Online retailer Temu is facing a 200-million euro (CAD $322 million) fine after an investigation by the European Union found that the company failed to protect customers from illegal products, including dangerous toys and faulty electronics.
The EU’s fine follows findings from an investigation opened in 2024. Preliminary findings from that had indicated that Temu was exposing consumers to high-risk products that were not compliant with the union’s consumer safety standards.
The final report was published on Thursday.
“The evidence at the disposal of the Commission indicates that consumers in the EU are very likely to encounter illegal items on Temu,” it said in a report published Thursday.
Mystery shopping exercises conducted in the investigation found that a “very high percentage” of electronic chargers failed standard safety checks, the commission said, adding that “a high percentage of tested baby toys posed safety risks of medium to high severity” because they contained “chemicals exceeding legal limits or posed suffocation hazards.”
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Regulators also examined the risks posed by Temu’s “addictive design,” including “game-like” reward programs and the steps the company is taking to mitigate those risks, according to the initial investigation announcement from 2024.
The trade bloc imposed the penalty under the Digital Services Act (DSA), a wide-ranging rulebook that requires online platforms to protect online users from harmful content or dangerous goods and carries the threat of heavy fines.
A person navigates the Temu website on a smartphone in Toronto on April 4, 2023. Temu is accused of violating users’ privacy rights in a series of proposed class-action lawsuits.
THE CANADIAN PRESS/Giordano Ciampini
Temu told Global News in an email statement that it “disagreed” with the commission’s findings and said the fine was “disproportionate.”
“The decision relates to our first DSA assessment in 2024 and does not reflect the current state of our systems,” the company said, adding that it “engaged constructively with the Commission throughout the process and has since taken further steps to strengthen risk assessment, platform governance, and user protection.”
“We will continue to engage with regulators in good faith and work toward a marketplace that serves consumers, businesses, and communities responsibly. We are reviewing the decision carefully and considering all available options,” the statement concluded.
Temu is the second digital platform to be fined under DSA rules.
The Brussels-based commission penalized Elon Musk’s X 120 million euros (CAD $193 million) under the same act last year for several regulatory breaches. It was the first time a fine had been issued under DSA rules, which came into effect in November 2022.
The Chinese firm entered Western markets only in the past three years and launched in Canada in 2023. Cheap goods — from clothing to home products — shipped from sellers in China led to its significant growth in popularity.
Temu has also faced scrutiny in the United States, where a congressional report last year accused the company of failing to prevent goods made by forced labour from being sold on its platform.
There are currently no formal investigations into Temu’s practices by official regulatory bodies in Canada, though there is a countrywide class-action lawsuit against the online shopping platform for collecting data from its users in excess and in amounts greater than it discloses, according to the Consumer Law Group.
— with files from The Associated Press
