Chinese online retailer Temu has been fined €200 million, or about $232 million, by European Union regulators for failing to do enough to stop the sale of illegal products on its platform.
The European Union’s tech regulators said on Thursday that Temu breached rules under the Digital Services Act, following the first part of a wide investigation into the company’s platform.
EU says Temu failed to assess illegal product risks
The case centers on whether Temu properly assessed and controlled the risks linked to illegal goods sold through its online marketplace.
Reuters reported that the European Commission said Temu failed to diligently identify, analyse, and assess the systemic risks of illegal products being sold on its platform and the harm those products could cause to consumers in the European Union.
The Commission also criticized Temu’s treatment of recommender systems and promotion programs. EU regulators found that Temu had not properly assessed how its recommendation tools and product promotions by affiliated influencers could amplify the risks linked to illegal product sales.
That part matters because regulators are not only looking at whether illegal goods appear on a platform. They are also examining whether the platform’s own systems may help spread, promote, or recommend those products to more users.
Complaints from consumer groups triggered scrutiny
The investigation did not come out of nowhere.
EU regulators investigated Temu after complaints from the pan-European consumer organization BEUC and 17 of its national members.
The probe has taken nearly two years and further penalties could still follow in the coming months. The Digital Services Act requires large online platforms to do more to tackle illegal and harmful content, and Temu’s case shows that online marketplaces are now facing tighter scrutiny under those rules.
Temu disagrees with the Commission’s decision
Temu rejected the EU’s findings and described the penalty as excessive.
The Verge reported that Temu said that it respects the objectives of the Digital Services Act and the need for clear, consistent rules across the digital economy, but disagrees with the Commission’s decision and considers the fine disproportionate.
Temu also said the decision relates to its first DSA assessment in 2024 and does not reflect the current state of its systems. The company said it has since taken further steps to strengthen risk assessment, platform governance, and user protection.
Action plan due by August 28
The fine may not be the end of Temu’s regulatory problems in Europe.
Reuters shared that the European Commission gave Temu until August 28 to submit an action plan. Regulators will then assess whether the company has done enough to comply with the Digital Services Act, with a decision expected within two months.
EU tech chief Henna Virkkunen told reporters that the case is about risk management, calling it a cornerstone of the DSA. Reuters quoted her as saying the decision sends a “very strong message to Temu.”
More DSA pressure could follow
The Commission is still looking into other parts of Temu’s business.
Regulators will continue investigating whether Temu’s service design is addictive, whether illegal products are still being sold, and whether its recommender systems and researcher data access comply with EU rules.
Companies can face fines of up to 6% of global annual turnover for breaches of the Digital Services Act.
The Temu penalty is also only the second fine issued under the DSA. The first was against Elon Musk’s X, which was fined €120 million last December.
For Temu, the fine is a major regulatory setback in one of its most important markets. For the EU, it is a signal that online marketplaces will be held responsible not only for removing illegal products, but also for managing the systems that may help those products reach consumers in the first place.
