European Commission investigation against Temu: possible violations of the Digital Services Act

Translated by Andrea Solazzo

On 31 October, the European Commission launched an investigation into whether Temu has potentially broken the law on digital services. The focus is on various aspects, including the possible sale of products that do not comply with European standards, service features that could be addictive, mechanisms used to suggest purchases to users, and access to data reserved for researchers.

On 31 May 2024, under the European Digital Services Act (DSA), the online platform Temu had been declared a Very Large Online Platform (VLOP), reportedly with 45 million active users. As a result, the platform was supposed to comply with the various VLOP obligations within four months and conduct various analyses regarding transparency and standards for risk reduction, management, and assessment.

But following the recent statement in September, in which Temu reported having 92 million monthly active users, as well as a preliminary report provided by the company itself and information received from third parties, the European Commission opened a formal investigation into whether Temu had breached its obligations under the DSA. In parallel, independent proceedings have already been initiated against Temu by several national authorities, concerning dumping practices and the lack of effective vendor controls. These authorities include the Competition Authority in Hungary, the Office for the Protection of Competition and Consumers in Poland and the Directorate General for Competition Policy, Consumer Affairs and Fraud Control in France.

What is the Digital Services Act?

The Digital Services Act (DSA), which came into force on 15 December 2020, is a European Union regulation designed to update the 2000 e-Commerce Directive and to address issues of illegal content, transparent advertising and misinformation, to be applied to all services that store information, including large search engines and platforms, including Temu.

The suspected violations

According to the CPC Network, tasked with investigating compliance with consumer protection laws, supported by the Commission and consisting of the national consumer protection authorities of the European Member States with also Norway and Iceland, the alleged infringements by Temu are attributable to Articles 27, 34, 35, 38 and 40. The investigations focus on possible practices of:

• False discounts to give the wrong impression that products are subject to some offer.
• Pressure selling, induced by false claims about the availability of products to urge consumers to buy early.
• Forced prize games designed to incentivise consumers to participate without properly specifying the conditions of use on rewards.
• Misleading information about consumers' legal rights regarding the refund policy.
• Inauthentic reviews.
• Hidden contact details that make it difficult for a consumer to get in touch with Temu.

From now on, Temu will have to respond to comments received from the CPC Network and to explain how it intends to address consumer protection issues. If the platform does not resolve these violations, national authorities may take more stringent measures, such as imposing penalties on Temu's annual turnover, to ensure compliance.

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