Temu accused by EU regulators of failing to prevent sale of illegal products

Chinese online retailer Temu was accused by European Union watchdogs on Monday of failing to prevent the sale of illegal products on its platform.

The preliminary findings follow an investigation opened last year under the bloc’s Digital Services Act. It’s a wide-ranging rulebook that requires online platforms to do more to keep internet users safe, with the threat of hefty fines.

The European Commission, the 27-nation bloc’s executive branch, said its investigation found “a high risk for consumers in the EU to encounter illegal products” on Temu’s site.

Investigators carried out a “mystery shopping exercise” that found “non-compliant” products on Temu, including baby toys and small electronics, it said.

Temu said in a brief statement that it “will continue to cooperate fully with the Commission.”

The commission didn’t specify why exactly the products were illegal but noted that a surge in online sales in the bloc also came with a parallel rise in unsafe or counterfeit goods.

EU regulators said when they opened the investigation that they would look into whether Temu was doing enough to crack down on “rogue traders” selling “non-compliant goods” amid concerns that they are able to swiftly reappear after being suspended.

In its preliminary findings, the Commission found that Temu could have had “inadequate mitigation measures” because the company was using an “inaccurate” risk assessment that relied on general industry information, rather than specifics about its own marketplace.

“We shop online because we trust that products sold in our Single Market are safe and comply with our rules,” Henna Virkkunen, the EU’s executive vice-president for tech sovereignty, security and democracy, said in a news release. “In our preliminary view, Temu is far from assessing risks for its users at the standards required by the Digital Services Act.

Temu has grown in popularity by offering cheap goods — from clothing to home products — shipped from sellers in China. The company, owned by Pinduoduo Inc., a popular e-commerce site in China, has 92 million users in the EU.

The company will have the chance to examine the Commission’s investigation files and respond to the accusations before the EU watchdogs make a final decision.

Violations of the DSA could result in fines of up to 6 per cent of a company’s annual global revenue and an order to fix the problems.