Temu accused of breaching EU's DSA in bundle of consumer complaints

Consumer protection groups around the European Union have filed coordinated complaints against Temu, accusing the Chinese-owned, ultra low-cost e-commerce platform of a raft of breaches related to the bloc's Digital Services Act (DSA). Temu launched in the region only about a year ago but recently reported blasting past 75 million monthly users.

Penalties for confirmed breaches of the EU's online governance and marketplace safety regime can reach up to 6% of the global annual turnover of the platform's parent. For some reference, Temu's parent Pinduoduo reported revenues of nearly $35 billion for 2023, nearly double on the year prior; Temu was estimated to account for about 23% of that amount last year.

BEUC, the European consumer organization that represents 45 regional consumer protection groups across 31 EU countries, said Thursday it's filed a complaint against Temu with the European Commission -- calling for the EU to urgently designate it as a "very large online platform" (VLOP) under the DSA. (VLOP status would mean Temu has to comply with additional algorithmic transparency and accountability rules, including mitigating systemic risk. Other e-commerce VLOPs include Alibaba, Amazon, Booking.com, Google Shopping and Zalando.)

At the same time, 17 of the BEUC's member organizations around the bloc have filed DSA complaints with their national consumer protection authorities -- accusing Temu of breaching the regulation's general rules, which have applied to Temu since mid-February.

The coordinated complaints allege the e-commerce giant is failing to meet a raft of DSA requirements, including trader traceability requirements, rules against manipulative design, and transparency around product recommender algorithms.

Commenting in a statement, Monique Goyens, director general at BEUC, accused the marketplace of being "rife with manipulative techniques" designed to push consumers to spend more, and claimed insufficient information about traders "frequently leav[es] consumers in the dark about who they are purchasing products from."

"This lack of traceability prevents consumers from taking an informed decision or to know if a product complies with EU safety rules," she added.

The consumer protection groups are also raising concerns about minor safety, pointing out the extreme price discounting and gamification features baked into Temu's platform are likely to be attractive to children.

"Temu does not guarantee its users a safe, predictable, and trustworthy online environment as the law requires," they argue in the complaint. "Among other things, we have strong concerns that consumers are falling prey to manipulative techniques, that Temu fails to ensure the traceability of the traders operating on its platform, or that its overall functioning remains opaque, all of which breach the Digital Services Act."

"Ultimately, the high number of dangerous products sold on Temu by untraceable traders, through manipulative practices and opaque recommender systems, are ingredients of a toxic cocktail likely to impair minors’ privacy, safety, and security," the groups also warn.

The coordinated complaints follow some individual actions by consumer groups concerned about the safety and legality of products for sale on Temu's marketplace.

For example, last fall, Italian consumer group Altroconsumo ran a test of cosmetics purchased on the platform and found the vast majority failed to list (or fully list) ingredients. Earlier this year, the German consumer organisation vzbv raised concerns about misleading product reviews and price discounts displayed on the platform.

As Temu isn't currently a designated VLOP, its oversight with the DSA's general rules falls to competent Digital Services Coordinators in EU member states where its service operates. Ireland's media watchdog, the Coimisiún na Meán, is in the frame as Temu opened an office in Dublin a year ago.

However, the complaint is likely to amp up pressure on the EU to designate Temu as a VLOP. A Commission spokesperson told us it's aware of Temu recently reporting more than 75 million monthly active users (MAUs) in the EU -- which is the threshold for triggering VLOP status -- adding: "We are in contact with the platform in view of a possible designation in the future."

Temu has been contacted for comment. Update: The company sent a statement, describing itself as a "newcomer" to the region and saying it's been taking feedback from customers, regulators and consumer groups and claiming to have been adjusting how it operates to align with local expectations. The statement reveals that in the past week Temu entered into a "cease-and-desist declaration" with Germany's vzbv. It suggests many of this authority's concerns overlap with the BEUC's complaint about its practices, adding that it's committed to addressing the issues raised.

"Regarding the BEUC complaint, we take it very seriously and will study it thoroughly," Temu also wrote. "We hope to continue our dialogue with the relevant stakeholders to improve Temu's service for consumers. Where we identify areas for improvement, we are eager to work together to enhance our service and to rectify any shortcomings. We hold the interest of consumers at heart and strive to provide a safe and trusted service that is valued by consumers and adds significant value. We are committed to transparency and full compliance with all applicable laws and regulations."

Last month Shein, another Chinese e-commerce giant that's been locked in a fierce rivalry with Temu -- including in relation to international market expansion -- was designated by the EU as a DSA VLOP after reporting passing the 45 million MAUs threshold.

While, back in March, the EU opened its first DSA investigation on a marketplace, targeting another China-owned e-commerce platform -- Alibaba's AliExpress -- which had been named a VLOP in the first wave of designations in April last year.

The Commission said then that it suspects AliExpress of breaching DSA rules in areas linked to the management and mitigation of risks; content moderation and its internal complaint handling mechanism; transparency of advertising and recommender systems; traceability of traders; and data access for researchers. The investigation -- one of several the EU has opened into VLOPs since last year's compliance deadline for these larger platforms kicked in -- remains ongoing.