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The investigation will look into Temu’s content and product recommender systems as well as the sale of illegal products on the platform.
The European Commission opened formal proceedings against Temu to assess whether the Chinese online retailer may have breached the EU Digital Services Act (DSA).
On 11 October, the Commission requested information from Temu regarding the mitigation efforts it has put in place against illegal product trading on its platform, as well as the risks arising from the platform to consumer protection, public health and users’ wellbeing.
It also asked Temu for information on its recommender systems and the risks to the protection of users’ personal data.
The investigation, announced today (31 October), followed an analysis of the company’s response to the Commission’s request for information a few weeks ago, as well as Temu’s risk assessment report along with information shared by third parties.
The Commission said it also relied on information shared by member states’ digital services coordinators, in particular, Ireland’s Coimisiún na Meán, to come to its decision on the formal investigation.
According to the Commission, the investigation will focus on the sale of illegal products on Temu, as well as the retailer’s built-in system to limit the reappearance of previously suspended sellers who sold illegal products.
In addition, the EU authority will also look into the risks associated with the addictive design of the platform, including the “game-like” reward programmes.
Temu, with a monthly user base of 75m, was designated as a very large online platform under the DSA earlier this year, which means that the company is subject to the “most stringent rules” under the Act as well as being subject to certain obligations under the Act.
The formal proceedings opened today, in addition, will investigate Temu’s DSA obligations linked to its content and products recommender systems as well as its obligation to give researchers access to its publicly accessible data.
The proceedings, which the Commission called a “matter of priority”, do not have a deadline and could have drastic results for Temu, which could be fined anywhere up to 6pc of its global annual turnover if found non-compliant.
A spokesperson for Temu told SiliconRepublic.com that they take obligations under the DSA “seriously”.
“We will cooperate fully with regulators to support our shared goal of a safe, trusted marketplace for consumers,” the spokesperson said.
The company also said that it was in discussions with the Commission to join a voluntary “memorandum of understanding on the sale of counterfeit goods on the internet”.
This, however, is not the first time Temu has come under the EU’s radar. In July, e-commerce giants Temu and Shein were sent formal requests for information on the measures they have taken to comply with DSA obligations on user reports on illegal products as well as protecting children on its platform.
Earlier this year, the EU used the DSA to go after Amazon, requesting that the online retail giant Amazon share information regarding the transparency of its recommender systems and their parameters. These are algorithms that suggest content to users based on data it has gathered about those particular users.
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Updated, 2:40pm, 4 November 2024: This article was amended to include statements made by Temu.
