EU to pursue Temu for alleged sale of illegal products

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Brussels is preparing to launch an investigation into Temu, the Chinese online shopping business, amid concerns that the ecommerce platform is failing to crack down on sales of illegal products.

The probe could be launched in coming days under the bloc’s Digital Services Act, according to two EU officials familiar with the matter. It could result in fines of up to 6 per cent of Temu’s global annual revenue.

The European Commission earlier this month asked Temu to provide information about its actions to curb sales of illegal items “as well as risks relating to consumer protection, public health and users’ wellbeing”, it said.

Temu replied on Friday, said a commission spokesperson. The company’s answers were being analysed and could lead to an official probe being launched, but no final decision had been made to date, the spokesperson added.

Bloomberg on Wednesday first reported the upcoming probe.

Consumer groups have warned about a high proportion of dangerous products sold by online platforms including China’s Temu and Shein, which do not comply with EU safety and consumers’ regulations, and bypass controls by selling directly to customers.

A recent survey which tested toys sold on Temu and other online platforms found that 80 per cent of the items were toxic or posed health hazards for children.

Platforms are not liable for products sold by other vendors, but they can be investigated for failure to police content and goods available for customers to buy.

Brussels has adopted more aggressive policies in the digital space as it tries to counter the dominance of large online retailers and service providers. The Digital Services Act, passed in 2022, gives the commission sweeping powers to fine large online companies for failing to police illegal content on their platforms. This year Brussels opened formal investigations into Meta, AliExpress, TikTok and X.

Temu, which was launched in 2022, has rapidly expanded to almost 50 countries in the space of two years thanks to an ultra-low pricing strategy.

But cracks are beginning to show in the meteoric growth of owner PDD Holdings whose shares plunged 18 per cent in August after posting lower than expected revenue of Rmb97.1bn ($13.6bn) for the three months ending in June.

The commission earlier this year designated Temu as a “Very Large Online Platform” which places it under greater scrutiny from Brussels. The platform was first requested to provide more information on its efforts to control the sale of illegal goods, along with the fast-fashion retailer Shein, in June.

Once launched, the proceedings against Temu can be dropped at any point if the company agrees to take more forceful action against the sale of illegal goods.

Temu did not immediately reply to a request for comment.