EU fines Temu €200 million over illegal product sales and violations of digital regulations

Chinese online retailer Temu has been fined 200 million euros for failing to stop the sale of illegal products on its platform. The retailer may face further penalties in the coming months as a result of a nearly two-year-long investigation under the Digital Services Act (DSA), which requires large online companies to do more to tackle illegal and harmful content on their platforms.

EU regulators launched the investigation into Temu following complaints by the European Consumer Organisation (BEUC) and 17 of its national members. The EU pointed out that the company failed to diligently identify, analyse, and assess the systemic risks posed by illegal products sold on its platform and the resulting harm to consumers in the European Union.

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It also criticised Temu for not properly assessing how its recommender systems and product promotion programmes, including those involving affiliated influencers, could amplify the risks associated with the sale of illegal products.

“Temu respects the objectives of the Digital Services Act and the need for clear, consistent rules across the digital economy. However, we disagree with the European Commission’s decision and consider the fine to be disproportionate,” the company said in a statement.

“The decision relates to our first DSA assessment in 2024 and does not reflect the current state of our systems. Temu engaged constructively with the Commission throughout the process and has since taken further steps to strengthen risk assessment, platform governance, and user protection,” it added.

EU’s action plan for Temu

The Commission has granted Temu time until August 28 to deliver an action plan, which regulators will assess. A decision on whether the company has done enough to comply with the DSA is expected within months.

Regulators will continue their investigation into whether the design of Temu’s service is addictive, as well as broader concerns regarding the sale of illegal products, its recommender systems, and researchers’ access to platform data.

EU’s regulatory fines for X last year

The Commission had issued a fine of 120 million euros to X in December last year for breaching its transparency obligations under the DSA.

The breaches mentioned by the Commission included the deceptive design of its blue checkmark system, a lack of transparency in its advertising repository, and failure to provide researchers with access to public data.

The use of the blue checkmark violated the DSA’s obligation for online platforms to prohibit deceptive design practices on their services. The EU raised concerns about X handing out verified status to users without meaningfully verifying who was behind the accounts, making it difficult for users to judge the authenticity of the accounts and content they engage with.

The EU had also stated that X’s advertisement repository failed to meet the transparency and accessibility requirements of the DSA. The Commission added that X incorporated design features such as access barriers and excessive delays in processing, which undermined the purpose of ad repositories.