Temu is Accused of Breaching the EU's DSA in a Series of Consumer Complaints | TechCrunch - Latest Global News

Temu is Accused of Breaching the EU’s DSA in a Series of Consumer Complaints | TechCrunch

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

Penalties for confirmed breaches of the EU’s online governance and market security regime can be up to 6% of the platform’s parent company’s annual global turnover. To illustrate: Temu’s parent company Pinduoduo reported revenue of nearly $35 billion for 2023, almost double the previous year; Temu is estimated to have accounted for about 23% of that amount last year.

BEUC, the European consumer organization that represents 45 regional consumer groups in 31 EU countries, said on Thursday it had lodged a complaint with the European Commission against Temu and called on the EU to urgently declare Temu a “very large online platform” (VLOP ) to mark. under the DSA. (VLOP status would mean Temu must comply with additional algorithmic transparency and accountability rules, including mitigating systemic risks. Other e-commerce VLOPs include Alibaba, Amazon, Booking.com, Google Shopping and Zalando.)

At the same time, 17 BEUC member organizations across the Union have filed DSA complaints with their national consumer protection authorities, accusing Temu of violating 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 number 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” aimed at encouraging consumers to spend more, claiming there was not enough information that traders “often migrate.”[es] Consumers are in the dark about who they buy products from.”

“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 advocacy groups also raise concerns about the safety of minors, noting that the extreme discounts and gamification features built into Temu’s platform are likely to appeal to children.

“Temu does not guarantee its users a safe, predictable and trustworthy online environment, as required by law,” they argue in the complaint. “We have serious concerns, among other things, that consumers are falling victim to manipulative techniques, that Temu does not ensure the traceability of traders operating on its platform, or that the overall functioning remains opaque, all of which constitute a violation of the Digital Services Act.”

“Ultimately, the high number of dangerous products sold on Temu by untraceable dealers through manipulative practices and opaque recommendation systems are components of a toxic cocktail that could compromise the privacy and safety of minors,” the groups also warn.

The coordinated complaints follow 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 incompletely) the ingredients. At the beginning of the year, consumer association vzbv raised concerns about misleading product reviews and discounts on the platform.

Since Temu is not currently a designated VLOP, oversight of the general rules of the DSA falls to the relevant digital services coordinators in the EU Member States where the service operates. Ireland’s media regulator Coimisiún na Meán is in the spotlight as 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 that he was aware that Temu had recently reported more than 45 million monthly active users in the EU – which is the threshold for triggering VLOP status – adding: “We stand with the Platform in contact with a view to a possible designation in the future.”

Temu has been contacted for comment.

Last month, Shein, another Chinese e-commerce giant embroiled in a bitter rivalry with Temu – including over international market expansion – was designated as a DSA VLOP by the EU after reporting that it had exceeded the threshold of 45 million MAUs.

While the EU launched its first DSA investigation into a marketplace back in March, it targeted another Chinese e-commerce platform – Alibaba’s AliExpress – which had been designated as VLOP in the first wave of classifications in April last year.

The Commission said at the time that it suspected AliExpress of violating DSA rules in areas related to risk management and mitigation; content moderation and its internal complaint handling mechanism; Transparency of advertising and recommendation systems; traceability of traders; and data access for researchers. The investigation – one of several the EU has launched into VLOPs since the compliance deadline for these larger platforms began last year – is still ongoing.

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