According to allegations, Temu is the online shopping platform owned by PDD Holdings Inc. in China. The EU has opened an investigation over the allegations it failed to stop the illegal sale of products.
As European regulators increase their scrutiny of online marketplaces, the probe may result in significant penalties for the platform.
Temu is targeted by the EU for non-compliance with regulatory requirements
Insiders say that the European Commission will investigate whether Temu violated EU Digital Services Act, which mandates platforms with more than 45 million users take strict measures to combat illegal content and counterfeit products.
If the rules are not followed, fines of up to 6% could be imposed on a company.
This investigation forms part of an EU-wide effort to hold platforms responsible for misinformation and illegal activities.
Sources suggest that the investigation could be announced soon, despite the fact the timing may change due to the impending changes in leadership within the EU. Temu is yet to issue a response.
EU Demands Answers from Temu
This investigation is a follow-up to an initial inquiry by the European Commission on 11 October, when it requested information about Temu’s handling of illegal and counterfeit products.
The regulators asked for internal data and documents on the efforts of the platform in curbing unauthorized trades.
Temu’s response failed to impress EU officials and a formal investigation was launched.
Temu has the opportunity to suggest corrective actions to address concerns raised by the Commission and possibly avoid penalties.
Temu could be severely affected by the outcome of this investigation, which will likely have a significant impact on its operations in Europe. It faces increasing scrutiny along with major platforms such as Meta, Alibaba’s AliExpress and TikTok.
Temu faces challenges ahead
Temu’s global footprint has grown rapidly since it was launched by PDD Holdings. The Super Bowl 2023 ad campaign, which was highly visible and high profile, helped make it the number one app in the US.
Flash sales, low price points, and features that are similar to games have drawn budget-conscious customers in many markets.
The e-commerce titan is now facing challenges due to the rising competition of TikTok and Amazon. Each are vying for attention from thrifty consumers.
PDD Holdings warned recently of possible difficulties, underlining the increased competition in the sector.
In the second quarter of 2013, the company’s revenue was 97.1 billion Yuan, which is $13.6 billion. This figure fell short of the expected 100 billion Yuan. The company’s net income was 32 billion yuan – slightly higher than the market expectation of 27.5 billion.
After the announcement, PDD’s American Depositary Receipts in New York fell 2.6% to $121.95.
EU Crackdown on Major Platforms
Temu’s EU investigation is part of an overall crackdown by the DSA on digital platforms.
Similar investigations have been launched by regulators against major companies including Meta Platforms Inc. and Alibaba’s AliExpress. DSA’s goal is to make the internet safer by forcing platforms to take down illegal content, and to prevent the sale or unauthorized goods.
Temu’s response to this investigation is likely to play an important role in determining any penalties or restrictions.
As it navigates Europe’s regulatory landscape, the platform will need to be able to take effective countermeasures.
The ICD published the article EU investigates Temu for illegal products sales.
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