European Commission sets its regulatory crosshairs on Temu for illegal product sales

The European Commission has launched a formal investigation into online retailer Temu for allegedly enabling the sale of illegal products and violating the Digital Services Act. The investigation will examine Temu's systems for preventing the reappearance of previously suspended traders and non-compliant products. The EC is also concerned about Temu's potentially addictive design, including gamified reward programs, and its systems for recommending products. The investigation may result in fines of up to six percent of Temu's annual revenue if the company is found to be in violation of the DSA. Temu has stated that it will cooperate fully with the investigation and is committed to strengthening its compliance system and safeguarding consumer interests. The company is also in discussions to join a collective of online retailers that collaborate to prevent fake product sales in Europe. The EC's investigation follows a preliminary risk assessment report and information shared by third parties, and is part of a broader effort to regulate Big Tech companies. Other companies, including Meta, X, AliExpress, and TikTok, are also facing DSA investigations. The US Consumer Product Safety Commission has also expressed concerns about Temu and may launch its own investigation. The outcome of the EC's investigation will depend on the findings, and may result in fines, voluntary commitments, or the case being dropped.