The European Commission has launched formal proceedings against online retailer Temu over the alleged failure to halt the sale of illegal products and the potentially addictive design of its service, based on information shared by Irish authorities.
The investigation for alleged breaches of the Digital Services Act comes after analysis from both the European Commission and Ireland’s Coimisiún na Méan into the online Chinese site Temu, which had 92 million users in the month of September alone.
“Our enforcement will guarantee a level playing field and that every platform, including Temu, fully respects the laws that keep our European market safe and fair for all,” said Margarethe Vestager, executive vice-president for a Europe Fit for the Digital Age.
The decision to launch formal proceedings came after preliminary analyses of a risk assessment report provided by Temu, as well as information shared by national authorities, including Ireland’s regulator.
The commission said its investigation would focus on several areas, including the systems Temu — whose parent company is PDD Holdings — has in place to limit the sale of illegal products in the EU.
One of the concerns authorities have is the systems to limit the reappearance of previously suspended rogue traders known to have been selling non-compliant goods in the past, as well as systems to prevent illegal goods from making it back on the market.
Another concern is the risks linked to the addictive design of the service.
This includes “game-like reward programmes, and the systems Temu has in place to mitigate the risks stemming from such addictive design, which could have negative consequences to a person’s physical and mental wellbeing,” the European Commission said.
Its proceedings will also focus on how Temu recommends content and products to users through its recommender systems and its compliance with the legal obligation to give researchers access to its publicly available data.
If the European Commission’s suspicions are proven correct, Temu would have breached five articles of the Digital Services Act.
Penalties for breaches of the act can include fines of up to 6% of global revenue. In the second quarter of this year alone, its parent company reported revenues of €12.2bn.
The European Commission added it would continue to gather evidence as it has now formally opened proceedings.
“The opening of formal proceedings empowers the commission to take further enforcement steps, including the adoption of a non-compliance decision,” it said.
“The commission is also empowered to accept commitments made by Temu to remedy the matters subject to the proceedings.
“The DSA [Digital Services Act] does not set any legal deadline for bringing formal proceedings to an end. The duration of an in-depth investigation depends on several factors, including the complexity of the case, the extent to which the company concerned cooperates with the commission, and the exercise of the rights of defence.”
Coimisiún na Meán has been contacted for comment.