Summary
Temu is a Chinese online marketplace owned by PDD Holdings Inc. that has come under formal investigation by the European Commission for alleged violations of the European Union’s Digital Services Act (DSA). Classified as a Very Large Online Platform (VLOP) due to its over 92 million monthly active users in the EU, Temu is subject to stringent regulatory requirements designed to ensure transparency, user safety, and the prevention of illegal activities on its platform. The Commission’s inquiry centers on concerns that Temu has inadequately prevented the sale of illegal or unsafe products, failed to provide sufficient transparency in its recommender systems, and employed addictive design features that may harm users, particularly vulnerable groups.
The investigation, initiated in mid-2024, scrutinizes Temu’s compliance with multiple DSA obligations, including the effectiveness of its mechanisms to detect and remove illegal goods, the traceability of traders, and the mitigation of risks arising from potentially manipulative user interface designs and recommender algorithms. These issues have drawn criticism from consumer organizations across Europe, which allege widespread availability of unsafe and counterfeit products on the platform. In response, the Commission has requested detailed information from Temu and has the authority to impose significant fines—up to 6% of Temu’s global annual revenue per violation—should breaches be confirmed.
Temu has expressed willingness to cooperate with EU regulators and is reportedly considering joining a voluntary European Memorandum of Understanding aimed at combating counterfeit goods online. Nevertheless, the case exemplifies broader challenges faced by large e-commerce marketplaces operating within the EU’s regulatory framework, particularly regarding the enforcement of product safety standards, transparency mandates, and the prevention of exploitative design practices. The Commission’s actions against Temu mark a significant enforcement milestone under the DSA and signal increased regulatory scrutiny of global digital platforms selling into European markets.
The investigation into Temu also highlights wider implications for digital consumer protection and platform accountability, as the EU seeks to set a robust precedent for regulating online marketplaces amid growing concerns about the volume of low-value imports, counterfeit goods, and manipulative online practices. The outcome may influence regulatory approaches in other jurisdictions and reinforce the importance of compliance for platforms operating at scale in the EU digital economy.
Background
Temu, a Chinese online marketplace owned by PDD Holdings Inc., has garnered significant attention in the European Union due to concerns over its compliance with the Digital Services Act (DSA). The platform, which reportedly has over 92 million monthly active users in the EU, qualifies as a Very Large Online Platform (VLOP) under the DSA because it exceeds the threshold of 45 million monthly EU users. This designation subjects Temu to enhanced regulatory obligations aimed at ensuring transparency, user safety, and the prevention of illegal activities on its platform.
The DSA framework requires VLOPs like Temu to implement robust mechanisms such as the ‘Notice and Action’ system that allows users to report illegal products, to avoid deceptive online interface designs often referred to as ‘dark patterns,’ to protect minors, to maintain transparency in recommender systems, and to ensure trader traceability and compliance by design. Temu has been under scrutiny since February 2024 for adherence to these general DSA rules, and since October 2024, it has been expected to prepare a comprehensive risk assessment report addressing the more stringent requirements applicable to platforms of its size.
Concerns raised by the European Commission center on allegations that Temu has inadequately prevented the sale of illegal or unsafe products, failed to comply with the transparency and safety provisions of the DSA, and employed addictive design features in its user interface and recommendation systems. In response, the Commission has initiated formal proceedings against Temu, including requests for detailed information on its compliance measures and the opening of a formal investigation to assess potential breaches of the DSA.
The investigation is part of the European Commission’s broader enforcement effort targeting very large platforms to hold them accountable for illegal and harmful activities online while safeguarding users’ fundamental rights and fostering trust in the digital environment. Non-compliance with the DSA could lead to severe financial penalties, with fines reaching up to 6% of the global annual revenue per violation, underscoring the high stakes for Temu amid this regulatory scrutiny.
Investigation into Temu
The European Commission launched a formal investigation into the Chinese online retailer Temu over concerns that the platform may have violated provisions of the Digital Services Act (DSA), particularly regarding its failure to prevent the sale of illegal products within the European Union. Temu was designated as a Very Large Online Platform (VLOP) under the DSA on 31 May 2024, which subjects it to heightened regulatory scrutiny and stricter obligations to address illegal and harmful content on its platform.
The investigation focuses on four primary areas of concern. First, the Commission is assessing whether Temu has implemented effective systems to prevent the sale of illegal or non-compliant products, including mechanisms to detect and remove such listings and the traceability of traders involved. This follows complaints from pan-European consumer organizations, notably BEUC and its national members, who highlighted numerous unsafe and illegal items being sold on Temu’s platform.
Second, the Commission is scrutinizing Temu’s platform design, which incorporates game-like reward programs and other potentially addictive features. These elements raise concerns about risks to users’ mental and physical well-being, as the DSA requires platforms to minimize such harms, particularly those arising from compulsive behavior. The Commission is examining whether Temu sufficiently mitigates these risks and provides appropriate safeguards for vulnerable users.
Third, the investigation covers the transparency and compliance of Temu’s recommender systems. The Commission has requested detailed information on how Temu’s algorithms function, whether they comply with DSA requirements to offer users accessible options for content recommendations not based on profiling, and how these systems impact user privacy and data protection. Temu was mandated to submit comprehensive responses by specified deadlines in mid-2024, with the Commission evaluating these replies to determine subsequent enforcement actions.
Lastly, the Commission is evaluating whether Temu fulfills its obligations under the DSA to provide vetted researchers with access to publicly available data, ensuring accountability and transparency of the platform’s operations.
The formal investigation empowers the European Commission to impose fines of up to 6 percent of Temu’s global annual turnover per DSA violation if breaches are confirmed. The process involves further information requests, monitoring, and the possibility for Temu to propose countermeasures to avoid or mitigate penalties. The Commission’s action reflects broader regulatory efforts to clamp down on unsafe and illegal online products, with Temu’s case emblematic of challenges posed by large online marketplaces shipping billions of low-value goods, primarily from China, into the EU.
Temu’s Business Model and Operational Challenges
Temu operates as a large online marketplace characterized by aggressive sales tactics and an addictive platform design. Its business model incorporates game-like reward programs aimed at increasing user engagement, which the European Commission has scrutinized for potentially encouraging addictive behaviors that could harm users’ mental and physical well-being. These design elements raise concerns under the Digital Services Act (DSA), which mandates platforms to minimize risks related to compulsive use and protect vulnerable users, including minors.
A central issue in Temu’s operations is its handling of product compliance within the European Union. The platform faces allegations of insufficient control systems to prevent the sale of illegal, non-compliant, or dangerous products, which constitute a significant challenge given the EU’s stringent standards for product quality, consumer rights, and digital transparency. The Commission suspects that Temu lacks effective monitoring and screening mechanisms to address these concerns adequately, raising the risk of rogue traders exploiting the marketplace.
The scale of Temu’s import activity into the EU exacerbates these challenges. In 2023, approximately 4.6 billion low-value items—amounting to around 12 million parcels daily and predominantly originating from China—were imported, doubling the figure from the previous year. This volume highlights the platform’s substantial role in the EU market and underscores the potential impact of non-compliance on consumer safety and market integrity.
Moreover, Temu’s platform design has been criticized for employing so-called “dark patterns”—manipulative interface techniques that complicate account closure and encourage consumers to spend more than intended. Such practices conflict with the DSA’s objectives to prevent deceptive designs and ensure transparency, fair treatment, and user autonomy online.
The Commission has requested Temu to provide detailed information on its compliance with several DSA obligations, including the operation of its Notice and Action mechanism for reporting illegal products, transparency and fairness in recommender systems, traceability of traders, and compliance by design principles. The company has expressed its commitment to cooperating with regulators and is engaging in discussions about joining a European agreement aimed at curbing the sale of counterfeit goods online.
Enforcement of the DSA involves cooperation between the European Commission and national authorities, which oversee platform compliance within their jurisdictions. The Commission holds investigatory and sanctioning powers and may impose interim measures to mitigate risks while investigations are ongoing. These can include modifications to recommender systems, increased monitoring of specific content, or orders to address infringements. If found in breach of the DSA, Temu could face significant fines and regulatory actions.
Temu’s Response to the Allegations
In response to the European Commission’s investigations and the various allegations concerning breaches of the Digital Services Act (DSA), Temu has publicly stated that it “takes its obligations under the DSA seriously” and expressed its willingness to cooperate fully with regulators to ensure a safe and trusted marketplace for consumers. The company has affirmed its intent to work closely with the European Commission and the Consumer Protection Cooperation (CPC) Network to address the concerns raised about its platform, including issues related to transparency, protection of minors, and the traceability of traders.
Furthermore, Temu confirmed that it is in discussions to join the “Memorandum of Understanding (MoU) on the sale of counterfeit goods on the internet,” a voluntary agreement facilitated by the European Commission that includes major online retailers and brands aimed at combating the sale of counterfeit products in Europe. By potentially joining this initiative, Temu seeks to demonstrate its commitment to collaborating on solutions that prevent counterfeit goods from being sold through its platform.
While the company has not detailed specific measures it has implemented to comply with the DSA beyond these commitments, its spokesperson emphasized the intention to support the shared regulatory goal of consumer safety and marketplace trust. Temu’s response comes amid ongoing requests for information from the Commission regarding its compliance mechanisms, including its use of recommender systems, handling of illegal products, and measures to protect minors.
Legal and Regulatory Implications
The European Commission’s actions against Temu highlight the stringent enforcement mechanisms established under the Digital Services Act (DSA), a regulatory framework aimed at increasing accountability of large online platforms operating within the European Union. As Temu is designated a Very Large Online Platform (VLOP) due to its more than 45 million monthly active EU users, it falls under direct Commission supervision and must comply with the DSA’s comprehensive obligations.
Under the DSA, platforms like Temu are mandated to take effective measures to curb the spread of illegal goods, disinformation, and other harmful content on their services. Failure to comply with these obligations can result in severe consequences, including financial penalties of up to 6% of the platform’s global annual turnover per violation. The Commission may impose such fines following a formal investigation if it confirms breaches of the DSA.
In the case of Temu, the Commission’s probe was initiated by a request for information concerning the platform’s policies and actions to prevent illegal or counterfeit product sales. If Temu provides incorrect, incomplete, or misleading information in response, it may face additional fines or enforcement measures. The Commission also has the authority to adopt interim measures during ongoing investigations if there is an imminent risk of serious harm to users, such as mandating changes to recommender systems or enhanced monitoring of specific content.
Beyond fines, non-compliance decisions can lead to enhanced supervision periods and periodic penalty payments aimed at ensuring that platforms implement corrective actions within deadlines set by the Commission. In extreme cases where infringements persist and pose serious risks involving criminal offenses or threats to users’ safety, the Commission may even seek the temporary suspension of the service.
The enforcement of the DSA in this context not only seeks to protect consumer rights and fundamental freedoms online but also aims to foster innovation and competitiveness by setting clear and proportionate rules. The regulation rebalances the responsibilities among users, platforms, and public authorities in accordance with European values, placing citizens at the center of digital governance.
The Commission’s investigation into Temu reflects broader EU concerns about the increasing volume of low-value imports, particularly from China, and the accountability of marketplaces for the sale of non-compliant or dangerous products. These measures align with similar regulatory pushes in other jurisdictions, including recent U.S. actions targeting duty-free shipments of low-value packages. Overall, the Commission’s approach under the DSA represents a robust and evolving legal framework to hold major online platforms accountable for their impact on digital markets and society at large.
Impact and Reactions
The European Commission’s announcement of a formal investigation into Temu has had significant implications both within the EU and beyond. The probe highlights serious concerns over Temu’s potential failure to prevent the sale of illegal and unsafe products on its platform, raising broader issues about consumer protection and regulatory oversight in the digital marketplace. The stakes for Temu are particularly high, as violations under the Digital Services Act (DSA) could lead to fines amounting to up to 6 percent of the company’s global revenue per infringement, potentially reaching 24 percent overall.
Consumer advocacy groups have broadly welcomed the investigation as a crucial step toward stronger regulatory enforcement. Fernando Hortal Foronda, digital policy officer at the European Consumer Organisation (BEUC), praised the Commission’s move, noting that Temu’s platform has been associated with numerous problematic products and deceptive design practices that mislead consumers. Similarly, Rocio Concha from the British consumer group Which? acknowledged the investigation positively but highlighted that the UK’s weaker consumer protection laws currently limit the ability to hold online marketplaces accountable for unsafe third-party sales, signaling a regulatory gap compared to the EU.
Temu has publicly expressed its intent to cooperate fully with regulators to create a safer and more trustworthy marketplace for consumers. The company is considering joining the European Commission-facilitated “Memorandum of Understanding on the sale of counterfeit goods online,” a voluntary agreement signed by major online retailers and brands to combat counterfeit products. Additionally, Temu indicated a willingness to work closely with the EU Consumer Protection Cooperation (CPC) Network and the Commission to address regulatory concerns and improve its practices.
The Commission’s actions mirror a global trend toward stricter scrutiny of e-commerce platforms. This is exemplified by recent U.S. government moves to end duty-free privileges for low-value shipments from retailers like Temu, targeting similar concerns over counterfeit and unsafe goods. The European Commission’s focus on the 4.6 billion low-value items imported into the EU in the previous year—mostly from China—reflects a growing urgency to mitigate risks associated with large volumes of potentially non-compliant products.
In parallel to product safety, the Commission also preliminarily found that Temu breached DSA transparency requirements related to advertising practices and access to data by independent researchers, underscoring a broader scope of compliance issues beyond product control. Should interim measures be deemed necessary during the investigation, the Commission may require Temu to adjust its recommender systems, increase monitoring, or take other temporary steps to protect users.
Broader Implications for E-commerce Platforms
The European Commission’s formal investigation into Temu, alongside ongoing scrutiny of platforms like AliExpress and Shein, marks one of the earliest and most significant enforcement actions under the Digital Services Act (DSA). This highlights the EU’s strong commitment to holding digital marketplaces accountable for compliance with new regulatory standards aimed at improving consumer safety and platform transparency.
By issuing formal Requests for Information (RFIs) to Temu and Shein, the Commission seeks detailed disclosures about their adherence
The content is provided by Jordan Fields, 11 Minute Read
