Chinese e-commerce giant Temu has received a massive fine of two hundred million euros, or about two hundred thirty two million dollars for its inability to implement effective measures against the sale of illegal products on its platform. This is the first major milestone in the long operational inquiry, which has been in progress for almost two years, and was announced by the European Union’s technology regulators on Thursday. The penalty is in line with the Digital Services Act, which is a law imposed by the bloc to compel big online platforms to proactively tackle illegal and harmful content instead of reacting to it once it has come to light. The fine is also not the end of the story, though, since regulators have said that additional fines may be issued in the coming months as the investigation continues.
The accusations against Temu didn’t just pop up out of thin air. After a formal complaint by the pan European consumers organisation BEUC and seven of its national member organisations, European regulators have launched an investigation into the company’s practices. These consumer groups have been sounding the alarm on the vast amount of dubious merchandise being pushed through Temu’s offerings, spanning from unsafe toys and electronics to counterfeit clothing and unregulated cosmetics. Given Temu’s rapid expansion in Europe with its ultra-low prices and rapid delivery, it’s no wonder that consumer advocates raised concerns. It was not the real risk of illegal products on its platform that was not identified, analysed and assessed by Temu, the real issue, according to the European Commission, is that the company did not properly assess the harm caused by the products and did not evaluate the harm to consumers in the European Union.
The unique aspect of this case is the Commission’s criticism of Temu’s internal risk assessment systems. The company was also found guilty of not considering the risks associated with the sale of these products, in addition to those from its own recommender algorithms and product promotion programmes, where they frequently use affiliated influencers. In simple terms, if a product contains dangerous ingredients or is a fake, but the algorithm actively encourages increased shopper interest in the product due to high engagement or low returns, it isn’t just a few bad listings, it is a structural issue. The Commission’s reasoning is that Temu should have predicted this and designed protections into the platform to begin with.
Temu responded to this fine with a calm but firm statement. “Temu is not in agreement with the European Commission’s decision and views the introduced fine as excessive,” the company said. The company also explained that the decision is for their first DSA assessment conducted in 2024 and not what the current state of their systems is. Temu told the Commission it has implemented “additional measures” in risk assessment, platform governance and user protection since engaging in the process and “engaged with the Commission throughout the process.” They also said they would stay in touch with regulators and are exploring all their options on the issue. It is essential to maintain those quotes intact, because it will demonstrate that a company is not simply accepting the decision on a quiet, quiet basis but will be ready to respond, while at the same time proclaiming that a company has “succeeded” in achieving some progress.
Practically speaking, the Commission has set a time limit for Temu to reply. A formal action plan is required by the company and will be considered by the regulators by August 28. The final ruling on whether Temu has done enough to meet the requirements of the Digital Services Act is to be made within 2 months of the deadline. As a structured timeline goes, it could only be a sign that Brussels is very serious about enforcement, yet is prepared to provide a roadmap for companies to follow for compliance—rather than just setting up a fine and forgetting about it.
Henna Virkkunen, the head of EU tech, said the decision was a simple one. To reporters, she said, “This is about risk management. It’s a very strong message to Temu with this decision. The message seems to be directed not just at Temu but at the entire e commerce industry, and specifically at speedily expanding foreign services that don’t come from the European Union, probably because they were not fully aware of the severity with which the DSA would be enforced. Virkkunen added that the regulators will keep investigating if the design of Temu’s service is addictive and a broader investigation into the sale of illegal products, recommender systems, and researchers access to data will continue. This final one on data access is important as independent researchers have long argued that platforms cannot be trusted to provide transparency, or it’s hard to determine the extent of illegal or harmful product sales.
The money here isn’t pennies and nickels. Fines for companies found to be in breach of the Digital Services Act could be up to six per cent of their global turnover per year. This percentage might become billions of euros for a firm of Temu’s size and growth rate if the Commission decides that the action plan is not enough or if other breaches are discovered. It is also noted that this fine is the second sizeable one impaled by the DSA this year. The first was imposed on Elon Musk’s social media platform X, which was fined a hundred twenty million euros in December. So far, those comparatively few enforcement actions indicate that regulators are taking their time, and that every new penalty drives up the pressure on other platforms to take a closer look at compliance.
