The European Union has turned up the scrutiny on Chinese ecommerce marketplace Temu after requiring more information regarding its compliance with multiple provisions of the bloc's online governance framework, namely the Digital Services Act (DSA), in relation to how it prevents illegal goods being sold on its platform.
The groups filed coordinated complaints against Temu for a second time last May, pushing the European Commission to investigate a range of concerns including trader traceability and manipulative design.
The DSA imposes a legal duty on the bigger platforms to identify a range of systemic risks that their services may pose to users in the EU, including issues related to minors and public health and take steps to prevent such harms from arising.
The regulation also lays down transparency requirements, which mandate that platforms give information on the logic of the algorithmic systems used in content recommendation for the users.
The sanctions imposed for the breaching of DSA are severe, levied up to 6% of total worldwide annual turnover.
In a Friday press release, the Commission said that it has asked Temu for further information on risk mitigations around the sale of illegal products. It also has requested details ("detailed information and internal documents") about how the platform identifies traders who are selling illegal items and on mitigation measures it uses to ensure that problem sellers cannot just find their way back and resume selling illegal wares.
In another twist, the EU is asking Temu questions on how it handles consumer protection risks, public health risks, and wellbeing risks for its users. The bloc further asks about Temu's recommender systems and approach to user data protection.
The ecommerce platform had been given until October 21 to submit the required information.
https://twitter.com/vestager/status/1844758178862334015
If the EU is not satisfied with Temu's answers it will possibly come back with more data requests. If not so, it will proceed by opening a formal investigation proceeding, under its ordinances, if it deems the ecommerce platform to be non-compliant.
The earlier Commission request for information, submitted in June to both Temu and another ultra-low-cost ecommerce platform, Shein, had included a similarly broad bag of asks. Then it wanted to know about their "Notice and Action" mechanisms - how they let users report problems/illegal products; interface design; protection of minors; recommender systems transparency; trader traceability; and "compliance by design.".
To this day, the Commission's investigation has not been transformed into an actual probe of either of the two ecommerce companies. But for Temu, it wasn't until May, when it was made a so-called very large online platform, or VLOP, that it fell under centralized oversight by the Commission.
The designation gave Temu until the end of September to align with the DSA's extra layer of risk mitigation and algorithmic accountability rules for larger platforms. So the EU appears to be acting fast, probably with public pressure from consumer protection groups raising alarms and demanding action in mind.
The European Consumer Organisation, aka BEUC, welcomed the development, according to a statement on Friday.
While the good news is that the Commission has urgently requested additional information from Temu to determine whether it complies with a number of obligations under the DSA, this is largely a follow up on our complaints filed in May where we raised many problematic issues on Temu, including poor transparency about who sellers on the platform are and the absence of transparency on how its recommender systems work, writes the BEUC digital policy officer, Fernando Hortal Foronda.
We believe that Temu is failing its customers and is probably breaking the law. Various member tests conducted over the past year on dangerous and illegal products point to a systemic problem that Temu is currently failing to address properly. We demand urgent changes from Temu now and hope this will mark the beginning of the end of the harmful practices consumers experience on Temu.
Reached for comment, a representative for Temu, Abigail Rush of New York City-based PR firm 5WPR, emailed a statement. The company said: "We have received the request for information from the European Commission and are fully cooperating". We have committed ourselves strongly to compliance for a long time. And since our designation as a VLOP on May 31, 2024, we have undertaken significant steps and continuously refine our practice under the Digital Services Act, putting a high priority on consumer safety. We welcome all forms of feedback and suggestions from all stakeholders while working toward offering access to quality, affordable products for our consumers.