginning with the sale of illegal products. Central to the Commission’s concerns is Temu’s ability to prevent illegal and unsafe items from reaching consumers. Regulators are scrutinizing Temu’s measures to prevent rogue sellers from reappearing on the platform and the recurrence of previously flagged hazardous products.
Another contentious issue is the allegedly addictive design of Temu's user interface, which may employ game-like elements to encourage prolonged usage. Reports suggest that these features could contribute to compulsive behavior, posing risks to both physical and mental health.
The investigation also evaluates whether Temu’s content recommendation algorithms comply with DSA standards. The DSA mandates that platforms should prioritize user safety in their algorithms, preventing the promotion of harmful or misleading content.
Finally, the Commission is assessing whether Temu meets its obligations to provide access to publicly available data, as required under the DSA. Data access for researchers is crucial for independent scrutiny, accountability, and monitoring of systemic risks associated with platform operations.
Violations in any of these areas could result in liabilities under the DSA, with potential breaches in Articles 27, 34, 35, 38, and 40.
EU Response and Stakeholder Reactions
Commissioner for Competition and Digital Policy Margrethe Vestager emphasized the importance of compliance with the DSA, stating, “We aim to ensure that Temu adheres to the Digital Services Act, particularly in guaranteeing that products offered on their platform align with EU standards and do not pose risks to consumers.” Vestager further highlighted that enforcing the DSA is essential for creating a fair digital marketplace in Europe.
Consumer advocacy groups have praised the EU’s decision. Fernando Hortal Foronda, digital policy officer at the European Consumer Organisation (BEUC), called it a “significant development” and encouraged the Commission to “maintain pressure on Temu” to drive compliance. The Commission’s next steps include gathering more evidence, interviewing stakeholders, and issuing requests for further documentation.
Potential Outcomes and Broader Implications
The Commission has broad enforcement powers under the DSA, which may include issuing non-compliance decisions and imposing remedial actions. Temu could propose commitments to address any shortcomings identified by the investigation. Additionally, the Commission’s findings may inform actions by national consumer protection bodies under the Consumer Protection Cooperation (CPC) Network, which enforces EU consumer laws beyond the DSA.
Looking forward, the investigation’s timeline remains open-ended, contingent on case complexity and Temu’s cooperation. Notably, the probe is separate from any measures market surveillance authorities may take under the General Product Safety Regulation, which is set to take effect in December 2024.
Since its designation as a ‘Very Large Online Platform’ (VLOP) in May 2024, Temu is subject to stringent DSA compliance requirements, especially concerning systemic risk assessment and mitigation. As the first major test case under the DSA, the outcome of Temu’s investigation could set a precedent for digital platforms operating within the EU, shaping the future of platform accountability and user safety in the digital marketplace.
