Bombay Durpun - EU fines Temu 200 mn euros over illegal products

"The company failed to diligently identify, analyse, and assess the systemic risks of illegal products being offered on its platform and the resulting harm to consumers in the European Union," the EU said.

According to EU regulators, European consumers are "very likely to encounter illegal items" on Temu, and the company "seriously underestimated how often EU consumers are likely to" see such products.

Temu is extremely popular in the European Union, with 130 million users after entering the bloc's market in 2023.

But it has come under fierce scrutiny since October 2024 when the EU opened its investigation, which preliminarily found in July last year that Temu had breached landmark rules over the risks of illegal products.

"Temu is a very big player in the European market," EU tech commissioner Henna Virkkunen told reporters, adding that its size meant that a "very big part" of EU consumers get their hands on such illegal products.

Thursday's fine is only the second imposed under the EU's powerful Digital Services Act (DSA) on content, after Elon Musk's X platform received a 120-million-euro fine in December.

Under the DSA, the world's most popular digital platforms including social media apps and online retailers must conduct a risk assessment to understand what dangers they pose and how to tackle the risks.

The EU slammed Temu for its 2024 risk assessment that it said "falls short of the standards", citing the discovery of baby toys, such as rattles, containing chemicals that exceeded legal safety limits, and chargers that failed basic safety tests. It also pointed to jewellery.

The European Commission said Temu failed to properly assess the platform's design and how it "could amplify dissemination risks of illegal products".

- EU focus on China -

The DSA is part of the EU's bolstered legal armoury to curb what the bloc considers excesses by Big Tech, and fines can go as high as six percent of a company's total worldwide annual turnover.

Temu's revenues were $61.7 billion last year.

While the EU could have hit Temu with a higher fine, a European Commission official said the amount was proportionate to the breach since it concerned a risk assessment for one year where the conclusions were "clear-cut".

Temu must now pay the fine and present a plan to the EU by August 28 that includes what action it will take to address the breaches.

If Temu does not comply, it faces periodic penalty payments.

It can also appeal the fine, as Musk has already done in the EU courts.

The EU continues to investigate other suspected breaches in the same probe including the use of addictive design features that could hurt users' physical and mental well-being, and how Temu's systems recommend content and products.

The fine comes a day before the EU executive is set to debate how the 27-nation bloc should approach China to level the playing field, with top EU officials warning that Europe must get tougher on China to defend its economy.

Brussels has already stepped up its anti-subsidy investigations into Chinese companies investing in Europe, and on Thursday it opened an in-depth probe into Chinese e-commerce giant JD.com's bid for Ceconomy, a major German electronics retail group, on suspicion it was boosted by state subsidies.

M.T.Johanson--BD