European Commission is investigating Temu for possible DSA violations

Brussels – Temu, one of China’s e-commerce giants, is in the crosshairs of the EU executive. The Commission on Thursday (Oct. 31) launched a formal proceeding to assess whether the company is violating the rules of the Digital Services Act (DSA), the legislative package that, together with the Digital Markets Act (DMA), regulates the galaxy of online platforms, from marketplaces to social networks. The investigations mainly focus on the selling of products that do not comply with EU regulations, the risk that the design of some services offered may create addiction in users, and the mechanisms of operation of recommendation systems (those that recommend items for consumers to buy).

Today’s decision, according to a statement from the EU executive, follows preliminary analyses of the risk assessments provided by Temu late last month, requests for information made by the Commission in June and October, and information shared by third parties, as well as analysis of the data that member states collect and share with Brussels. Specifically, sources inside the Berlaymont explained that the investigations will focus on four main aspects.

The first focus will be on having illegal products on the company’s platforms. The Commission found the control mechanisms employed by Temu to prevent or limit the spread in its marketplaces of articles that do not meet EU standards to be insufficient, according to the DSA. According to experts, some products removed from the site because they breach the new EU rules tend to reappear “quickly” on the platform, which is also allegedly not taking adequate measures to remove not only the offending items but also “rogue” sellers (i.e., those who persist in selling illegal products). The speed with which removed products reappear is variable and depends on the category of products, Commission sources explained. However, the phenomenon would be “systemic in nature” and occur across the types of items sold on the site.

A second element of the investigation concerns the risks that the design of some user reward and loyalty programs, developed on the model of video games, produce some form of addiction in consumers. The fear is that the risk assessment carried out by the company does not meet the requirements of the DSA, one of whose stated goals is to protect the mental and physical health of users.

Thirdly, the Commission is examining how the product recommendation mechanisms work for users to ensure they comply with EU consumer protection standards. Under the DSA, users should always be informed about how their preferences are collected and how the algorithms operate to suggest items to them on the site, and they should always be able to reject the use of these profiling services.

Finally, the last question in the survey concerns the obligation of Temu to guarantee independent researchers access to publicly available data to analyze the platform’s operation.

If the Commission’s suspicions were confirmed, Temu would violate several articles of the DSA (at least 27, 34, 35, 38, and 40). The opening of today’s procedure does not prejudge its outcome, the note says. However, the Commission will now “carry out an in-depth investigation as a matter of priority,” which does not have a legal deadline. The EU executive will now continue to gather evidence from Temu, national authorities, and third parties to consider whether to adopt a decision of non-compliance with EU rules.

For now, the company is behaving cooperatively and providing the data requested by Brussels, experts assured. Temu was designated last May as a Very Large Online Platform (VLOP) under the DSA, having over 45 million active users in the EU, according to the company. Last month, Temu registered an increase in its user base to 92 million.

The Commission’s operations against Temu are part of a broader discussion on e-commerce in the Union, which also involves, among others, the other Chinese giant AliExpress. According to EU executive officials, Temu is learning that staying (and growing) within the single market requires playing by the rules, which can be particularly complex in this area.