The European Union is gearing up to initiate a formal investigation into Temu, an e-commerce platform operated by Chinese-owned PDD Holdings, over its alleged failure to halt online sales of illegitimate goods. This investigative operation holds the potential to impose substantial financial penalties on the e-commerce entity.
Sources who prefer to stay anonymous revealed that the European Commission is preparing to open official proceedings against Temu. The investigation rests on concerns of potential breaches of policies against illicit web activities. While the announcement of this inquiry is anticipated to be made soon, there may be delays as the executive body based in Brussels gets ready for a transition in political leadership.
The EU’s Digital Services Act mandates that online platforms – boasting over 45 million users across the region – take assertive actions to halt the dissemination of misinformation and illegal content. This includes prohibiting the sale of products deemed illegal by the EU, or risk facing fines that could amount to nearly 6% of their annual global revenue.
In the light of this impending EU probe, Temu, which has so far remained silent on the matter, possesses the right to recommend the introduction of remedial measures to satisfy the commission’s apprehensions and deflect potential penalties.
This investigation ensues in response to the EU’s demand on October 11th for transparency from Temu regarding its efforts to combat the listing of fake or hazardous goods on its online marketplace. The commission expressed dissatisfaction with the information provided thus far, indicating it has done little to abate the EU’s worries.
Following the turn of events, PDD’s American Depositary Receipts plummeted 2.6 per cent to $121.95 in New York, with a decline of 17 per cent recorded this year.
Enjoying exponential growth since its launch by PDD to infiltrate global markets, Temu became a highly sought-out app in the US, thanks to its extensive promotion, namely its 2023 “Shop Like a Billionaire” Super Bowl advertisement. Employing flash sales, gamified features, and offering reduced prices, the app has garnered customers from numerous countries worldwide.
PDD, the e-commerce titan, has recently issued warnings of potential struggles it may face in the near future. This comes as rivals such as TikTok, owned by ByteDance, Alibaba Group Holding Ltd., and Amazon are racing to attract price-conscious consumers and challenging Temu’s products.
For the quarter ending June, PDD announced revenue of 97.1 billion yuan (€12.7 billion), falling short of the expected average of 100 billion yuan. Nonetheless, the net income exceeded expectations, reaching 32 billion yuan against the predicted 27.5 billion yuan.
Elsewhere in Brussels, EU regulators are assertively utilizing their online content regulations against large platforms. At present, the commission is conducting Digital Services Act (DSA) inquiries into Meta Platforms Inc., AliExpress by Alibaba, TikTok by Bytedance, and Elon Musk’s proprietary X. This report is brought to you by Bloomberg.