(Bloomberg) -- The European Union has opened an investigation into e-commerce platform Temu looking at whether the company is doing enough to combat sales of illegal products on its site.
The European Commission said it suspects the company is violating its new Digital Services Act, a law aimed at stamping out illegal content and disinformation online, confirming an earlier Bloomberg report. If found in breach, Temu may be on the hook for a fine of as much as 6% of its annual revenue.
The commission also said it would also assess Temu’s transparency and data access practices, as well as the alleged deployment of addictive features to keep users engaged. The commission said it’s concerned that illegal and potentially dangerous products may be for sale on the platform and that the company isn’t doing enough to control rogue traders.
A spokesperson for Temu said that the company will cooperate fully with regulators and “takes its obligations under the DSA seriously, continuously investing to strengthen our compliance system and safeguard consumer interests on our platform.” The company also said it’s in discussions to join a voluntary agreement facilitated by the commission to combat the sale of counterfeit products online.
Temu is the latest in a string of large tech companies that the EU has targeted under the DSA as the bloc leans into its role as the global tech regulator. Other companies current facing DSA proceedings include: Meta Platforms Inc., Alibaba Group Holding Ltd.’s AliExpress, Bytedance Ltd.’s TikTok and Elon Musk’s X Corp.
Throughout the probe the company, a unit of Chinese-owned PDD Holdings Inc., will be able to make commitments that address the commission’s concerns, potentially avoiding penalties.
The probe follows the EU’s Oct. 11 request that Temu share data on how it tackles counterfeit or unsafe products on its marketplace. At the time, the commission said it had demanded “detailed information and internal documents on the mitigation measures taken against the presence and reappearance of traders selling illegal products” on Temu.
Temu has grown explosively since PDD introduced the service to expand in global markets, including a “Shop Like a Billionaire” Super Bowl ad in 2023 that quickly made it one of the most downloaded apps in the US. Its flash sales, game-like features and low prices pulled in consumers in dozens of countries around the world.
(Updates with Temu response in fourth paragraph)
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