Temu accused of breaching EU DSA in bundle of consumer complaints | TechCrunch

Consumer protection groups across the European Union have filed coordinated complaints against Temu, accusing the ultra-cheap Chinese-owned e-commerce platform of a series of breaches related to the bloc’s Digital Services Act (DSA). Temu only launched in the region about a year ago, but recently reported that it had surpassed 75 million monthly users.

Sanctions for confirmed violations of the EU’s online governance and market safety regime could amount to up to 6% of the platform’s parent company’s global annual turnover. For reference, Temu’s parent company Pinduoduo reported revenues of almost $35 billion for 2023, almost double the year before; Temu was estimated to have been responsible for about 23% of that amount last year.

BEUC, the European consumer organization representing 45 regional consumer protection groups in 31 EU countries, said on Thursday it has filed a complaint against Temu with the European Commission – and is calling on the EU to urgently designate it as a “very large online platform” (VLOP) under the DSA. (VLOP status would mean Temu must 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 member organizations from across the bloc have filed DSA complaints with their national consumer protection authorities – accusing Temu of breaching the general rules of the regulation, which have applied to Temu since mid-February.

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

In a statement, Monique Goyens, director general of BEUC, accused the market of being “full of manipulative techniques” designed to entice consumers to spend more, and claimed there was insufficient information about traders who “regularly leave the market”.[es] consumers do not know whose products they are purchasing.”

“This lack of traceability prevents consumers from making an informed decision or knowing whether a product complies with EU safety rules,” she added.

The consumer protection groups are also raising concerns about the small security, noting that the extreme price discounts and gamification features baked into Temu’s platform are likely to appeal to children.

“Temu does not guarantee its users a safe, predictable and reliable online environment as required by law,” they say in the complaint. “We are deeply concerned, among other things, that consumers are falling prey to manipulative techniques, that Temu is failing to guarantee the traceability of the traders operating on its platform, or that its overall operation remains opaque, all of which are contrary with the Digital Services Act. ”

“Ultimately, the large number of dangerous products sold on Temu by untraceable traders, through manipulative practices and opaque recommendation systems, are ingredients of a toxic cocktail that is likely to compromise the privacy, safety and security of minors,” the groups also warn.

The coordinated complaints follow several 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 conducted a test of cosmetics purchased on the platform and found that the vast majority did not list (or fully list) the ingredients. Earlier this year, the German consumer organization vzbv expressed concerns about misleading product reviews and price discounts displayed on the platform.

Because Temu is not currently a designated VLOP, supervision of the general rules of the DSA falls under the responsibility of the digital service coordinators in the EU Member States where the service operates. Ireland’s media watchdog, the Coimisiún na Meán, entered the picture when Temu opened an office in Dublin a year ago.

However, the complaint is likely to increase pressure on the EU to designate Temu as a VLOP. A Commission spokesperson told us they were aware that Temu recently reported more than 75 million monthly active users (MAUs) in the EU – which is the threshold for activating VLOP status – and added : “We are in contact with the platform with a view to a possible designation in the future.”

Temu has been contacted for comment. Update: The company sent a statement describing itself as a “new entrant” to the region and said it has received feedback from customers, regulators and consumer groups and claims it has adjusted the way it operates to align with local expectations. The statement shows that Temu concluded a “cease-and-desist statement” with the German non-profit organization last week. It suggests that many of the authority’s concerns overlap with the BEUC’s complaint about its practices, adding that it is 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 relevant stakeholders to improve Temu’s services to consumers. Where we identify areas for improvement, we are happy to work together to improve our services and resolve any shortcomings. We keep the interests of consumers at heart and strive to provide a safe and trusted service that is valued by consumers and adds significant value. We strive for transparency and full compliance with all applicable laws and regulations.”

Last month, Shein, another Chinese e-commerce giant engaged in a fierce rivalry with Temu – including over international market expansion – was designated a DSA VLOP by the EU after reporting that it had crossed the 45 million MAU threshold .

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

The Commission said at the time that it suspects AliExpress of violating DSA rules in areas related to risk management and mitigation; content moderation and the internal complaints handling mechanism; transparency of advertising and recommendation 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 – remains ongoing.

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