The European Union is launching an investigation into Temu because they suspect they are not taking enough steps to stop the sale of illegal products. According to Bloomberg, the Asian e-commerce platform could face large fines if it is proven that they do not do enough to prevent it.
Temu is a relatively recent online store in Europe. However, it has managed to carve out a niche for itself as a large online platform, according to the European Digital Services Law. This implies that it must comply with a series of stricter regulations to avoid receiving large financial fines and to remain operational on the continent.
In the Bloomberg article, which they have spoken to “people familiar with the matter”, they detail that the European Commission is working on opening formal proceedings against Temu. The investigation has not yet been publicly announced because it could be delayed due to the change of political leaders in the institution, but it is a proposal that is already on the table.
The EU Digital Services Law dictates that online platforms with more than 45 million users within member countries must take special protection measures against bad practices. That ranges from trying to prevent the spread of hoaxes and illegal content to stopping the sale of illegal products in the European Union. Otherwise, the fines that could be imposed would be up to 6% of their global annual income.
Temu has not made any statements after Bloomberg revealed the EU’s intentions. However, the Asian company will have the right to propose the adoption of countermeasures to address the European Commission’s concerns and avoid possible sanctions following relevant investigations.
The background to the EU investigation into Temu
Although it is now that we know that the European body intends to initiate an investigation into the sale of illegal products, they had already shown their interest in the measures taken from Temu. On October 11, the EU asked the company to share a report on what they were doing to mitigate “the presence and reappearance of merchants selling illegal products.”
According to anonymous sources who have spoken to Bloomberg, the information provided by Temu has not been satisfactory. As the EU continues to be concerned about the sale of counterfeit or unsafe products on the e-commerce platform, they have taken the decision to investigate it. However, the European institution based in Brussels is about to carry out a change of its political leaders, so the process could be delayed, as commented in the article.
If the European Union detects that Temu is not taking the appropriate measures, it could pay up to 6% of its annual income. To give us an idea, PDD Holding, the Chinese group that owns the marketplace, closed the 2023 financial year with a turnover of 247,639 million yuan. This is equivalent to 31.6 billion euros, which was almost double the figure recorded the previous year (2022). However, PDD Holding did not break down sales by lines of each business, so it is unknown how much annual income corresponded to Temu. This makes it difficult for us to get an idea of how much you could pay as a fine if the EU considers that you do not comply with the current regulations of the Digital Services Law.
