The European Commission announced that Temu, the fast-fashion e-commerce platform owned by China's PDD Group, will need to comply with stringent EU online content rules under the Digital Services Act (DSA). This development places Temu in the same category as major tech companies like Amazon, Meta Platforms, and TikTok.
The European Union's DSA stipulates that companies with over 45 million users must be designated as very large online platforms (VLOPs) and adhere to more rigorous standards to combat illegal and harmful content, as well as counterfeit products. Temu, which launched in the EU market in April last year, had approximately 75 million average monthly active users in the EU for the six months ending March 31, 2024.
"Following today's designation as a VLOP, Temu will have to comply with the most stringent rules under the DSA within four months of its notification," the European Commission said in a statement. This means Temu must meet these requirements by the end of September 2024.
As a VLOP, Temu will need to undertake comprehensive risk assessments and implement measures to mitigate systemic risks associated with its services. These include preventing the listing and sale of counterfeit goods, unsafe or illegal products, and items that infringe intellectual property rights. Non-compliance with DSA regulations can result in fines of up to 6% of a company's global annual turnover.
The decision to designate Temu as a VLOP comes shortly after European consumer protection groups filed coordinated complaints against the company, alleging multiple breaches of the DSA. The European consumer organization BEUC, which represents 45 consumer protection groups across the EU, was among the complainants. They called on lawmakers to classify Temu as a VLOP, citing concerns over the platform's practices.
Temu now joins 23 other companies facing additional obligations under the DSA, which applies to both VLOPs and very large online search engines (VLOSEs). This group includes products from companies such as Alibaba, Alphabet, Amazon, Apple, ByteDance, Meta, Microsoft, and Snap. In December, three pornographic websites were also designated as VLOPs, and Temu's Chinese retail competitor Shein was the first to be designated under these rules.
As a VLOP, Temu will face increased scrutiny over its use of algorithms, AI, content ranking, and recommendation tools. The company will also be required to assess and mitigate any systemic risks stemming from its services, including addressing counterfeit, illegal, or unsafe products listed on its platform.
From the point of notification, Temu will have four months to comply with these additional requirements. The company will need to collaborate with the European Commission and the Irish Digital Services Coordinator-Temu's European headquarters is in Dublin-to provide regular risk assessment reports. These reports are required at the start of the compliance period and annually thereafter.
The European Commission's decision to include Temu in the VLOP category reflects its commitment to ensuring that large online platforms adhere to higher standards of accountability and transparency. The move aims to protect consumers and maintain the integrity of the digital marketplace.
Temu's designation as a VLOP underscores the growing influence of Chinese e-commerce platforms in the global market and the increasing regulatory scrutiny they face. The DSA's rigorous requirements are designed to create a safer online environment for consumers by holding large platforms accountable for the content and products they host.
As the compliance deadline approaches, Temu will need to implement significant changes to its operations to meet the EU's stringent standards. This includes enhancing its content moderation practices, improving transparency in its use of algorithms, and ensuring that counterfeit and unsafe products are swiftly removed from its platform.
The European Commission's decision marks a significant step in regulating the activities of very large online platforms and underscores the importance of consumer protection in the digital age. Temu's compliance with the DSA will be closely monitored, and its efforts to meet these new standards will likely set a precedent for other emerging e-commerce platforms.
